The business world has a way of
coming up with catchy terms which are, in the best case, thought provoking. The
idea of the ‘Cognitive Enterprise’ is one such idea that is taking hold: and
the genesis is becomes quite apparent, once you start thinking about it. It
starts with the basic axiom of a competitive marketplace: Every enterprise
today is living in a world of continuously increasing Complexity – from within
(e.g. structural changes in the workforce as Millennials have started growing
into middle management roles) and without (e.g. disruptive technologies and
business models). Every Fortune 500 executive worth her salt is trying to
figure out how not just to manage this complexity; but hoping to capitalize on
this complexity.
And it turns out that we don’t have
to look too far for inspiration: the human race, as a species, is probably the
best example of how to thrive in Complexity. From being one of the millions of
species on the planet, we have managed to utterly dominate the planet in an
astonishingly short span of time. As a species, we have crossed the line in
many areas (think global warming, wiping out species etc.) but it stands to
reason that we have achieved something that has made us a tremendously
successful species.
So, how has the human species
achieved this and what can we learn from this? If I were to pick the main
factors (the power of 3!), these would be:
1.
The ability to respond to Environmental changes.
And not just in the slow reactive evolutionary cycle (which every species
does), but in a more active, problem-solving sense. We have, more than any
other species, a highly sophisticated “system” for responding to change (more
on this later).
2.
The ability to not just learn from experiences and
more importantly, share them rapidly across the species. Our ability to build
this species level ‘institutional learning repository’ by sharing them through
the medium of a language and storing them for future retrieval is uniquely
human.
3.
The ability to imagine a future, create “stories”
and then rally large groups of people around the shared goal to execute and
make the future real is also uniquely human. No other species has come remotely
close to us. No one has captured this better than Yuval Harari in ‘Sapiens’
So, what lessons can an
enterprise draw from these to become more ‘Cognitive’ and thus, give itself a
shot at breaking out from the pack, much like the human species? I will
continue to discuss specific ideas of these as we go along – here’s a start:
1.
Organization
as a Signal Processing and Response System: Companies need to invest in
getting better at making observations: both in terms of precision (e.g. track
every SKU as it traverses through the supply chain) and speed (e.g. bring down
the latency between taking inventory positions). And then use that information to
react faster (e.g. trigger a replenishment up the supply chain all the way to
reduce stock-outs)
2.
Organization
as a Learning System: Companies need to build the capability to
continuously learn from signals to effect both policy and execution changes. E.g.
Instead of being saddled with static safety stock policies, adaptive supply
chains need to be learn constantly from changing demand patterns by building
trigger mechanisms that would seek to improve the safety stock algorithms. The
ever-decreasing cost of computing has made this possible like never before.
3.
Organization
as an Anticipatory System: Companies are constantly facing choices – from
tactical, daily execution challenges to strategic decisions that drive capital
allocation. Success is obviously making more correct than incorrect ones – instead
of relying solely on past experience, decision makers need to be able to
develop models to explore what-if scenarios and develop a ‘choice portfolio’
with the potential outcomes and risks for each choice. Once again, powerful
computing resources are available to build highly complex system-level models
to explore multiple scenarios, even more so when it comes to expensive capital
allocations.
So, how are companies doing on
their way to becoming more cognitive? Obviously, the answer varies by individual
function, the company culture and the industry context and so on. In my experience,
an average Fortune 500 scores reasonably well in #1, thanks to years of CIO
driven technology investments. Progress on #2 is getting a lot of attention,
especially in more analytically mature organizations. When it comes to #3, the
record has been less than stellar – very few have fully observed the power of Simulation
and what-if scenario modeling. More on this later.
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