What do we mean by intelligent enterprise? Wikipedia defines human intelligence as “ . . . an umbrella term used to describe a property of the mind that encompasses many related abilities, such as the capacities to reason, to plan, to solve problems, to think abstractly, to comprehend ideas, to use language, and to learn.”
Another major use of intelligence relates to information gathering and analysis. This is the kind of intelligence practiced by government agencies, like the CIA and NSA in the US; the Secret Intelligence Service in the UK, better known as MI6 and perhaps most famous as the home of Secret Agent 007; and the KGB of the former Soviet Union.
Information-based intelligence has become increasingly important to enterprises and other organizations over the past couple of decades. The use of business and market intelligence has gone way up in recent years, as the Internet and World Wide Web have unleashed a torrent of information, which increasingly powerful computers can analyze and thus help companies better understand what is going on out there.
Last November, IBM Chairman and CEO Sam Palmisano announced a new initiative aimed at taking information-based intelligence to a whole new level in a talk to the Council on Foreign Relations titled A Smarter Planet: The Next Leadership Agenda.
When he talks about making the planet smarter, Sam said " . . . this isn't just a metaphor. I mean infusing intelligence into the way the world literally works - the systems and processes that enable physical goods to be developed, manufactured, bought and sold… services to be delivered… everything from people and money to oil, water and electrons to move… and billions of people to work and live."
What makes this possible is that just about everything can now be instrumented - anything we care about can be measured, sensed and seen. We can embed sensors in physical things, like cars, appliances, medical equipment, cameras, roadways, pipelines, pharmaceuticals or livestock. We can measure entire ecosystems - whole supply chains, business processes, cities and healthcare networks. And, we can now gather huge amounts of real-time information about the state of an enterprise, an industry or a whole economy.
"What this means," said Sam in his talk, "is that, for the first time in history, the digital and physical infrastructures of the world are converging. Computational power is being put into things we wouldn't recognize as computers. Indeed, almost anything - any person, any object, any process or any service, for any organization, large or small - can become digitally aware and networked."
These instrumented things will interact with each other, much as they do in the physical world. Our instrumented processes can exchange information with each other over the Internet so that together they can improve the operations of the larger system, enterprise or organization of which they are parts. We can then make all these various things and processes much more intelligent by turning the mountains of information we gather from the instrumented components and their interactions into real insights using sophisticated analysis and powerful supercomputers.
In the mid-1990s, just about every single business started to embrace the nascent new Internet and become what we called an e-business. The universal reach and connectivity of the Internet enabled access to information and transactions of all sorts for anyone with a browser and an Internet connection. Any business, by integrating its existing databases and applications with a web front end, could now reach its customers, employees, suppliers and partners at any time of the day or night, no matter where they were. They were able to engage in their core transactional activities in a much more productive and efficient way.
Some companies embraced the Internet faster, some slower. Some were happy to do so, others were dragged kicking and screaming. Ultimately just about every company became an e-business. The competitive marketplace left them no choice.
What will now happen as all these information and analytical capabilities make it possible for enterprises to become much more intelligent? I believe that over time every company will need to evolve and become an intelligent enterprise. As with e-business a decade ago, the competitive marketplace will leave them no choice.
Last month, in anticipation of this business imperative toward information-based intelligence, IBM announced a new consulting organization, IBM Business Analytics and Optimization Services, to help companies improve their information analysis capabilities and make smarter decisions. This new organization will draw on IBM’s deep expertise in research, mathematics and information management, as well as in global enterprises and vertical industries to help companies improve the speed and quality of business decisions while better understanding the consequences of those decisions.
A recent study, Business Analytics and Optimization for the Intelligent Enterprise, by IBM’s Institute of Business Value, highlights both the challenges and opportunities in becoming an intelligent enterprise. The study defines the intelligent enterprise as one that makes decisions and takes management actions based on facts and information analytics that were previously the domain of academic research instead of basing them primarily on personal experience, insight and intuition. It says that
“For the intelligent enterprise, the new reality is this: personal experience and insight are no longer sufficient. New analytics capabilities are needed to make better decisions, and, over time, these experiences will even inform and hone our gut, or instinctive, responses. Making analytics core to our thinking is the only way we can really get smarter, so doing so is an imperative not an option. The information explosion has permanently changed the way we experience the world: everyone – and everything – is leaving real-time data tracks. Intelligence is now increasingly embedded in objects, and individuals have become market segments of one.”
Most companies agree with this premise. Based on interviews with 225 business leaders around the world, the study found that about 3 in 4 of them agree that better use of information would significantly improve their business decisions. But most of these companies have a long ways to go and need help. Less than 1 in 6 feel that they are adequately leveraging information for business advantage, while 2 in 3 feel that they are just getting started.
Let me conclude with a personal observation why I think this such a big deal not only for business practitioners out in the real world, but for those in universities and other research institutions involved in business research and education.
Over the past century we have made huge progress in developing and operating complex engineered systems, like airplanes, microprocessors, bridges and cars. The key reason, in my opinion, is that we have successfully studied them using the tried and true scientific method, that is, we have a pretty good understanding of how these complex systems work, based on collecting and analyzing lots and lots of information, highly sophisticated models, powerful simulations, lots of experimentation, and so on.
What is so exciting, is that we can now extend the scientific method to the business world to help us better understand enterprises and other complex organizational systems. Over time, this will help us manage them in a more effective - and intelligent - way. This is likely to be one of the grandest of challenges we face in the 21st century, but also one of the most promising opportunities in our emerging knowledge economy.