May 28, 2016 Technology

Chief Strategy Robot

According to Martin Reeves and Daichi Ueda an integrated strategy machine is the collection of resources, both technological and human, that act in concert to develop and execute business strategies. It comprises a range of conceptual and analytical operations, including problem definition, signal processing, pattern recognition, abstraction and conceptualization, analysis, and prediction. One of its critical functions is reframing, which is repeatedly redefining the problem to enable deeper insights. Within this machine, people and technology must each play their particular roles in an integrated fashion.

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Amazon represents the state-of-the-art in deploying an integrated strategy machine. It has at least 21 data science systems, which include several supply chain optimization systems, an inventory forecasting system, a sales forecasting system, a profit optimization system, a recommendation engine, and many others. These systems are closely intertwined with each other and with human strategists to create an integrated, well-oiled machine. If the sales forecasting system detects that the popularity of an item is increasing, it starts a cascade of changes throughout the system: The inventory forecast is updated, causing the supply chain system to optimize inventory across its warehouses; the recommendation engine pushes the item more, causing sales forecasts to increase; the profit optimization system adjusts pricing, again updating the sales forecast. Further second- and third-order interactions occur downstream. While many of these operations happen automatically, human beings play a vital role in designing experiments and reviewing data traces to continue to learn and evolve the design of the machine.

To design such an integrated strategy machine, they believe there are six requirements:

 

Relevant, specific strategic aim. Don’t let technological capabilities dictate the problems you solve. If all you have is a hammer, then everything will look like a nail. Humans must frame the central question, and thereby define the initial insight into where the opportunity lies.

Design appropriate to the aim. Just as different environments call for fundamentally different approaches to strategy and execution, different strategies also call for different designs for the strategy machine. For example, strategies in predictable classical environment require a logic of “analyze, plan, execute.” On the other hand, unpredictable adaptive environments require a process that can be characterized as “vary, select, scale.” Form must follow function.

Correct human-machine division of labor. Human beings are still unique in our capacity to think outside the immediate scope of a task or a problem and to deal with ambiguity. Machines are good at executing a well-defined task or solving a well-defined problem, but they can’t think beyond the specified context (at least not currently). Nor can they pose new questions, invent answers beyond what’s being asked, or reframe or connect the problem to a different challenge they’ve previously faced.

Integrated solution. The right division of labor is critical, but nonetheless the human and technological components must work together seamlessly. Humans, with our unique ability to understand broad contexts and connect insights from disparate spheres, must design and optimize the flow of information and insights in the strategy machine to ensure it’s optimized for the overarching aim rather than individual operations.

An interface that allows for detailed analysis. Architects of the strategy machine must avoid the temptation of relying on reductive visualizations. People need to be able to see inside the black box, probe the “messy” data and findings, and reframe to gain richer insights.

Unique tools, data, or process. The integrated strategy machine’s ultimate function is to produce competitive advantage. Some aspect of the machine must be impervious to imitation by competitors, whether it’s the tool, the data, the people, or the design. The strategy machine must itself be capable of evolving and, like any effective conventional strategy, must keep on running to even stay in the same place.

 

 

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