Exploring Concepts of Intelligent Enterprise

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Rick Dove, Paradigm Shift International, www.parshift.com,

The International Council on Systems Engineering (INCOSE) is forming an interest group to explore aspects of the Intelligent Enterprise. What does intelligence mean when applied to an enterprise? Jack Ring, co-leading the effort, says enterprise intelligence is indicated by agility, dynamic stability, and goal-seeking behavior. He sometimes interchanges the phrase response ability for dynamic stability. But he hasn't yet committed to a definition for an Intelligent Enterprise.
   Jack would never pretend that there is some righteous and absolute definition for Intelligent Enterprise, but he clearly wants to use that phrase to encompass whatever it is that this interest group will agree it means, and then explore. If this term is necessary, then it must clearly mean something beyond the other terms we already have, like lean enterprise, virtual enterprise, agile enterprise, adaptive enterprise, learning organization, whatever.
   What would you expect the phrase to mean?
   As I ponder this question I see that one basic way we use the word intelligence is to distinguish ourselves from other life forms. We have it, they don't. When we use the word this way we are generally referring to the basic human abilities to understand a situation, no matter how big or small, how social or technical, evaluate the issues and options presented by the situation, and adapt to it appropriately as it changes, and as our perceptions of it change.


...the most important characteristic
a stock analyst looks for is
the ability to implement strategy.


At the heart of all of this is the human ability for continuous and real-time learning, that results in continuous decisions based on integrating new with accumulated learning, and implementation of those decisions to change behavior. We walk through life doing this daily and unconsciously, and getting away with it quite well.
   This word intelligence, when used this way, reflects an ability to understand a changing environment and adapt accordingly, and to both understand and adapt across a very large spectrum. We relate the degree of intelligence one has directly to both the depth and expanse of understanding, as well as the appropriateness of adaptation. And we recognize intelligence as a human characteristic who's presence has served us well as a prime survival mechanism, regardless of how we got it.
   In this light, if we speak of an intelligent enterprise, we might distinguish it as one which understands (knowledge) the situation it is faced with, learns continuously from it as it changes (learning), and adapts (response ability) appropriately (decisions) to result in markedly superior achievement of purpose (goals).
   Okay, maybe I'm beginning to see how Jack's choice of terminology might describe something distinctively useful.
   My own personal distinction between "response ability" and "agility" is to see the first as a capability (like having fast-twitch muscles) and the second as this capability plus the knowledge necessary to know when it should be exercised. I've always recognized that this isn't the end of the story – for knowing enough to make a decision and actually making it are further distinguished by action, and action, of course, is further distinguishable by result, which is a quality issue.
   Action. It is said that the most important characteristic a stock analyst looks for is the ability to implement strategy. Notice that this is not a focus on the quality of strategy, but rather the ability to implement it, whatever it is. Goal seeking action.
   Nolan Bushnell, the father of computer gaming, made a statement quoted in a San Francisco newspaper years ago that will always stick with me: "Ideas are $%#&, implementation is everything. Anyone who's stood in the shower more than ten minutes has had more ideas than they'll implement in a life time."
   Allen Fairbairn from the UK, Jack's co-lead for the Interest Group, "...would distinguish an IE as having the growing ability to know what to keep looking for and acting/reacting/responding to, in order to achieve its stated goals, which are themselves in a state of flux, or dynamic stability. This would be [in contrast to] an unintelligent enterprise that also had stated goals, data gathering abilities, and even an understanding that things may need to change all of the time, but lacked the intelligence to sift what was coming in.
   Allen argues to include the quality of decision as necessary to warrant the term Intelligent. This is related to my suggestion that the breadth and depth of how someone understands a situation is one way we distinguish degrees of intelligence among different people.
   Jack caps the vote for a quality requirement by making it a competitive measure: "An enterprise is intelligent to the degree that its behavior matches the needs of its customers, suppliers and stakeholders better than does the behavior of competitors and rivals."
   Last year's dot.bomb crop wouldn't qualify as intelligent enterprises. They multiplied like flowers after a rare desert rain, never questioning how often it rains. Clearly uncaring of the real situation.
   This interest group is forming as a community of practice under the International Council on Systems Engineering, and intends to look at enterprise through a systems engineering lens, with the tools and models this discipline brings to the table. However, enterprises are systems where humans are both the primary components of the system and the key drivers of its behavior, introducing a whimsical and sometimes irrational element that will both stress and stretch system engineering concepts.
   I am intrigued.
   Business can be looked at as processes, practices, and people. The processes are those automated procedures we employ to conduct the activities of business. Practices are those belief and knowledge systems that substitute for process when a procedure does not exist. Practices also influence how we design and operate formal processes, and how much integrity and fidelity we require of formal processes.
   People are the gremlins that keep the processes running and the practices performing, as they feel whimsically self-directed at the moment. People are not rational in a grand sense, but only in a self-sense, at best; and subject to discontinuous changes and inconsistencies in that self-rationality.
   At the heart of this interest group's work is the notion that an intelligent enterprise is a system that is "engineered" as such. It has processes and practices that, in spite of the people, prevail. If we view the operating part of the enterprise as consisting only of these three (processes, practices, people), then I suspect it is in the practices which mitigate between the people and the processes where we will find the conjuring of intelligence.
   Putting people in your systems theory equations sounds like fuzzy-logic-meets-systems-engineering. There is some precedent, however.
   My minor at university was economics, and the prime text we had to read at the time was called The Theory of the Firm, which assumed perfect markets with perfect information and perfectly rational decision making. Sound mathematical models easily explained price elasticity and supply-demand curves. Markets were explained as the emergent result of many firms maximizing their profit potential by observing these supposedly natural laws. The theory of the firm was based on the prediction of rational decisions by the firm, according to market realities.
   This was economic gospel until 1963, when A Behavioral Theory of the Firm, written by Cyert and March, broke with this conventional thinking. Cyert and March suspected that the mathematically perfect view was flawed, and set out to observe the actual behavior of firms in decision making processes. Ample evidence shows that perfect knowledge is not obtained by decision makers, decisions are not particularly rational economically, and conflicts exist within the organization. If these observed realities are at work in the firm's economic decisions, it is reasonable to expect similar irrationality in decision making throughout.
   In their 1992 preface to the second edition, they comment on how contemporary thinking has caught up with some of the ideas they had expressed in their first edition: "The agenda and the first steps we proposed were somewhat deviant from dominant ideas in both economics and organization theory when the book first appeared. In the years since 1963, conventions of theoretical discourse about organizational decision making have changed, and a number of ideas discussed in the book have become part of received doctrine. In particular, a perspective that sees firms as coalitions of multiple, conflicting interests using standard rules and procedures to operate under conditions of bounded rationality is now rather widely adopted in descriptions and theories of the firm."
   The Intelligent Enterprise Interest Group will define its precise mission at its first meeting in October. In anticipation, Jack Ring suggests that the group might explore and demonstrate the utility of system engineering for evolving Intelligent Enterprises; and further suggests that that the group might specifically:

  • determine how enterprise intelligence can be assessed
    and diagnosed
  • determine the interventions and/or environments
    appropriate for evolving enterprise intelligence
  • construct a model showing the relationship of enterprises’ intrinsic
    and extrinsic attributes to degrees of enterprise intelligence
  • clarify how system engineered enterprises can be matched to the
    challenges of their mission and nature of their organizational context
  • directly experience the implications of an Intelligent Enterprise
    by operating as an IE

Most interesting to me is this promise to "determine the interventions and/or environments appropriate for evolving enterprise intelligence." For me, this is where the real payoff is. Right now I am totally immersed in a major corporate project at Silterra, a semiconductor manufacturer, to help create what Jack's group might call an Intelligent Enterprise. Though much of the initial work is focused on infrastructure, in the end it will all hinge on intervention and environment: confronting and molding a culture.
   That an enterprise should be "engineered" is also a front line effort we are wrestling with at Silterra, complete with a proposed office of business engineering. An office of business engineering at the highest and most strategic level should not come as a surprise. It is little different than what we preach at lower levels of business process and practice – namely, that there should be a continuous improvement effort on what we do and how we do it, and there should be zero tolerance for recurring problems...a problem being an opportunity to develop an insight that directs a system correction.
   If you want to explore participation in this Intelligent Enterprise Interest Group, contact Jack Ring at jring@amug.org. He is looking for serious players who will share and use ideas in real world projects at for-profit, non-profit, and government organizations. A critical mass of international participants is already committed.


2001 RKDove - Attributed Copies Permitted
Essay #062 - Published Nov/Dec 2001 in Automotive Manufacturing & Production, Gardner Publications


Would you like to offer some thoughts or add to the dialog? Your sending of a comment automatically grants us permission to edit and post at our discretion. Send your comment to
========= Reply =========================
From: JessFreitas@numeta.com   (Jess Freitas), Date: Sat, 29 Sep 2001
I am interested in exploring how String Theory might serve as a useful metaphor for "System Engineering" as you describe in here. From a "General Systems" perspective (i.e. emerging new knowledge reflected in various disciplines) the "String Theory" inquiry is my proposed doctoral thesis in Human and Organization Systems [HOS] at the Fielding Institute  http://www.fielding.edu/. Current advanced manufacturing research to be built upon includes www.ims.org programs:

My thought process is to utilize the emerging knowledge of quantum physics to establish a way of thinking about the   Virtual / Fractal Factory distributed Manufacturing Environments:

  • Hierarchical = Theory of Relativity -- good for describing large scale systems
  • Heterarchical = Quantum Mechanics -- good for describing what is going on at the evolutionary adaptive level
  • Open Space Technology = Discovery Zone http://www.openspaceworld.org/

String Theory then with it's 9 to 12 dimensions would be used to draw illuminating comparisons between the emerging discoveries of the "unified field theory" in physics and apply these insights to the emerging distributed manufacturing solutions relative to the dimensions/plans of entity-relationship-data-model/ERP and PDM and CSM and SCM... seeking to add to the breakthrough concepts of demand flow / lean / agile / manufacturing replication center's etc. that are increasingly harmonizing the data, material and cash flows of the global manufacturing web. An interpretive framework that allows for seeing new and better ways.

========= Reply =========================
From: (Rick Dove), Date: Mont, 29 Oct 2001
I'm unable to speak to string theory myself, having long since decided it is an area better suited to others to think about. I applaud your choosing the IMS programs to build upon - I like their consortia approach to collaborative knowledge development, and have always been interested in the program focused on holonic manufacturing concepts - though they have been at it a long while and I've seen nothing seeping into the general knowledge base.

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From: jack@jackring.com  (Jack Ring), Date: Thu, 1 Nov 2001
I am somewhat familiar with the HOS program at Fielding because I know one of the graduates, Susan Osborn, and for ten years have considered entering the program but never got it high enough on my time and money list to make a commitment. I am not as familiar with string theory but think I get the gist of it. You will be the judge of that.

First, I have to ask, why string theory? What problem system are you intending to address and what are the degrees of freedom of the set of problem symptoms you are interested in suppressing? I ask this for two reasons. One reason is that Ashby's Law of Requisite Variety warns that your "solution" must exhibit higher variety than does the problem system facet you want to suppress but Lanchester's Law and the system principle of parsimony says that the costs of seeking too much variety increase rapidly and the variety will not be used. The second reason I ask is because the applications you mention, manufacturing and business enterprises, are largely constrained by people and you probably do not need 9 to 12 dimensions to deal with "peopled systems" even though such systems are partially composed of those strangely indeterminate components.

I may be biased by years of playing with intake and exhaust systems for high performance internal combustion engines where the name of the game is discontinuous, compressible flow (what is the limit of acceleration of air?) but I see that people interactions are essentially discontinuous, compressible, thus can be modeled by second order implicit differential equations. Now, we don't have decent models at this level, so why would you want to take on string theory?

Unless string theory has a strong attraction, I encourage you to look into the theories and partial experimentations of Prof. Rudolph Starkerman and consider how to further that work.

On the other hand, if string theory is a strong urge then, yes, an explanation of how the 9 to 12 dimensions of ST map to the several dimensions of a general system model; especially a model of a System A that not simply controls System B but "generates" system B (the stork doesn't bring systems, either).

I seriously question the utility of using plant and animal models for describing or prescribing or permitting behaviors of human systems. Doing so ignores the added factors that humans bring into the game. Worse, too often the resulting models use humans as cogs or levers. Clue. Do not try to help any company that has a Human Resources organization. They simply do not understand.

Although the concept of holon is quite valuable, in the limit it is an attempt to characterize second order dynamics in hierarchical terms. The concept of holon can be replaced by the concept of mode. I dare say you operate in a different mode on the futbol pitch than when waltzing with your significant other. When Bridey Murphy exhibited as many as 23 distinct personalities was she a collection of 23 holons or simply a system having 23 patterns of relationships?

Seems to me the notions that have surfaced are the duals of: 1) hierarchy vs. heterarchy, 2) structure vs. process (as in BOM and Routings) and 3) statics vs dynamics. Hierarchy is rumored to be stronger and more orderly than heterarchy but such is not necessarily the case. Also, note that the popular model, "people, process and technology" is not valid because people and process are not orthogonal. People and process Plan are distinct but Process is an emergent characteristic of mixing people and resources and Plan and time. This is a deep problem because the language of humans acknowledges structure but not time. Thus we see process as "a series of tasks or steps" meaning, of course, structure. If you don't believe me, tell me how (or send me a process diagram for) a neural network determines whether an applicant qualifies for a loan.

Think of three elements and one relationship between any two. Think about that relationship being static. Now think about it being sinusoidal. Now think of the three elements expanding and contracting where each has a distinct frequency but the frequency varies over time. Now think of the relationship switching around between the best two out of three that harmonize with its frequency. Now you are close to a value web. Information, having no mass, cannot be pushed, only pulled.

Cheers, Jack

========= Reply =========================
From: JessFreitas@numeta.com (Jess Freitas) Date: Fri, 2 Nov 2001
Small world, Susan Osborn was my Faculty Advisor for my MBA Capstone Project on Quality Function Deployment at College of Notre Dame Belmont -- and her Advisor at Fielding had been my Fraternity Big Brother at Stanford Doug Adams

I am approaching this from more of a Social Science  perspective rather than hard science -- however, looking to General Systems Theory in terms of Physics revealing some key truths relative to ways to think about systems.

So, risking that this may be more poetry than anything else -- my motivation is to suggest a way for information systems, human systems and management systems to allow for and appreciate the need humans have for meaning and purpose in their lives. Suggesting that Dr. Deming was on to something we he postulated that businesses have two reasons to exist: 1) provide products and services that enhance the quality of people lives; 2) provide interesting jobs for people to do.

Having read much on various systems theories (i.e Socio- technical-systems; systems dynamics; self organizing; complex  adaptive etc.) -- I heard a television interview of a leading  physicist (who's name escapes me) who very clearly and eloquently  described for the TV Audience the concept of String Theory. He  explained that Einstein's Theory of Relativity did well in  explaining the behavior of large objects like planets etc. and  that quantum mechanics on the other hand more accurately  captured what was observed to be happening at the quantum level...  Following, then was String Theory with it's 9 to 12 dimensions/  planes or what have you that is appearing to offer a unified view  of the two aforementioned theories.

So beginning there, I plan to offer Relativity as the "Control" lenses/paradigm through which to view the manufacturing enterprise (i.e. ERP, Financials, specifications etc.) with Quantum Mechanics providing the lenses/paradigm for "Order" (i.e. time related emergence, complex adaptive, autonomous agent kinds of synchronization) -- with the primary 3 strands of String Theory represented by 1) Information Flows; 2) Material Flows; 3) Cash Flows -- with the Information Flow domain enfolding the remaining dimensions that would hopefully shed light on how one might think of unifying an IT Systems Environment -- an interpretive architecture/framework that would hopefully become  usefully descriptive of the J2EE Containers taking form... --  this is -- an explanation for why MRP II's Control Oriented Data Model needed to give way to the emerging pull system-solutions, at the  operational planning level (hopefully, something encouraging could be  discovered from this line of inquiry, in terms of how to more effectively  organize the Fractal Factory or what have you... [i.e. Numeta software has  a BOM that can be indented or flat -- my sense is that this both/and  ability will be come increasingly useful as more and more firms seek  to deploy the Agile Enterprise Model].

Poetry, possibly useful or...?.
Jess Freitas, Senior Account Manager, www.numeta.com
408/392-9988 x323, 707/291-8400 mobile

========= Reply =========================
From: flexcom@hellasnet.gr  (Alexander Tsigkas), Date: 8 Nov 2001
The agile company must also become adept at changing the organisation. It is not only the ability to make changes; it is the ability to recover quickly and effectively from the disruption caused by the changes. Like a light-weight boxer or a graceful gymnast, an agile organisation can elegantly recover from any blow or disturbance. How do you think, this could be possible?

========= Reply =========================
From: (Rick Dove), Date:  8 Nov 2001
As to your question...agility from my perspective has always been focused precisely on minimizing or eliminating the disruption caused by change - enabling change by removing the inhibiting factors. And I have suggested that this is accomplished by:
(1) a change proficient corporate culture.
(2) a systemic structure (of the things to be changed) based on ten design principles that enables change with little side effect.

Both of these concepts are explained in great detail in my book, and discussed, somewhat less coherently, as work in process in the various essays in the library on this site.

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