Streamline Training & Documentation: The Delphi Technique

Tuesday, August 28, 2007

The Delphi Technique

You can get a quick introduction to the Delphi technique for forecasting in the September issue of the Harvard Business Review. Robert Duboff, CEO of HawkPartners, a marketing consulting firm, explains that the Delphi technique involves recruiting about 20 experts in the area you are assessing (e.g., the prospects for an investment that is under consideration) and asking them — by phone, email, or in person — to evaluate possible outcomes.

First, the experts are asked to identify the outcomes they consider possible, and then to rate the likelihood of each. Duboff suggests that this initial set of ratings be made in the absence of any comments from the experts explaining their predictions. Your choice concerning whether to solicit comments at this stage of the process depends on whether you think allowing comments will inhibit or enrich the generation and consideration of ideas.

The experts' ratings are tabulated and presented to them. After discussion, the experts rate the predicted outcomes again.

Additional rounds are conducted until a pre-determined stop point is reached. This can be consensus on the ratings, or it might be a maximum number of rounds if consensus does not emerge.

You can read a history of the Delphi technique in its Wikipedia entry, which also provides a helpful comparision to prediction markets, reproduced below in slightly edited form.

Advantages of prediction markets, relative to the Delphi technique, include:

They can motivate people to participate over a long period of time and to reveal their true beliefs.

They aggregate information automatically and instantly incorporate new information into the forecast.

Participants do not have to be selected and recruited by a facilitator; they themselves decide whether to participate.

Advantages of the Delphi technique include:

Delphi allows a broader range of problems to be formulated.

For many people, it is easier to reveal one's opinion in response to a questionnaire than to translate it into market prices.

It may be easier to maintain confidentiality with Delphi.

Delphi is not vulnerable to manipulation by participants.

The transparent exchange of knowledge in Delphi allows participants to learn from each other and to introduce new ideas into the discussion.

Only 5 to 20 experts are necessary for conducting a Delphi session.

You can find a wealth or information on the Delphi technique and other forecasting methods at http://www.forecastingprinciples.com, a site created by J. Scott Armstrong, a professor of marketing at the Wharton School. Prof. Armstrong has also created the Delphi Decision Aid, an easy-to-use tool for implementing the Delphi technique.

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Labels: Decision-making, Prediction markets

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