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:
- Be Strategic
- Conduct Prediction Tournaments
- Model Expert Employees
- Run Artificial Intelligence Experiments
- Transform the Organizational Operating Model
Let’s now discuss the strategic opportunities in detail.
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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