The prediction market we ran as part of our innovation program for high potential young employees at a large financial services firm turned out a great success on a number of levels. Most important, it generated excitement around the proposals, motivating a high percentage of participants to actively trade and provide a new type of feedback to one another. And, though forecasting wasn’t the primary goal of this market, the market results served well to predict project outcomes.

We invited all 52 participants to invest in the “stocks” of any of the ideas under development. Participation was completely optional and had no bearing on their performance in the program. In the seven weeks the market ran, over 2/3 of them actively traded, which, for a first-time market is an extremely high participation rate. Of course it helped that many of the participants are professional traders.

A handful of program alumni from the previous year also traded. Though it wasn’t a large group, they were paying attention to the innovative ideas coming out of the program and they were offering their insights – two objectives that are difficult to motivate in people who don’t have a stake in the outcome.

Because the ideas on which the participants were trading might take months or even years to come to market, we could not make the final valuation of the stocks dependent on, say, generated returns. Instead we asked the senior executives to “grade” each proposal on a specific set of criteria including strategic alignment, revenue or cost savings potential and thoroughness of the presentation. The aggregate grade became the final price. So in effect, traders were betting on how the senior executives would respond to the projects.

The market predicted which two ideas the senior executives liked the best. It also predicted three of the top five projects and four of the bottom five projects. So, this limited sample indicates that a group of young high-potential employees representing a broad cross section of roles, locations and functions, can think like their leaders.

For future iterations we are considering breaking out the various project criteria as separately traded stocks. This makes the market more complex but should provide better feedback on whether the market is indicating, for example, that people believe the idea is a good one but the team didn’t pitch it very well. We also plan to encourage earlier and more active participation by a wider group of stakeholders and alumni.

Our clients told us that this first experience with a prediction market opened their eyes to the power of collaborative tools for innovation. There is no question about this becoming a regular part of our programs and we are already discussing wider applications.