Agility Essay #63: A System Framework for Intelligent Enterprise

A System Framework for Intelligent Enterprise

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

In an earlier essay we explored what distinguishes an "intelligent" enterprise, and concluded that it would exhibit goal seeking behavior, exercising its potential for agility by understanding its business situation, learning and adapting continuously as the situation changes, and demonstrating sustained achievement of purpose.
This enterprise intelligence is a result of the way the enterprise is built and operated. It is wired into the fundamental structure and fabric of the enterprise. It is neither the result of a management team's annual strategic whimsy, nor the collective talent of a group of employees, but rather a phenomenon that emerges by design. There is little human choice in the matter. A higher order of systemic design reigns.
We will explore here what goals, principles, and sub-systems might be employed to design such an enterprise.

Fundamental Goals
I suggest that four fundamental goals might drive the manifestation of enterprise intelligence:

Recognize opportunity.

Take advantage of opportunity.

Recognize threat.

Minimize impact of threat.

These four goals are timeless - meant to endure. They are fundamental and amoral, like the so-called human reptilian limbic brain that functions at the unconscious survival level. It is left later to things such as enterprise vision, mission and strategic principles to socialize this shark of a company into something with higher purpose and identity.

...like the so called human reptilian limbic brain
that functions at the
unconscious survival level.

Here, we focus on the nature of a goal seeking system that can deliver "sustainable" achievement, intending to understand its fundamental concepts and subsystems, and their implications - a prerequisite for crafting compatible vision, mission, and strategic principles.
   Jack Ring, instigator and co-lead of the INTteligent ENTerprise Alliance (www.intentalliance.net), built an initial strawman of principles and subsystems that he suggested might mold an intelligent enterprise. I've taken some liberty with that work, and pressed him into active collaboration, to include agile enterprise concepts consistent with the models my research has indicated.

Key Principles
Much like the timeless goals above, principles are design and implementation guidelines and objectives that might be satisfied many different ways under many different circumstances, yet remain true and unchanging across time and circumstance. They provide unequivocal direction without prescribing a precise means of achievement, and function as a strategy test when changing circumstances bring confusion.
   There are four principles suggested as guides to the design of an intelligent enterprise system. They are presented next as a linear flow of dependency, but the accompanying figure shows a richer interlinkage.
   1) Knowledge management - Knowledge should be appreciated as the fuel of the corporate engine, and known as actionable understandings that employees have learned. Knowledge value is related to time, and the further from prime time that knowledge is obtained, the lesser is its value. Knowledge of the external world that can affect corporate success limits the quality of strategy and decision. Knowledge of the internal world that can affect performance and implementation limits achievement of strategy and decision. The principle of knowledge management means having the right knowledge in the right place at the right time.
   2) Reactive and proactive balance - Planning is a process that develops a model of action which is expected to achieve a result. Knowledge is employed in this process to characterize the situation which must be addressed, shaping and limiting the quality and nature of the plan. Some plans are triggered by an involuntary reactive need to respond to an event or condition, others by the voluntary proactive pursuit of an opportunity or advantage. In either case the actual situation presents both reactive and proactive dynamics, and a robust sustainable result will be shaped by knowledge of both. The principle of reactive and proactive balance means strategies are based on knowledge of situation dynamics, maintain a balanced blend of reactive and proactive objectives, and are brought into play decisively.
   3) Response ability - Having a plan is of no value if it cannot be acted upon effectively. The ability to carry out a plan is enabled or inhibited by the abilities to assemble resources and implement change. Plans triggered by new knowledge are generally unanticipated. The principle of response ability means having an explicit competency, appreciation, and methodology for dealing effectively with unanticipated change, of any kind, and in any area, of the enterprise.
   4) Dynamic integrity - An enterprise is a living system, reshaped continuously by people making daily decisions at all levels. The integrity of an intelligent enterprise (at this limbic level) is maintained to the extent that the key subsystems are actively managed and reshaped to fit the changing business situation in pursuit of enterprise goals, without compromise of key principles. This is accomplished when continuous learning informs competent decision makers who take decisive corrective actions.

Key Subsystems
The four cornerstones of the framework above are expressed by six subsystems, which are formal activities of the enterprise. These subsystems do not necessarily equate to entities on the organizational chart, but may in some cases be distributed across the enterprise, or embodied in procedures or IT applications. In each case, however, we have a formal process with designated responsible ownership, clear time-based objectives that continuously evolve, and performance metrics.
   1) Resource portfolio management - provides the top-down directed component of the knowledge management. principle. The right profile of the knowledge resource is as important as the right profile of other resources such as money, materials, machinery, processes, data, etc. The knowledge portfolio must be managed to anticipate emerging needs, satisfy current needs, and weed out the obsolete needs everywhere in the enterprise. It is responsible for the identification, acquisition, diffusion, and renewal of all knowledge that is appropriate.
   2) Collaborative learning management - provides the bottom-up grass roots component of knowledge management. It embeds in the employee group an appreciation for the learning process, an appreciation for the value of continuous learning , a demand for new knowledge, and a propensity for collaboration and knowledge sharing . It is responsible for facilitating and nurturing collaborative knowledge development and knowledge sharing, and for creating and maintaining an environment that facilitates learning beneficial to the enterprise.
   3) Adaptable structure management - provides a framework and module architecture for enterprise systems, designed specifically to facilitate change. It is responsible for formulating and enforcing rules of framework design and module interaction for key enterprise systems and infrastructure, consistent with adaptable systems principles.
   4) Change proficiency management - embeds in the employee group a vocabulary and metric basis for change performance, knowledge and appreciation of adaptable enterprise systems, and a view of problems and opportunities in terms of their dynamics. It is responsible for acculturating the concepts of change proficiency throughout the enterprise, to the level of unconscious corporate competency.
   5) Decisive action management - provides timely attention to decision making. Responsible for illuminating situations which require decision, identifying time value and penalty for resolution, and causing clear decisions to be made and carried out as appropriate.
   6) Competency and talent management - provides competency in all positions and talent where the enterprise can benefit from strategic leverage. It is responsible for having the right skills in the right place all of the time, especially for decision making quality.

Goal Seeking Emerges
Constructing these managed activities in accordance with the principles, and with an eye toward achieving the goals, results in a goal seeking system. It has a clear goal definition, knowledge of the path it must take to reach that goal, feedback measuring deviation from the modeled path, and means to employ this feedback as a direct driver of corrective action. In goal pursuit there is little decision or whimsy involved, as is the case in traditional peopled systems, where denial, hope, delay, incompetence, and ignorance come into play. In a goal seeking system, delay in feedback, feedback evaluation, or feedback driven corrective action causes oscillation around the desired path, and generally a missed goal.
Enterprise intelligence is then a characteristic of the enterprise entity, not of transient people; and equivalent to the volume of the pyramid shown in the accompanying figure. Sustainability will not disappear if the president retires, nor weaken when valued employees are wooed away to other challenges. The enterprise is a goal seeking system built to achieve purpose in a dynamic and unpredictable business environment..

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From: ttolman@evergreenengineering.com (Tom Tolman) Date: Tue, 22 Jan 2002
I found it interesting that you used a tetrahedron to model the Intelligent Enterprise System Framework. This is the fundamental first order stable structural unit as identified by Buckminster Fuller in Synergetics. As you have modeled it, the four Key Principles/Concepts appear at the four vertices and the six Key Subsystems as the six edges; could the four Systemic Goals be assigned to the four faces?

I have no feel for the validity of the tetrahedronal analogue or how far it might be pushed, but real systems don't have the perfection of equal-length edges or equal-area faces, and in the presence of a gravitational gradient may topple if these factors are too unbalanced. Also note that two of the Systemic Goals are "recognition" and the other two are the corresponding "actions".

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From: jring@amug.org (Jack Ring) Date: Wed, 23 Jan 2002
To amplify on the "emergence" aspect of the intelligent enterprise --- consider that we can remark about the properties and behaviors of hydrogen and we can remark about the properties and behaviors of oxygen. These remarks say nothing about the properties and behaviors of the system that results from combining two H with one O. H2O is a sign or pointer to something we call ice or water or steam (depending on its situation). This system exhibits behaviors that are not seen in hydrogen nor oxygen alone.

In an IE the idea is that it is more than the sum of its parts because the parts are cleverly combined (interrelated) such that unique behaviors emerge. And these behaviors are different depending on the situation the enterprise is in. If the enterprise temperature is low enough then its limbic system can keep on keeping on and change is not an issue. If the enterprise temperature gets higher due to friction between it and its market or competitors, then the enterprise has to behave more like water, seeking level no matter how the vessel is tilted and tossed. And if the temperature gets even higher the enterprise may have to achieve an even more agile gaseous state. It may then disappear or may condense on some new "market surface" with a new product.

The system, if properly assembled with the right amounts of KM, Response Ability, Reactive-Proactive etc. exhibits an emergent behavior that is called Goal-seeking. This is a behavior that can seek one goal at the limbic level but with higher intelligence can seek multiple goals, and at the highest level can seek the best compromise of divergent goals or even sublimate and make decisions not that maximize goal achievement of minimize goal loss but maximize the likelihood of being around long enough to make a subsequent decisions when the temperature changes.

The net of all of this is Goal Seeking.

You've labeled the corners and links, but not the surfaces. I suggest that they would be Operate, Adapt, Align, and (the base) Resources. He who makes the most intelligent use of his resources, wins. But, to be clear, humans are not resources. Humans are the sources of enthusiasm and innovation.

Goal seeking system is a concept. It is what you get when the pyramid is all there. If all the molecules are not there, you don't get it.

GS has Goal, Trigger, Energy, Competency, Statusing and Feedback. Goal, and Statusing are KM related, Feedback is Response Ability related, Trigger is Reactive-Proactive related. Energy (enthusiasm) is related to Collaboration. Competency (especially dC/dt) is related to Learning, which is an aspect of KM.

The volume of the pyramid is the indicator of its intelligence. Intelligence has units, work/time, or POWER. The two main drag factors (friction) are adaptable infrastructure and change proficient culture (which is just another name for adaptable infrastructure in the formless world of concepts and emotions).

Note the "throttle" effect of the Integrity concept. This is critical because the other aspects of the IE will tend to evolve at different rates thus distorting the system. The Integrity factor keeps the system in balance, suppressing, if necessary, some parts of the system to wait for others. Of course the maximally intelligent enterprise would evolve at the speed of opportunity, not having to suppress anything.

A key thought is that the vertices require the ingredients of the edges. This does not mean that the edges generate the vertices. It just means that the edges are like the top half of the recipe. There are things still to be said about how the vertices go about creating their contribution to the faces (ie., Response Ability is a lot more than just three inputs).

The second key thought is critical mass. Until all are there, the Goal Seeking System doesn't emerge, thus the enterprise does not morph to "best fit" its context. It may still morph but not as well as actually possible. In fact, many enterprises think they can have bigger boobs simply by investing in a bra with larger cup size.

The third key thought is Reflexive. This means that when a Goal Seeking System does emerge it operates not only on the context but also on all components and relationships that comprise the enterprise, making each more goal-seeking and harmony seeking. Culture, for example, is only a label for a "chord" sustained by a subset of the enterprise who adopt the chord as a goal. Culture is not a component. Culture is tacit reflexivity (quid pro quo). Likewise is wisdom.

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From:

(Rick Dove) Date: Wed, 23 Jan 2002
People in the system instead of automatons allow the system to be response able to unforeseen conditions and opportunities. Natural self organizing systems such as ecologies and stock markets respond to unforeseen situations as well, but do not keep a goal in mind. More importantly, they cannot rebuild their basic system design. In theory people can. In practice, they do not. That is, people are hide bound with limited abilities to see new models just as self organizing inanimate systems are restricted to work within the bounds of their self-organizing capabilities. In business this people limitation is solved when the system gods (BoD) replaces the CEO. In natural systems there is only extinction.

Peopled enterprise systems have a distinct advantage when it comes to survival - they can restate the purpose of the enterprise. You might question that such a system survives the change, and instead suggest that it has in fact become extinct, and its parts simply reused as parts in a new system. But going there leads to an endless metaphysical story without useful lesson beyond "nothing matters", if you are one of those willing to entertain that philosophy. Perhaps I can consider that the system has survived by remolding itself to its new environment. And that survival is embodied in a coherent time-line of asset and resource conversion.

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From: skrane@parker.com Date: Wed, 23 Jan 2002
Rick, as with everything else you have written, and I have read, I think your words are well aimed and economically chosen.

What is intelligence: We humans have been successful at increasing our numbers over the past several millennia to the point of displacement of a majority (or large minority) of other Earth species due to our "intelligence". Intelligence is a measure of the ability to adapt to, or change, the environment, for the purpose of continuing to do so. As a family group, or tribe, or species, add to that definition the ability to transfer intelligence to the succeeding generation so they start from a higher baseline.

Regarding the intelligent shark-organization: It is tempting to divorce intelligence and ethics but it is a mistake to do so I think. If intelligence has to do with surviving well, particularly in an environment of change too rapid or dramatic for biological evolution to react to, then a key question would be whether ethics have anything to do with survival. I do think that the origin of ethics is traceable to selection pressures that favored ethical behavior. Selection pressures tend to give an advantage, however slight (sometimes the bad guys win), to individuals and groups where thievery, aggression and other insults to the common good are restrained and individual sacrifices are sometimes made.

Threats/Opportunities: If you define risk as risk = uncertainty = threats + opportunities then your fundamental goals become one; management of risk, where management includes recognition and prioritized action. Risk of what? Risk of not surviving is ultimately it.

I suppose I should get back to work. Good to hear from you. Keep in touch, Steve

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From: jring@amug.org (Jack Ring) Date: Wed, 23 Jan 2002
I resonate to these remarks, especially the exploration of "intelligence" similar to my recent posting on the Intelligent Enterprises conferencing system. However, regarding the last paragraph, I think it is better to say that managers must manage resources in a way that honors the risk involved. It is the resources that make the difference. Risk awareness determines how well you allocate and schedule the resources.

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From: jring@amug.org (Jack Ring) Date: Thu, 24 Jan 2002
I think Tom Tolman has discerned one of the underlying principles. Not to declare that I understand Mr. Fuller but the stability and integrity aspects of an enterprise are fundamental. Also, two other principles, in fact perhaps the very meaning of intelligence of an enterprise, are Awareness (of situation, both external and internal (sans denial) and Awareness of the outcomes of decisions taken (including the ability to discriminate effects due to the decision itself vs. the implementation thereof).

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From: skrane@parker.com (Steve Krane) Date: Fri, 25 Jan 2002
To complete the thought on whether ethical behavior is a component of intelligent behavior, for an individual, or an enterprise system:

Ethics did not appear in your definition of intelligence because the fundamental goals you list are not quite complete.

The reason that ethical behavior is intelligent has to do with the frequency and severity of the appearance of risk. In your fundamental goals you list "Recognize opportunity" and "Recognize threat". Stated in that way the goal is too passive. Intelligent behavior will influence the number of opportunities and threats that arise for subsequent recognition. Risk is not something that just happens to you. Ethical behavior generally
will increase opportunity and reduce threat and is therefore intelligent.

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From: jring@amug.org (Jack Ring) Date: Fri, 25 Jan 2002
The phrase, ethical behavior, signals that it is pertinent to the Take Action aspect of an IE. However, a deeper look at the notion of "recognize" reveals that a persons ethics colors what he sees and whether we consider any specific observation as threat or opportunity. The maintenance of sufficient ethics and the effect of insufficient ethics shows up in the Integrity aspect.

Now, is there such thing as "sufficient" ethics and how does that not get confused with "situation ethics"?

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From: skrane@parker.com (Steve Krane) Date: Fri, 25 Jan 2002
"Recognize" is an internal, passive, cognitive process that has to do with perception and assigning of meaning to that perceived. I am saying that ethical behavior, yes, actions taken, affect your environment in such a way as to modify the subsequent threats and opportunities that arise within your field of awareness, whatever ethical glasses you wear. In addition to "recognize opportunity", is "create opportunity" and that is why ethics is intelligent.

The question of sufficient ethics is an important one (particularly since more of us each decade are outfitted with nuclear weaponry). Consider basic moral codes people live by. Add your own if you find the list incomplete.

1) Do unto others as you would have them do unto you.
2) Do not do unto others as you would not have them do unto you.
3) Do unto others as you would have them do unto to you, first, but respond in kind, then do not make any further response.
4) Do unto others before they do unto you.
5) Suck up to those above you and extort those below.
6) Kin first, all others beware.

[recited from Carl Sagan's last book, perhaps not without fault] Game theorists played these codes out in a game called the prisoner's dilemma. You and you companion are jailed for a crime. It matters not whether you are guilty. If you confess, you're sentence is guaranteed, but it will be light. Likewise for your companion. If you do not confess, and your companion does you will receive the maximum penalty. If neither of you confess, you may both go free.

Now, say this happens to the two of you over and over again. 100 times (the two of you are not too bright). Knowing what happened the last time, what will you choose? Which moral code will you apply? Game theorists, I understand, have played this out to find that the total punishment inflicted on the two is minimum with moral code (3) above.

People in business apply all of the above codes but, of those in positions of power, I have observed proportionately more of (5) than any other. It's one of the bigger single organizational diseases I can name. I am reminded of my father running out of gas on the interstate with an employee of his, who, though he noticed the gage was below E, thought it was not his place to remark about it. Dad said he thought people were "too polite" in Arkansas.

In nature, individual organisms, communities of organisms, or species behave "ethically" only to the extent, and it is considerable, necessary to maximize the probability of continuation of the lower level. Individual (including offspring) over tribe, tribe over species, species over environment. That is the basis by which we all (the survivors that is) have gotten along over the millennia. Note that a preference for individual over environment does not mean that compromises are not made for preservation of environment and thus individual.

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From: (Rick Dove) Date: Sat, 26 Jan 2002
The last paragraph above puts, for me, the proper perspective on ethics: they are a luxury that comes after personal survival. I don't feel an incompleteness in the fundamental goals, nor the need to see the overt addition of an ethical parameter at this limbic system level. I believe that ethics are a choice (in peopled business systems), and agree that they can determine the degree of intelligence. That said, one may choose to install ethics into the activities of the fundamental limbic framework at any specific company, and contribute to the degree of intelligence as a result, but I don't find them necessary at this level. I believe that ethics play their proper and necessary overt role at the vision/mission/guiding-principles level where purpose and identify are shaped.

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From: jring@amug.org (Jack Ring) Date: Fri, 25 Jan 2002
Steve - The experiment to which you refer was conducted by Robert Axelrod, U. Mich., and explained in his book, The Evolution of Cooperation. Please cite your source for the last paragraph. I am interested in meeting the person who can communicate with organisms about their ethics. Meanwhile be cautious of impugning motives to the unconscious.

Rick - Your last comment raises the question I had not asked before regarding why the "limbic" analogy is used. Does "limbic" indicate that enterprises may have higher forms of behavior as do humans or what?

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From: (Rick Dove) Date: Fri, 25 Jan 2002
Yes. Limbic indicates that the enterprise is like the layers of an onion. I use limbic to indicate that the framework is not intended to be all that the enterprise is, just its very basic core which generates the potential for intelligence and sustained survival. All humans are intelligent, but we also give meaning to the notions that some are more intelligent than others genetically, and that some are more intelligent than others in the identities and personalities they become, either by choice or circumstances.

My interest in this limbic focus is because I want to make sure (in intervention) that the core is right before we start addressing the "higher" level concepts - else the higher level concepts will be tenuous and energy intensive for maintenance.

Company's are people, and people get confused. They especially get confused when the issues of ethics and morals arise - as well as when they confuse form for content.

I'm pursuing this line of thought so that I can paint for any company (right now Silterra) an inarguable line of reasoning that ties their higher level strategies to vision/mission/principles to GSS. If they want to argue about the choice of higher level strategy, they must either show that it does not support vision/mission/strategy or show a better way that does. Thus removing the amateur whimsy that is too often exhibited in all creations and judgments of strategy. The same holds for the choice of vision/mission/principles - they must be consistent with GSS or stand the risk of being superficial, energy intensive, and unsustainable.

So I have tried to remove the controversial and choice issues from the design of the core - realizing all the while that for many people the idea of an amoral core is itself controversial. But there they stand, built upon one such, an existence proof of functional success.

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From: skrane@parker.com (Steve Krane) Date: Mon, 28 Jan 2002
I don't see that ethics are a luxury after personal survival. I think there is a preference for individual survival, but not a rule. From the viewpoint of DNA, circumstances may arise in which you find that personal sacrifice is preferred. Particularly if you are no longer reproducing and your utility to your offspring or your community is low, or negative. The analogy of individual and enterprise starts to break down here since enterprises don't intend to reach an end of life decision (Enron notwithstanding). If I were running an enterprise, I would insist on adherence to a set of ethical principles, as a component of my survival and growth strategy. In establishing these principles, I would take care in stating them in a way in which they would not be sacrificed for expediency or other gain. They definitely could not be considered a luxury, when we have time, and are sufficiently in the black.

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From: skrane@parker.com (Steve Krane) Date: Mon, 4 Feb 2002
Can an enterprise be intelligent but not creative, or does intelligence imply requisite creativity? It seems obvious that enterprises can be creative but unintelligent (Enron).

If creativity is a dimension that needs to be treated separately, in addition to, intelligence, how do you set up the playing field to evoke it? My father used to say that constraints evoke creativity. That is why constraining poetry to the form of a sonnet, or music to the form of a symphony, or sculpting to the mechanical properties of stone provides an environment for the production of fine art.

In hydraulics, work is done by a pump because of the restriction (constraint) of the circuit. Pumps make flow, resistance to flow makes pressure, and the product is work. It is particularly easy to see the devastating effect of lack of constraint on children. Instead of spending their energy doing something useful, they spend their time trying to figure out where the boundaries are.

It seems an important subject to think about how to set up helpful constraints without stepping on liberty.

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