Focus groups are such a standard part of our market-driven culture that they’ve long since become the subject of parody. Decision-makers are seen as being afraid to act without consulting them; surely, no political party would pick a candidate, no legislator would introduce a big policy initiative, and no movie studio would green-light a big-budget film without focus-grouping it first.

But while they may be ridiculed, the truth is that business organizations—especially consumer product companies—still spend quite a bit of money on focus groups. Such ensembles are considered a crucial way to identify products people will buy and weed out bad ones before they’re brought to market.

The rise of the Internet, however, has created faster, cheaper alternatives to the classic eight-people-around-a-table-and-a-whiteboard scenario. Since 2000, Waltham, MA-based Invoke Solutions has been one of the companies running online surveys that, in effect, let market researchers assemble focus groups that are hundreds or thousands strong.

Until recently, Invoke’s surveys were still real-time affairs, conducted at scheduled times. Groups of researchers huddled in control rooms, administering questions, interacting with participants directly, and watching the data pour in. Last year, though, Invoke introduced a new “asynchronous” survey system called Engage that allows volunteers to participate in market studies at any time they choose. And in January, it enhanced the system with new reporting and analytics software that lets Invoke’s clients view and explore the results, via instant PowerPoint presentations and other types of visualizations, as they come in.

Invoke’s president and CEO Ben Cesare, who came by Xconomy’s office a couple of weeks ago, says the response to the new reporting software has been “thrilling.” Within 60 days after Invoke rolled out the Engage Analytics tool, 120 Fortune500 clients were already using it, says Cesare, who joined the company in 2005 and became CEO a year later. The veteran of Apple Computer, Psion, and Agile Software says he’s “not a research guy”—meaning he isn’t steeped in the strategies of giant market-research firms like TNS or Ipsos. But he says he does understand “innovation that works, capturing the information that matters. That’s what I really care about, and that’s what attracted me to Invoke.”

Cesare (pronounced like “Caesar”) argues companies need to embrace market research systematically, the same way they’ve embraced enterprise resource planning (ERP) or customer relationship management (CRM). In fact, he’s got his own three-letter term for what Invoke does—RDM, for research data management.

During his visit, Cesare gave me the basic download about the venture-funded, 55-employee company (which raised a $7 million round one year ago) and its latest accomplishments in the young discipline of RDM. But I started out asking him about the competition—the old fashioned focus group. A greatly abridged version of our conversation follows.

Xconomy: What’s wrong with focus groups?

Ben Cesare: The problem with focus groups is that they are time-consuming and expensive and they give you a small sample size. You could spend a month and a half flying around to six cities and talk to eight people in each city and then find that only three of those eight do all the talking. Are you going to make a call based on the opinions of 18 people? We’ll put you in front of 1,000 people over a week at a fraction of the cost, and all the answers will be believable. There’s no groupthink, no bias in the room. You’re not traveling.

X: So why do companies keep doing them?

BC: You know the old saying—nobody ever got fired for buying IBM. There’s a lot of safety in the same old stuff. People will say, “I have to do my focus group, I have to look those eight people right in the eye.” I submit the opposite. My point of view is that people will …Next Page »

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Forrester Research (NASDAQ: FORR), the Cambridge, MA-based technology market research firm, said yesterday it will deal with the economic crunch by cutting 50 positions, or about 5 percent of its global workforce. But the move comes after a big hiring surge in 2008; even after the cuts, the company will still have 14 percent more employees than it did in February 2008, the company said. We’ve updated the Boston Tech Layoff Tracker with the latest numbers.

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Commercialization is rarely a solitary pursuit; bringing an idea to the world requires a set of diverse skills and knowledge, a proverbial commercialization village. Or a crowd. Enter the power of crowdsourcing.

Crowdsourcing refers to aggregating a large number of people to express their opinions or ideas about specific topics—and the term first appeared in a 2006 Wired magazine article by Jeff Howe. But simply bringing together a large number of people is not enough to create new products. An integral part of engaging a large community to solve the world’s biggest problems is matching the right type of crowd to two stages of the commercialization process: a diverse crowd for brainstorming of breakthrough innovations, and a large crowd for refining the product for the market.

By its definition, innovation requires a break with the status quo. Research repeatedly shows that groups with diverse backgrounds propose the largest number of unique solutions to a problem. This has also been my experience with BrainBuzzes, brainstorming events that I organize for Young Inventors International. The simplest explanation for this phenomenon arises from research by James March and the late Nobel Laureate and Turing Award winner Herbert Simon, who suggest that our capacity to search for solutions is limited by what we know. Thus, we find solutions that are “locally” optimal to what we know, but which may not be “globally” optimal for innovation because we are restricted in our search space. By bringing together a diverse group of people, we end up expanding the search field for increasingly “global” solutions and drawing on expertise from unrelated fields. While a larger number of people can brainstorm more solutions, diversity is key when crowdsourcing new, breakthrough product ideas.

One of the most established Internet companies that uses crowdsourcing to assist with brainstorming is Innocentive. Innocentive brings together companies that post problems for scientists and engineers around the world; the winning solution receives a specified amount of prize money. Innocentive focuses on brainstorming new breakthrough solutions; its model allows the company to provide economic opportunities to a diverse group of researchers from outside of North America whose experiences may be different from those of their North American colleagues. Another web site, Innovation Exchange, works on a similar premise, although it also allows for collaboration among problem solvers.

However, the success of an innovation depends not only on its ingenuity but also on its appeal to and adoption by the market. The market is perilous and fickle, and the products that are most likely to succeed are those that are best able to anticipate and satisfy the needs of the largest number of customers. For many years, marketing experts have used focus groups of potential customers to assist with identifying issues of usefulness and usability of new products. Today, the Internet allows for relatively easy aggregation of large numbers of people who can provide feedback on a product or vote on the optimal solution. The number of participants matters more in this case. Indeed, the ideal crowd to source is one comprising of all potential customers.

Other companies in the space include Cambrian House, Kluster, IdeaScale, CrowdSpirit, FellowForce, and IdeaBlob. All of these companies incorporate elements of voting for the best ideas. But to arrive at the wisdom of the crowd, the sites require large amounts of traffic. As more of these sites arise, there is a battle for users and, unless there are incentives for participants to contribute, these communities may suffer. For product refinement and focus group crowdsourcing, the best model might be for companies to encourage feedback on their own web site, such as Dell does through its Idea Storm site and Salesforce does through its Idea Exchange. This model is likely to generate better results because the companies already receive large amounts of traffic interested in their products and participants can be rewarded with free products or product discounts relevant to their interests.

While giving away products, discounts, or flat fees might suffice as compensation for focus group participants, determining sufficient compensation for innovators who create truly disruptive ideas with breakthrough market potential is more difficult. If correct incentives do not exist to compensate participants for their contribution of intellectual property, those with the most promising ideas will choose to commercialize them on their own. Understanding the type of group that must be sourced for a specific purpose allows us to begin designing rewards that will attract the right crowd essential to the complex journey of commercialization.

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Lexington, MA-based economic forecasting firm Global Insight said yesterday that it will be acquired by IHS (NYSE: IHS) of Englewood, CO. Global Insight’s 700 employees, including 325 analysts, provide business analyses and risk assessments for regions around the world to industrial, financial, and government clients, while IHS specializes in analysis energy, security, environemental, and product lifecycle issues. The companies did not disclose the terms of the deal.

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In a merger of market research minds, Cambridge, MA-based Forrester Research (NASDAQ: FORR) announced today that it will purchase JupiterResearch and its parent company, JUPR Holdings, from MCG Capital Corporation (NASDAQ: MCGC) for $23 million in cash, plus assumed liabilities. JupiterResearch, with 2007 revenues of roughly $14 million, has 83 employees. Forrester reported 2007 revenues of $212 million and 1,000-plus employees, according to a release.

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When was the last time you had a spare 45 minutes to sit through a telephone survey or to take part in a focus group? Finding willing participants for traditional market research studies is getting increasingly difficult, but Invoke Solutions of Waltham, MA, gets around the problem by shifting market research to the platforms where people are focusing more and more of their attention: the Web and mobile phones. And today the company announced that it’s picked up $7 million in new venture funding to build out its technology and pursue new customers.

In January, the nine-year-old company rolled out a new family of products called Engage that allows real-time interaction and feedback between panels of consumers participating in Web-based surveys and marketing experts from the companies sponsoring the surveys. For example, clients using the Engage Live Web-based system can watch participants’ answers to multiple-choice or open-ended questions as they come in, add questions on the fly to drill deeper on specific issues, and open direct chat sessions with individual participants. All of the information survey participants provide is captured in Excel and PDF reports.

The company’s InvokePing service, meanwhile, hits volunteers with survey questions right on their mobile devices, while they’re still inside a store or restaurant. Customers opt in by texting a message to the short code displayed on an in-store sign. They’re then sent a few questions via text message; after about 5 minutes, they get a reward such as a discount code. Study results accumulate on a Web-based dashboard available to store managers.

The company partners with research firms like HarrisInteractive and the Gallup Organization to design its surveys, and has worked with a range of Fortune 1000 customers such as Microsoft, Washington Mutual, Conagra, Dell, and Nestle. North Atlantic Capital, an expansion-stage investor based in Portland, ME, led the new funding round, which also included existing investors Bain Capital and BEV Capital.

“Our new Engage Family of Solutions is being quickly embraced by our partners and customers, both in the U.S. and in Europe,” said Invoke president and CEO Ben Cesare in a company statement published today. “This funding from North Atlantic Capital and our existing investors enables us to keep growing across the entire organization in order to scale the business in 2008 and beyond.”

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