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Smart Systems in Business

K. Mani Chandy

Smart Systems in Business: A Biological Metaphor

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What makes a system smart? Let's use a biological metaphor to answer this question. Living things acquire information from birth through their sensory organs. They store pertinent information in memory. They identify patterns about how their environments evolve and use these patterns to build (implicit) models of themselves and their environments. These models tell living things how their environments will react to different actions. When data acquired by the sensory system indicates a significant event - a threat or an opportunity - then these models tells organisms how to respond. The organism's actuators - muscles and nerves - execute responses for the given conditions. The success of an organism depends on how well it senses its environment, stores relevant information, learns patterns and builds models, detects significant events, predicts probable outcomes, and responds effectively to changing conditions.

What makes an organization smart? The success of a collection of organisms depends on the very same characteristics applied to the collective as a whole. Prides of lions, flocks of geese and pods of whales sense conditions individually and communicate information to others in the group so that the group senses conditions collectively. They store information individually but share their knowledge with the group so that the group retains information collectively. They learn patterns and build models of others in the group: when a pride of lions hunt, each lion predicts the probable behavior of the environment - for example a lame zebra will run slower than others - and each lion expects a pattern of behavior from others in the pride so that synergy for the group is built from collections of individual actions. The group detects events collectively by having members detect and communicate local conditions; for example white-tailed deer raise their tails to signal danger to the herd. And the group coordinates significant activities such as running away from threats or running towards opportunities.

A smart system, for the purposes of these notes, is a system that amplifies the success of an individual or an enterprise by better sensing, information retention, pattern identification and model building, event detection, prediction, and action.

Long-term and short-term aspects of smart systems: Smart systems have two complementary and important characteristics: the first is long-term and the second is short term and often instantaneous. The first deals with learning, identifying significant patterns, and building models. We may need to change models quickly - for example the stock market crash may have resulted in rapid change to one's model of credit default swaps - however, the basic structures of models we use do not change frequently (though model parameters change). The second characteristic deals with sensing and conditions in the environment and responding to them in a timely manner. Sense and response uses models that have been learned over time. A decision to buy gold, dollars, or yen in the next minute is based on predictive models that may have been developed over years.

Both the long-term and short-term aspects of smart systems are crucial. If our model predictions are bad then our responses, even if executed perfectly in terms of model predictions, will be ineffective. Likewise, if we have superb models but cannot sense conditions or respond effectively in a timely fashion, then the responses will have no value. I will discuss both the long-term and short-term aspects of smart systems in the future. And both aspects are critical for the success of living organisms from herds of deer to large corporations.

The focus of this blog
These notes will study the design and use of smart IT systems in a variety of application areas including those most fundamental to life: food, water, energy, security, and health. I will also discuss how smart system applications will impact the workforce of the 21st century and how they will benefit different business verticals. Smart IT systems amplify human smartness; so they impact everything!

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Smart systems use historical data and data acquired continuously from multiple sources; they correlate this data and identify patterns that indicate important events; they predict probable futures; determine appropriate responses; and then respond. Smart systems help businesses by identifying and responding to changing situations rapidly and appropriately. This blog describes smart systems, its key foundational ideas, and their applications.

K. Mani Chandy

K. Mani Chandy is the Simon Ramo Professor at the California Institute of Technology in Pasadena, California. He received his B.Tech from IIT Madras in 1965, MS from the Polytechnic Institute of Brooklyn in 1966, and PhD at MIT in 1969. He worked at Honeywell and IBM, was a professor at the University of Texas at Austin from 1970 to 1987, and has been at Caltech since then. View more


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