Issue 6
Knowledge is the
Welcome 1
Research from Gartner: The success factors of many large-scale enterprises can often be found in their
How to Define and Use Smart
Machine Terms Effectively 2
Learning. Understanding.
Reasoning. The Roots of the
AI-enabled Enterprise 6
Arago The Sum of
Experience 8
Ticket to an AI-enabled
Enterprise
The value of knowledge within organizations to empower Smart Systems
Welcome
corporate philosophy and work ethic. These frequently contain concepts such
as organizational structures, diverse intercommunication-channels, flexibility
or adaptive responsiveness. However, everything includes the knowledge of
the entire organization. When shared and applied appropriately, this factor
represents an indispensable and significant company asset that contributes to
Chris Boos,
CEO & Founder more than 60 percent of the total value. The importance of knowledge as a key
success factor is particularly evident in todays fast-paced dynamic business
environment which is marked by complex products and services, intense competition, increasing
customer expectations and shorter product life cycles which require agile development to help
businesses leverage these new opportunities.
Successful companies gather, analyze and store knowledge, but still find it challenging as to how
this information can be shared within the organization. Nevertheless, the focus is primarily on
delivering and exchanging the right knowledge in an effective and efficient manner.
Where in the past, emphasis was placed on manpower and machines many of todays
businesses owe their successful existence to the knowledge they hold in their field of expertise. The
creation and proper utilization of specialized knowledge represent a major competitive advantage,
which greatly impacts future business development and performance. As such, knowledge-
sharing must be regarded as an inevitable and ongoing process to tap the full potential of the
existing know-how an organization - whether corporate or small enterprise - must offer.
Putting these so-called Smart Machines into this context, we are talking about a vigorous system.
A system which must be considered as a raw IQ container, a system that needs unstructured
input to train its sense, a system that needs a semantic understanding of the world to be able to
take further actions. A system that needs a detailed map of its context to act independently and
transfer experience from one context to another, a system that is equipped with all the necessities
to develop, foster and maintain knowledge.
And it is our responsibility to share our knowledge with these machines as we would share it with
our children, spouses or colleagues. This is the only way to transform these machines, made of
hard- and software, into a status we would describe as smart, helping them to become more
intelligent by learning on a daily basis, building the groundwork to create a self-learning system.
While reading the following Gartner research note always keep in mind that machines are
only as smart as the knowledge they are empowered with.
Source: Arago
 Research from Gartner:
How to Define and Use Smart Machine
Terms Effectively
Assigning human attributes to technology distorts our understanding
of what that technology can truly accomplish. We define the term
smart machines and compare it to other similar terms (cognitive and
artificial intelligence) to help IT leaders separate the marketing hype
from reality.
Key Findings
Smart machines deliver amazing results, but they are still machines
and can only be smart in a narrow sense.
Marketers (and popular media) confuse fact and fiction when
implying that smart machines have humanlike capabilities.
Smart machines address complex problems, are themselves
quite complex and have interior mechanics that may not be fully
understandable.
Extensive training of a prototype smart machine with a very large
body of information is essential to the self-learning of smart
machines. Extensive testing is also essential.
Pairing unsmart, rule-based systems with smart machines reduces
risk in applications such as self-driving cars.
Recommendations
Resist the temptation to anthropomorphize technology; it can set
inaccurate and damaging expectations. Use descriptive terms for
technology to differentiate it from people, rather than likening it to
people.
Ignore marketing hype that repeatedly uses any of the terms
discussed (cognitive, artificial intelligence, smartness).
Ensure cross-functional teams are well-enough versed in the
capabilities and weaknesses of smart machine technologies to be
able to exploit the business opportunities and ignore the myths.
Base investment decisions on demonstrated capabilities and
specific business results.
Analysis
When we anthropomorphize technologies (ascribe human
characteristics to them) we run three direct risks:
We deceive ourselves with regard to the real capabilities and
limitations of the technology.
We overgeneralize and ascribe related human attributes to the
technology.
We construct, or allow others to construct, scary, nonproductive
fictional tales about the technology.
2
The consequences inherent in these risks include disappointment,
wasted time and money, negative career and business impacts, calls
for regulation and government intervention, and a loss of momentum
for very promising technologies.
CEOs, CIOs and other business leaders need to exercise extreme
caution when exploring investments predicated on assuming that
machines are really smart and that artificial intelligence (AI) has finally
succeeded in producing tools that can emulate how the human brain
(the detailed physiology) works or replicate our cognitive (thinking)
processes (as if we really knew how brain physiology or human
thinking really work). All of these assumptions are wrong and likely to
remain wrong for many decades.
To cut through the fog (and resulting foggy decision making), this note:
Reintroduces smart machines
Compares smart machines, artificial intelligence, cognitive
computing and other related terms
Defines smart machines
Provides illustrative capabilities
Includes frequently asked questions, and answers
Provides specific actions for IT leaders and line-of-business
managers
Reintroducing Smart Machines
The smart machine big bang (occurring at the intersection of radical
new hardware, massive amounts of data, and unprecedented
advances in deep neural networks) has ushered in a new, 75-year
general-purpose technology cycle the Smart Machine Age.
Smart machine technologies are smart in a narrow sense. In Where
Banks Can Use Smart Machines, we sketch out six different sample
smart machine product categories that are dependent, at least in part,
on smart machine technologies. These categories range from smart
vision systems through virtual customer assistants to smart campus
infrastructure. In that same note, we provide dozens of examples of
applications that can be implemented in the different product categories.
The smart machine space is a value chain (as depicted in Figure 1) that
can be viewed from either end the technologies or the business
results. Between technologies and business results lie product
categories, applications and specific use cases. The numbers of
observed instances increases sharply as you move from technologies
to business results: what starts with an expanding handful of critical
technologies, grows into a larger collection of product categories in
which there will be thousands of applications tied to millions of different
specific uses driving a very broad range of diverse business results.1
Not everything in the chain is a smart machine. For example, algorithms) coded for them to run. Machines have no common sense;
applications will contain a mix of smart and unsmart technologies. they are narrow in purpose and there is nothing in the research
(And enterprises may choose to avoid smart machine technologies, literature to suggest otherwise, at least not yet.
relying instead on rule-based systems particularly when the
problem is simple enough and the rule-based option is already well- Many products claiming to be cognitive or AI do indeed contain
proven and demonstrably meeting similar needs for other users.) smart machine technologies. However, referring to machines as
AI, cognitive computing or smart does more damage than just
Comparing Smart Machines, Cognitive and Artificial deluding people into assuming that products think; which they do
Intelligence and Similar Terms not. Anthropomorphizing technology feeds the Jaws phenomenon
before Spielbergs movie, people had very few nightmares about
Smart is a less objectionable term than the others but none is ideal.
sharks; afterward, they began to condone finning and otherwise
People like to anthropomorphize (ascribe human characteristics
killing sharks. Anthropomorphism gives rise to scary fictional tales
to nonhuman entities). Poets call it the pathetic fallacy, because it
about how AI will be worse than nuclear weapons and will eventually
assigns pathos deep feeling to things that cant experience it. Its
kill us all.
also a mistake when it comes to these technologies, because people
begin to assign to the machines human properties that are simply
Being a relatively soft term, we find smart machines the least
not in evidence in the technologies. Smart machines are not generally
objectionable, but all these terms suffer from the problem of
able to reason on their own, demonstrate common sense or figure out
anthropomorphism to some degree. We use the term smart instead
new ways of doing things. Theyre not the stuff of the science-fiction
of others such as intelligent, intelligence, AI, machine intelligence or
fantasies currently making the rounds of movie houses (as well as the
cognitive computing because it has less specific loading than the
agendas of talk shows and glossy magazines). So, avoid applying the
other terms. Some people are smart alecks; some are smart dressers;
word intelligence to machines of any kind. In academic literature, there
my hand smarts when someone slams a door on it. And yes, youre
are hundreds of different, often contradictory, definitions of intelligence.2
pretty smart since you may know all this already.
There is no single, central agreed definition that provides a solid basis
for measuring the intelligence of humans or machines.
Besides cognitive, AI and smart machines, theres a vast array of
terms bandied about that can create confusion, including narrow
The word intelligent is also too closely allied to another inappropriate
purpose intelligence, general-purpose intelligence, artificial general
anthropomorphic label, artificial intelligence. Back in 1955,
intelligence and technological singularity. Defining and differentiating
researchers assumed they could describe the processes that make up
all these terms is beyond the scope of this research note.
human intelligence and automate them, creating an artificial (human)
intelligence (AI).3 They were wrong then and remain wrong now, but we
Smart Machines Defined
are moving beyond that into a new age: the age of smart machines,
precipitated by a big-bang combination of three developments Understand the definition in the context of its important qualifiers,
deep neural networks, very high performance parallel processors, such illustrations, and frequently asked questions (see Table 1).
as GPUs, and big data that came together around 2012.
Definition:
Cognitive computing is another troubling anthropomorphic term used
in marketing. This term leads people to assign to cognitive computing Smart machine technologies adapt their behavior based on experience,
human properties that are not in evidence in the technologies. are not totally dependent on instructions from people (they learn on their
Machines are not cognate; they dont think; they dont reason their own) and are able to come up with unanticipated results.
reasoning typically reflects the use of reasoning rules (detailed

FIGURE 1
Average IT Spending Across Run/Grow/Transform Classifications, 2011-2015

Source: Gartner (August 2016)

3
Important qualifiers:
1 Unanticipated results are sometimes surprisingly good and at
other times not acceptable. Extensive testing is required to get
the technology to perform within acceptable boundaries.
2 People define the architecture (model) to be used by the smart
system technology and construct mechanisms that feed data
and models to the technology to train it. Then, they feed in more
data to test it. In the future, it may be feasible for smart machines
to manipulate their environment to learn how to improve their
own performance, but it is not possible today in a scalable,
general-purpose way.
3 Machine smartness is primarily perceptual in terms of classifying
content (such as images, faces, speech, bodies of text, sensor
signals and inputs from other smart machines). Smart machines
find patterns in data and extrapolate generalizations from those
patterns.
4 Smart machine technologies are part of the broader smart
machine value chain (see Figure 1).
5 Most smart machines will be hybrids, containing a mixture of
smart and unsmart technologies and marrying the uncertainty of
learning with the control provided by rule-based systems.
6 Smart machine technologies can be described at various levels
from high-level abstractions, to more specific models and
algorithms, to implementations and physical instances and
software, hardware and data all of which are important.
7 We have avoided defining smart machine technologies in terms
of specific algorithms, models, hardware or datasets, because
the specifics will continue to evolve. The smartest deep neural
networks of today will be superseded by different technologies
in the future, but the definition of smartness will be more
persistent.
8 Smart machines contain three logical processes: training, testing
and runtime systems. Most runtime systems will be virtual
clones of the training-testing systems and reliant on the training
and testing systems for learning.4 We consider these clones to
be smart if there is a way for the training-testing processes to
update the clones internal models.
9 This definition will evolve as the smart machine value chain
evolves.
4
Illustrative Smart Machine Capabilities
Smart machines can:
Ingest (get value from and classify content in) very large bodies of
information including images, video, speech and other waveforms,
free-form text and structured content. (Very large bodies of
information will likely not persist as a defining property. Much work
is going on to develop smart machines that learn well from smaller
bodies of information.)
Detect patterns that people cannot and outperform people in
performing the same task. For example, they can often exceed
human performance on facial recognition. However, superior
performance is not automatically the case.
Appear to understand large, sometimes inconsistent and ever-
changing bodies of medical literature, case law, or wide swathes
of Internet content to provide deep advice for experts to consider.
(The appearance of understanding is not the same thing as saying
or implying that they do understand.)
Make mistakes. Both humans and smart machines make errors,
but the types of errors each makes are quite different. (This leads to
the use of hybrid systems mixing smart and unsmart to make
the best of two very different approaches to problem solving.) Some
smart machine errors are easily understood by developers, others
are not; they must be well tested and, in critical situations, paired
with rule engines to determine what actions to take.
Make general-purpose, publicly operating self-driving vehicles
possible (when combined with unsmart rule engines).
Manage productive dialogue with (and satisfy or delight) customers
seeking assistance.
Recommendations for IT leaders and line-of-business managers:
Resist the temptation to anthropomorphize technology; it can set
inaccurate and damaging expectations.
Use descriptive terms for technology to emphasize its differences
from people, rather than likening it to people.
Ignore marketing hype that repeatedly echoes any of the terms
discussed (cognitive, artificial intelligence, smartness).
Ensure cross-functional teams are well-enough versed in the
capabilities and weaknesses of smart machine technologies to be
able to exploit the business opportunities and ignore the myths.
Table 1. Frequently Asked Questions
Question
How smart does a smart machine have to be, to be
considered a smart machine?
How can we determine what is not a smart machine?
Isnt smartness really in the eye of the beholder?
In 2010, we had a technology everyone thought was
smart Rio Tintos self-driving trucks in Australia. Are
they still smart?
Are industrial drones smart?
Whats the relationship between smart machines and
the Internet of Things (IoT)?
You refer to smart machines as learning, being trained
and being tested. Arent you anthropomorphizing
technology with those statements?
Source: Gartner (March 2016)
Base investment decisions on demonstrated capabilities and
specific business results.
Evidence
1
See discussion of the economic concept of general-purpose
technologies in Smart Machines See Major Breakthroughs After
Decades of Failure.
2
See A Collection of Definitions of Intelligence, Cornell University
Library.
Answer
Use the smart machine technology definition in the Smart Machines Defined section
of this note. Determine if any part of the offering meets all three requirements. We are
not proposing a litmus test for how to weigh the relative contributions of smart versus
unsmart components.
If the technology in question relies solely on brute force engineering, the smarts are
all in the heads of the programmers and all possible outputs can be described in detail
by the programmers, then the machine is not smart. It may be extremely valuable, but
its not smart in terms of our definition.
To the best of our knowledge, these trucks relied on brilliant brute force engineering
alone to navigate around an open pit mine. They do not meet our current definition of
smart. Self-driving vehicles are in the process of moving from brute force engineering
to incorporating smart machine technology (plus brute force engineering.) We would
describe the 2010 trucks in question as pre-emergent smart machines. (Weve also
used the term precursors.)
Industrial drones are another class of product that is starting to incorporate some
smart machine technology; for example, to improve their vision systems where the
benefits to navigation and safety are enormous. The answer to the specific question
varies depending on whether there are smart machine technologies embedded in the
particular drone or not. At a minimum, we would refer to the category of drones as
pre-emergent smart machines; although, today, some are clearly smart (and others
may be totally unsmart).
Smart machine technologies are leading to various things becoming smart (for
example, light poles containing smart vision systems that include models to interpret
what the cameras see and then communicate that information upstream in the IoT
stack). Smart machine technologies will transform the IoT to become the Smart Internet
of Smart Things by adding smartness at almost every level of the IoT stack.5
Yes, but as we define smart machines saying learn on their own the word learn
is part of a parenthetical phrase. Its there to help the reader digest the rest of the
definition. Further, we greatly qualify the word learning in the qualifier paragraphs
that follow, so that the reader doesnt come away with an inappropriate set of
expectations about what a smart machine can and cannot do.
3
See A Proposal for the Dartmouth Summer Research Project on
Artificial Intelligence, Stanford Computer Science Library.
4
See Figure 1, and related text discussing smart vision systems in
self-driving automobiles in Smart Machines See Major Breakthroughs
After Decades of Failure.
5
See Top 10 IoT Technologies for 2017 and 2018 and The Move to
Digital Business Demands Investment in Five Classes of Technology.
Gartner Research Note G00301283, Tom Austin | Alexander Linden
Martin Reynolds, 04 March 2016
5
 Learning. Understanding. Reasoning.
The Roots of the AI-enabled Enterprise
As stated by Gartner, Smart Machines can deliver great results, but
they are still machines and are only smart in a narrow sense. Thus,
they depend on a large base of information that is essential to the
self-learning of machines to become smart. To reach this goal, it is
necessary to constantly teach machines the essential knowledge, they
need to understand the purpose and environment they are acting in.
Like you would prepare your children to understand the world they are
living in, you have to prepare the machines on an ongoing basis. This
can be achieved with a 1:1 approach or by connecting the machines
with other machines or environments. There is no other way then to
provide the machine with as much data as possible in order to reach
a stage where it has enough information to interlink its knowledge and
then become a self-learning system.
From a companys perspective, business processes are algorithms
that are currently processed by humans and not machines. However,
as machines get smarter, their ability of taking on more than one task
simultaneously, accelerates. Arago believes that anything that is a
process will be done or at least run by an Artificial Intelligence (AI) within
a relatively short time frame of 2-5 years. Ergo: Smart Machines have
the power to transform any company into an AI-enabled Enterprise.
However, AI-enablement is not a goal in itself. The goal for companies
is to be able to evolve and transform themselves to remain competitive
with their existing peers and overcome upcoming threats that can
disrupt their market. The ability to transform themselves is key to
become an AI-enabled Enterprise, which has the following advantages:
The Journey to an AI-enabled Enterprise
The Journey to an AI-enabled Enterprise
Top-down Retraining
Prepare and train your organization for and future business events.
an AI-enabled enterprise and accepting
Rethink Strategy a new business model.
Think about a new (exponential)
business model.
RA TE G
ST Y 7
4 5
3 A
2 D A T
1
E XE CUTION
Semantic Map of your Data Autonomous IT Operations
Accept continuous data flow as a Automate IT operation to receive immediate Using knowledge of company gathered through IT
foundation for future strategy. value brought by HIRO and collect data.
6
The whole organization is mapped in a graph that provides them
with analytical abilities as a basis for exponential growth which
only the network effect companies have today (e.g. Google,
Amazon and Facebook).
The experiences of the organization are stored as knowledge and
utilized for future ideas. No knowledge is lost.
Most of the IT and business processes are automated intelligently,
which frees up a huge number of valuable resources to develop
new disruptive ideas, etc. while guaranteeing compliance, quality
and knowledge retention as well as sharing.
It drives down the costs significantly, thereby freeing cash to invest
in business transformation or disruptive ideas, etc.
To start the AI journey, Arago advises to create a semantic data pool
for the organization to describe the company itself, the technology and
tools used in the company that can potentially be controlled by an AI to
run all their processes. In doing so, Arago recommends starting with IT
automation as the strategic starting point since it provides immediate
value to the organization before automating business processes. IT is
where all the data and information and thus knowledge pass through.
IT continuously generates data as a foundation for semantic mapping.
Over time, companies can derive any learning and insights about their
business and market based on the collected data that is cumulated in
their own IT environment.
Predictive Analytics
Use data from the semantic map to
expedite, improve business processes
AI-enabled
6 Enterprise
Data-driven Processes
Use data and AI to generate
outcome based processes.
Expand to Other Business Processes
automation, make more processes autonomous.
Source: Arago, 2017
To support companies on their AI journey, Arago has developed HIRO,
a general problem-solving AI that combines dynamic reasoning with
machine learning. HIRO can automate any IT or business process. In
doing so, HIRO consists of three major abilities: learning, understanding
and reasoning. Powered by Aragos algorithms, HIRO uses these
three capabilities to solve problems, make decisions and optimize
itself continuously. Furthermore, HIRO can be implemented across the
entire IT as well as enterprise stack and integrated into any existing
environment without required standardization or new infrastructure.
As a side note, experience has shown that in particular enterprises
are purchasing a large amount of different solutions over time. Thus,
they are building technology silos that are difficult to integrate, leading
to high complexity, which do not support the business goals. Thus,
IT decision makers timely should consider an AI-related industry
standard within their IT environment that supports the companys
entire business stack.
Source: Arago

This general approach revolutionizes business processes and IT

operation automation as AI increasingly learns more about the
environment with use, thereby laying the foundation for corporations
to leverage the potential of AI. IT automation is only the starting point,
considering that anything that is a process can be and will be run by AI.
With HIRO, organizations can build a future-proof AI-enabled Enterprise
which is key for any digital transformation strategy.

7
 Arago The Sum of Experience

Arago is a leader in the field of artificial intelligence and one of few

companies worldwide to offer a commercially proven general artificial
intelligence platform. Our mission is to guide our clients transformation
into future-proof AI-enabled enterprises and to empower them to
unleash the potential of their existing intelligence regardless of
industry. In 2014, we partnered with leading global investment firm KKR
to scale and internationalize our business.
arago GmbH
Since being founded in 1995, Arago has been a pioneer in AI
engineering and has maintained its start-up mentality for decades. We Eschersheimer Landstrae 526 - 532
are building an AI platform focused on the B2B sector using machine 60433 Frankfurt am Main
reasoning and analytical components to assist your efficiency and Germany
promote your innovation.
Tel: +49 69-40568 - 0
Aragos general AI platform HIRO is built to automate enterprise Fax: +49 69-40568 - 111
IT and business operations to an extent not seen before. With our E-Mail: info@arago.co
approach, a machine with human problem-solving skills is taught by
the experts, so the actual humans can turn their attention to moving 41 East 11th Street
innovation forward. New York, NY 10003
USA
HIRO that constantly learns and enables enterprises to face the
future worry-free is market proven, following five years in commercial
use and R&D investment period of almost 20 years. HIRO takes
problem-solving to the next level: it dynamically reacts to a changing
environment and is able to autonomously solve even ambiguous and
complex problems. Its ability to create solutions for specific tasks grows
exponentially with knowledge stored.

Our focus is on giving people back the time they are currently spending
in repetitive processes. If we can optimize technology giving it the
ability to learn continuously and make experiences, assumptions and
predictions, and even act we can improve life in society.

Knowledge is the Ticket to an AI-enabled Enterprise is published by arago. Editorial content supplied by arago is independent of Gartner analysis. All Gartner research is used with Gartners permission, and was originally
published as part of Gartners syndicated research service available to all entitled Gartner clients. 2017 Gartner, Inc. and/or its affiliates. All rights reserved. The use of Gartner research in this publication does not indicate
Gartners endorsement of aragos products and/or strategies. Reproduction or distribution of this publication in any form without Gartners prior written permission is forbidden. The information contained herein has been
obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. The opinions expressed herein are subject to change without notice.
Although Gartner research may include a discussion of related legal issues, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner is a public company,
and its shareholders may include firms and funds that have financial interests in entities covered in Gartner research. Gartners Board of Directors may include senior managers of these firms or funds. Gartner research
8
is produced independently by its research organization without input or influence from these firms, funds or their managers. For further information on the independence and integrity of Gartner research, see Guiding
Principles on Independence and Objectivity on its website.