Business Quandary? Use a Competition to Crowdsource Best Answers

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Crowdsourcing has become increasingly popular since the late 1990s. At its best, it offers a way to tap the "wisdom of the crowd" to solve problems faster, better, and more cheaply than they can be handled within a company.

But how, exactly, can organizations use crowd-sourcing effectively? In "Business Quandary? Use a Competition to Crowdsource Best Answers," inMIT Sloan Management Review, data and analytics editor Renee Boucher Ferguson interviewed Anthony Goldbloom of Kaggle Inc. about this important topic.

As he explains, during a 2008 internship at The Economist, Goldbloom, an economist-turned-journalist, made an important discovery: Many organizations that want to use predictive analytics don't have the skills to do it well, if at all.

That makes a huge difference in the results they achieve, because the quality of the data scientist is crucial in determining the quality of a data science solution. Data science is extremely high leverage, so a data-set and an algorithm in the hands of a great data scientist can generate a $100 million return on investment, while the same data in the hands of somebody who doesn't have that ability can be extremely costly.

Goldbloom figured there would be lots of people like him who thought they could help, but they weren't being given the chance. In response, Goldbloom came up with an interesting business idea: Create a company that allows anyone, anywhere, to compete to solve other businesses' analytics problems. The result was Kaggle, a company that hosts data prediction competitions, which help companies crowdsource their business analytics problems.

Today, hundreds of organizations, both public and private, have submitted their data-sets and business problems to Goldbloom's company. "Data scientists" from around the globe have signed up with Kaggle to compete to develop the best algorithm for a given problem, from predicting click-through rates on ads to predicting who will be admitted to a hospital within the next year — a current competition with a $3 million purse. Ongoing results are displayed in real-time on a virtual leader-board.

So, how do Kaggle's big data competitions work?

When someone submits an algorithm, Kaggle back-tests it on what...

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