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Intelligent Enterprise

In order to contest and survive in this competitive business environment, organizations need to work towards developing a Differential Advantage that others cannot imitate.

Organizations, generally, draw Differential Advantage from price reduction, proprietary intellectual property, key talent, or visionary leadership.  However, in this age of disruption and knowledge economy, a shared capability to reach evidence-based, rational choices and decisions is required to create and maintain a sustainable Competitive Advantage.

Creating an Intelligent Enterprise, able to make smart decisions, depends on 2 key factors.

  • The increasing power of computers and Big Data, which enables operations research, forecasting models, and Artificial Intelligence (AI).
  • The growing comprehension of human judgment, reasoning, and decision making. Years of research has revealed a wealth of information about what humans do well and where they lack.

To be an Intelligent Enterprise, executives need to have a sound understanding of human decision making and evolving technological capabilities to produce superior judgments.  Management needs to develop strong capabilities in combining the 2 key factors—human intelligence with data and technology—to make informed choices.

Incorporation of computing capability (hard side) with human judgment (soft side) isn’t simple—but once done properly this can be a game changer for an organization.  A number of organizations are already developing smart Decision Making and superior judgmental capabilities by utilizing Big Data and Predictive Analytics.  Intelligent Enterprises leverage 5 strategic opportunities to outsmart their competition:

  1. Be Strategic
  2. Conduct Prediction Tournaments
  3. Model Expert Employees
  4. Run Artificial Intelligence Experiments
  5. Transform the Organizational Operating Model

Let’s now discuss the strategic opportunities in detail.

Be Strategic

The 1st opportunity entails doing a thorough analysis into previous organizational forecasting models and pinpoint areas where improving subjective predictions can make a positive impact and pay the highest dividends.  This analysis into the forecasting models assists in prioritizing the problems to be tackled.  Ideally, the top problems to solve should be where hard data and soft decision-making skills can be effectively integrated.

Management is often unaware of the faults of the guesses their analysts make.  Leadership should be asked to provide a detailed defense of their opinions and review the results of their choices and fundamental assumptions.  The key is to avoid psychological biases and unjustified assumptions.

Conduct Prediction Tournaments

The 2nd strategic opportunity demands identifying the ideal forecasting methods by encouraging competition, Experimentation, and Innovation among teams.  To create superior forecasts, leadership may use Prediction Tournaments to discover the teams and methodologies that produce the soundest decisions.  Prediction tournaments encourage teams to assess the probabilities likely to happen and evaluate the predictions that proved correct afterwards.  The organizers of Prediction Tournaments come up with relevant questions and draw participants to provide answers.  Teams are urged to ignore biases and conduct Experimentation to boost the accuracy of their forecasts.

Empirical research and years of trial and error in Data Mining and Analysis indicate 4 factors to be critical in developing and improving the forecasting skill in teams:

  • Ascertaining the characteristics of reliably superior forecasters.

Interested in learning more about the other critical factors and strategic opportunities that Intelligent Enterprise utilize to outsmart their competition?  You can download an editable PowerPoint on Intelligent Enterprise here on the Flevy documents marketplace.

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About Mark Bridges

Mark Bridges is a Senior Director of Strategy at Flevy. Flevy is your go-to resource for best practices in business management, covering management topics from Strategic Planning to Operational Excellence to Digital Transformation (view full list here). Learn how the Fortune 100 and global consulting firms do it. Improve the growth and efficiency of your organization by leveraging Flevy's library of best practice methodologies and templates. Prior to Flevy, Mark worked as an Associate at McKinsey & Co. and holds an MBA from the Booth School of Business at the University of Chicago. You can connect with Mark on LinkedIn here.

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