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It’s time for businesses to think.

The Cognitive Enterprise (Bob Lewis and Scott Lee, Meghan-Kiffer Press) has been released into the wild. The questions of the hour: (1) What makes an enterprise cognitive? (2) Why does it matter?

There seems to be a strong negative correlation between the size of an organization and its ability to respond in sensible ways to changing circumstances. And this lack of good organizational sense seems to be independent of how smart the organization’s leaders and staff are.

It’s as if there’s an impenetrable barrier that prevents the considerable intelligence available in a business from influencing the behavior of that business.

Superimposed on this is the industrial model of business management — the notion that businesses should be “designed by geniuses to be run by idiots.”

This is the driving philosophy of most business process design: Simplify, simplify, simplify. Which, depending on the process and its goals, often is the best answer. In truly industrial situations — manufacturing and its analogs, where the goal is to create large numbers of identical work products — simplification and standardization make all kinds of sense.

But (you know “but” was just floating in the air, waiting to be uttered …)

With a few exceptions, business is first and foremost a game. It’s about winning and losing. In the short term, it’s pretty close to a zero-sum game, where one company selling more products to more customers means some other business will find itself selling fewer products to fewer customers.

There just aren’t that many games where success comes from streamlining, simplifying, and standardizing. In football, the winning teams aren’t the ones with the skinniest playbooks. In baseball, pitchers don’t throw every pitch exactly the same. If they did, they’d get shelled.

If you don’t like athletic metaphors, consider chess. Think a grandmaster is going to win by always playing the same opening?

* * *

Business designers follow a well-worn formula: People, process, technology.

Except it’s really PROCESS, Technology, people. No, it’s worse. People are an actual impediment. Carefully designed processes, written standard operating procedures, and automation are all established to overcome the limitations of we pesky human beings.

This worked just fine in the past because of a key and rarely explored metric — the stay-the-same to change ratio.

That business cycles are compressing isn’t a new insight. What’s often missed: Establishing well-defined and (more important) well-practiced business processes, supported by optimized automation, takes an investment of time, effort, and money. Having invested, businesses need a long enough period of stability to recoup that investment.

Business cycles are compressing — the stay-the-same piece of the ratio is shorter — but the change side of the ratio hasn’t compressed anywhere near as much.

Same investment, less time to get a return from it.

Which is why Scott and I are proposing a new framework. Instead of people, process, technology, cognitive enterprises will emphasize customers, communities, and capabilities.

Start at the end: A capability is anything an organization can do, independent of whether it’s doing it right now. Capabilities are what let an organization adapt to changing circumstances.

Communities next. More and more, the men and women who contribute their efforts to an organization’s success have less loyalty to their employer. (Employers, of course, jettisoned the quaint idea that they owe their employees any loyalty long ago.)

Supplanting, or perhaps augmenting employees’ relationship with their employer is their relationship with their profession and their peers in that profession. Developers, for example, constitute a thriving community, whose members are better at their trade in proportion to their community participation.

And their employers benefit from this by getting better programmers with a smaller investment in training.

Communities build capabilities.

And then there are customers. It might seem strange that customers need mentioning, but they do. Industrial businesses have a strong internal focus — so much so that most of the business considers other parts of the business to be their customers. This internal-customer focus is the source of untold mischief.

In a cognitive enterprise, everyone has the same customer — the real, paying customer who makes buying decisions about the company’s products and services.

And, understanding what these customers want, cognitive enterprises are able to marshal their capabilities to deliver it, whether or not they have a well-define process in place to do so.

Is this all there is to it? Of course not. If it was, Scott and I wouldn’t have had to write an entire book.

And we wouldn’t be asking you to read it.

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We’re waiting on the proofs for The Cognitive Enterprise (Bob Lewis and Scott Lee, Meghan-Kiffer Press). It should be available in a week or two. To whet your appetite, here are some excerpts from the Introduction:

People, process, technology.

When running a business we have to think in these terms, or so we’re told by those who tell us such things. We’ve said such things ourselves.

But while they say “people” first, most often these business experts actually put process in first place. Technology comes in second, playing an important supporting role.

People, when they finally make an appearance … mostly represent irritating contributors to organizational change resistance. Something that must be overcome.

It’s really PROCESS, Technology, people.

While dehumanizing, this perspective worked pretty well for the industrial age of business …

Organizations “designed by geniuses to be run by idiots” was pretty much the game plan for the industrial age. Instead of operating through practices that were as smart as the smartest practitioner, businesses operated according to processes designed with a focus on simplification and standardization. These aren’t bad things in themselves, but they’re unfortunate in how they encourage employees to disengage their brains when they enter the building.

Businesses built to this model — call it the “industrial model” — are anything but cognitive. They’re nothing like an entity that pays attention to the world around it, evaluates itself and its changing situation, and continually adapts …

Even companies that aren’t in the Industrial business of creating lots of identical copies of things have, to their detriment, adopted practices designed for companies that are, because that’s “best practice” — a phrase that should, in your loyal authors’ opinion, be taken out and shot …

For more and more businesses, the industrial perspective and the hidden assumptions it rests on are obsolete. A constellation of forces are making them an impediment to success …

Before we get to that, there’s one hidden assumption that has to go by the wayside immediately. It’s the assumption that businesses are just like people only bigger …

They aren’t. Nor are they merely the sum of the individual human beings who work in and for them, any more than you are merely the sum of your intestines, spleen, brain, and so on …

Human beings are more than their component parts. Businesses are, too. They’re an artificial life form, created by human beings but non-human in their anatomy, physiology, and behavior. Among the differences, two stand out:

  • Humans are presumptively moral. Businesses are demonstrably amoral. We rightly assume most of the people around us, most of the time, aren’t going to behave in ways that are excessively nasty … the systems set up to enforce [our laws] are scaled to the assumption that people who violate them are the exception.

Businesses, in contrast, have as the bedrock principle of their moral code their fiduciary responsibility to their shareholders …

  • Human beings think before making decisions. Businesses, in contrast, aren’t intrinsically cognitive entities …

The closest equivalents to human-style thinking businesses have are the governance mechanisms that in principle make some business decision-making independent of the foibles of the individual human beings involved.

But governance is often window-dressing, with actual decision-making the result of horse-trading among the human beings who are supposed to be acting in the corporation’s best interests. It’s also commonly slow and cumbersome, unsurprising given that the fundamental building block of most governance is the committee …

But enough of that … our goal isn’t to bore you to death. It’s to provide practical guidance on making an organization behave more like an intelligent, purposeful organism and less like a directionless ecosystem.

Consider the difference between an organism and an ecosystem and it will be clear. Organisms act as a whole. As entities they make decisions, whether they’re as simple as an amoeba or as complex as Homo sapiens.

Ecosystems are just as complex as organisms … more … but don’t act with purpose … any “decision” an ecosystem makes is the accidental direction set through the “invisible hand” of all the plants and critters that live in it.

Most large enterprises are more like ecosystems than organisms, hence the old phrase, “It’s a jungle out there” …

A cognitive enterprise is one that acts more like an organism — one where business decisions are about the success of the business in its environment.

The point and purpose of this book is … to make the business, if not truly cognitive in the sense of being an entity capable of human-style thinking, at least an entity that mimics it in rudimentary but useful ways.

That’s what this book is about: How the hidden assumptions that led to the wholesale dehumanization of large enterprises are less and less valid, what the new circumstances are that are supplanting them, and what to do about it all.

* * *

Sorry. I know book excerpts don’t make for the best reading. But my wife and I took a road trip this weekend and I didn’t have time to write a real column.

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