Intelligent Enterprise is the concept originally introduced by James Brian Quinn that highlights the driving role of intelligence in organisational success. In simple terms, it implies that organisational profitability and sustainable competitive advantage may stem from a limited number of functions and business processes. For example, a powerful manufacturer of innovative designs may outsource its physical production but still be a market leader due to its focus on the key elements of its success. This is similar to the use of a high-quality grammar checker in your promotional campaign. While it does not define your main strategy, you can use it to ‘outsource’ some simple tasks and save the valuable resources of your writers, editors, and marketing specialists.
In this article, we will analyse what is the main promise of the ‘Intelligent Enterprise’ and what impact it might have on service and management paradigms.
Key constituent elements of an intelligent enterprise
According to Quinn, the following premises characterise the concept of an intelligent enterprise.
1. Human talent defines success
Highly knowledgeable personnel members who are motivated by their superiors create value for organisations by developing innovative solutions increasing the productivity of business processes.
2. Ideas are more important than resources
As opposed to traditional resource-based concepts such as VRIN (valuable, rare, inimitable, non-substitutable), modern organisations usually have access to most resources they need. In this situation, their capability to effectively utilise them is more important than the availability of such elements.
3. Internal organisation acts as a multiplier
Effective human resource management practices and internal systems allow companies to organise their human resources more effectively. This leads to higher levels of creativity and innovation supported by knowledge management systems and similar tools.
4. Ownership is not required
As opposed to traditional ownership of vertically integrated supply chains and manufacturing facilities, the concept of an intelligent enterprise implies the use of outsourcing when necessary. The production of some items in overseas facilities may be preferable if it allows a company to realise its ideas. A good example of this approach is Apple that develops its innovative smartphones, laptops, and other devices in the US while manufacturing them in China.
5. Focus equals flexibility
The focus on core competencies and company strengths allows intelligent enterprises to minimise their unnecessary costs and prevents them from ‘spreading themselves too thin’. As a result, they become more flexible. For example, the capability to outsource the production operations means that they can choose any supplier or move their manufacturing operations between different countries to maximise their savings.
Implications for service and management paradigms
Quinn views modern organisations are ‘packages compiled from interdependent services’. This means that they can transform some parts of larger business processes into separate businesses. An example from their book demonstrates how a producer of mining items eventually became a tool storage company, which led to higher profitability rates and lower competition due to the focus on a narrow niche. From a management standpoint, this requires the use of knowledge management and organisational learning systems that identify, measure, develop, and store the intellectual assets of an organisation. Effectively, these paradigms can be recognised in the following elements.
1. Strategic focus is on customer value
Consumers need to recognise the value of company offerings. As a result, the companies need to prioritise the business activities creating it while other areas may be outsourced or treated as less significant ones.
2. Production is disaggregated in favour of services
Most consumers view company offerings as a holistic service experience involving all value-adding elements. In this scheme, the use of outsourcing, third-party distribution platforms, automation, and other ways of cutting costs and utilising the core competencies of specialised providers is more important than controlling the whole cycle of production and distribution.
3. All intellectual capital needs to be captured
Employee ideas and innovations must be rewarded to stimulate the accumulation and development of intellectual capital. This process can be facilitated by knowledge management systems ensuring the free flow of information between different organisational departments and its storage.
4. Knowledge needs to be used as leverage
Knowledge management systems must support training and development activities of new and existing staff members to promptly spread new ideas. The cumulative effect from such implementation creates even more value due to organisational improvements and economies of scale achieved through business process optimisations.
How can modern companies become intelligent enterprises?
The analysed concept has a number of clear advantages that can be used by modern businesses willing to increase their innovativeness and optimise their internal operations. Here is a list of steps that can be initiated right away to start transforming your firm into an intelligent enterprise.
1. Create a knowledge database
Knowledge management is one of the key activities making intelligent enterprises extremely effective. Any employee needs to be able to share their insights and ideas with their peers. Similarly, the accumulated knowledge and best practices must be instantly available to any staff member encountering a problem faced by their colleagues in the past.
2. Introduce reward systems
Knowledge-sharing and knowledge creation must be properly rewarded to start developing your intellectual capital. Make sure that every person creating value is intrinsically and extrinsically motivated to adhere to the desired behaviours. You may also introduce mentorship schemes to develop organisational talent more effectively.
3. Identify your strengths
Analyse the core elements creating customer value (you may need to organise some focus groups, surveys, and interviews for this purpose). As soon as you find these strengths, focus 80% of your resources on them and look for ways to outsource other non-critical operations and cut costs. If you make the best pizza in town, you do not need to also own the best delivery fleet in town to be successful.
4. Outsource your weaknesses
The flexibility offered by the exclusion of all non-core activities allows you to have a choice of suppliers and strategic partners who can perform these activities for you. Make sure that you develop a network of providers in order to guarantee a seamless delivery of products and services to your end customer.