The Invisible Hand and the Digital Enterprise

Stephen DeAngelis

May 18, 2021

At a time when conspiracy theories result in all sorts of crazy notions and actions, I hesitate to write about an “invisible hand” — it sounds so full of mystery and intrigue. However, in a recent article, Sanjay Poonen (@spoonen), Chief Operating Officer at VMware, insists “digital transformation is the ‘Invisible Hand’ of our time.”[1] He rightfully credits the term “invisible hand” to Adam Smith, asserting Smith introduced it in his seminal 1776 economic classic entitled An Inquiry into the Nature and Causes of the Wealth of Nations. According to Wikipedia, Smith did indeed coin the term, but in a much earlier work entitled The Theory of Moral Sentiments, written in 1759.[2] F. Eugene Heath, a Professor of Philosophy at State University of New York at New Paltz, explains what Smith meant by the term “invisible hand.” He writes, “[The] invisible hand [is a] metaphor … that characterizes the mechanisms through which beneficial social and economic outcomes may arise from the accumulated self-interested actions of individuals, none of whom intends to bring about such outcomes.”[3]

 

Poonen argues the “invisible hand” of the digital enterprise exposed itself during the pandemic. He explains, “Some companies were able to meet the new demands from their customers and grow their businesses. They include DoorDash, Target, Home Depot, Panera Bread, Beyond Meat, Tesco, Lidl, Aldi, DBS Bank, Zoom, Square, DocuSign, and many more. It became a matter of business survival while also responding to the needs of a population with limited mobility and healthcare concerns. In many cases, what drove their successful growth was the ability to interact with their customers online, through cloud-based mobile apps or curbside pickup. From a technology perspective, the main drivers were apps and cloud.” He adds, “People often scoff at ‘digital transformation’ as the latest fad. However, what we saw from these companies was the true impact of ‘going digital.’ Every business is now defined by the digital services built to better serve their customers, markets and workforce.”

 

The Digital Transformation Imperative

 

Although digital transformation requires more than simply implementing new technologies, Jacques Fouché, Head of Strategic Advisory at Ovations Group, insists, “Organizations should view technology as an opportunity to compete against those businesses that have set themselves up to make the most out of digital.”[4] He explains, “The foundation of a digital enterprise includes the following four elements: 1) A set of standardized business processes across internal functions to ensure a consistent customer experience; 2) the ability to predict and respond to levels of customer demand and meet their requirements on time; 3) [the ability to use] your customer knowledge to drive personalization; and 4) the ability to deliver new products and features quickly — digital enterprises should be able to experiment and react at pace.” According to Shashin Shah, CEO of Pimcore Global Services, companies that were well into their digital transformation efforts were able to “react at pace” and pivot when the pandemic struck. He writes, “Those who embraced [digital transformation] in the past years seem to be winning the war against Covid-19 without fighting, and those who haven’t are fighting without winning.”[5] And, as Poonen argues, digital enterprises provided valuable social benefits while winning the war against Covid-19.

 

As I noted above, digital transformation is about more than implementing new technologies. Tricia Wang (@triciawang), a self-described Tech Ethnographer & Sociologist, explains, “A lot of companies treat digital as if they are ‘doing digital’ — this is ‘digitization’ at its worst — as if it’s some checklist of things to do. It’s very transactional, and people are so busy doing digital they don’t even know WHY they are doing it in the first place! Whereas [some companies] embrace ‘being digital’ — this is ‘digital transformation’ at its best — it’s a total paradigm shift in the culture and operations — it’s not just about buying the latest digital tool, but about creating a new system, new cadence, new mindset.”[6] Part of that new mindset is putting customers first.

 

As Professor Heath noted, the invisible is about creating beneficial social and economic outcomes, even if they are not the intended goals of business activity. Often, in today’s business environment, companies are looking to create both social and economic outcomes through the products and services they offer. In one of the late Clayton Christensen’s last books, entitled Competing Against Luck: The Story of Innovation and Customer Choice, he, and coauthors Karen Dillon (@KarDillon), Taddy Hall (@taddyhall), and David S. Duncan, discuss the “Theory of Jobs to Be Done.” According the book’s introduction, that theory helps companies understand their “customers’ struggle for progress and then [creates] the right solution and attendant set of experiences to ensure [they] solve [their] customers’ jobs well, every time.” Digital enterprises use data and cognitive technologies to help understand their customers and their challenges.

 

AI and the Invisible Hand

 

At the heart of most digital transformation efforts, you will find some form of cognitive technology (aka artificial intelligence (AI)). Judith Hurwitz (@jhurwitz), President and Founder of Hurwitz and Associates, observes, “As businesses look for ways to transform their organizations in an era of uncertainty and emerging competitive threats, many are turning to artificial intelligence technology. … AI can provide significant tools to help businesses take advantage of their data and knowledge. But as with any complex business transformation, there are no quick solutions — solving complicated problems requires careful planning and a well-constructed roadmap.”[7] Hurwitz argues that the first step in digital transformation is knowing “the business problems you’re targeting with AI.” She explains, “Identifying the starting point and the business problem you’re trying to solve is critical.” Any sound investment decision should be supported by a good business case. In the case of investments in cognitive technologies, strong business cases are usually not difficult to make.

 

Flavio Villanustre (@fvillanustre), Chief Information Security Officer and Vice President of Technology for LexisNexis Risk Solutions, believes AI needs to become part of the DNA of a digital enterprise. On the hand, he notes, “There’s a difference between accelerated adoption of a new technology and reckless deployment of one. As is the case with most tools, AI has the potential to unintentionally harm individuals and expose organizations and individuals to risks, risks that could have been mitigated through careful evaluation of potential consequences and making the correct implementation choices early in the process. This idea is the basis of responsible and ethical use of AI.”[8] Keeping people involved in AI solutions is one way to help ensure they are being implemented responsibly. Hurwitz notes, “Focusing on business outcomes rather than software development requires human and machine collaboration — this is called Augmented Intelligence. … Human experts with experience and knowledge are best able to understand data in context. … Therefore, the real magic comes in combining the sophistication of AI-based systems to analyze massive amounts of data with human expertise.” In other words, a real hand can assist the invisible hand in securing positive outcomes.

 

Concluding Thoughts

 

Poonen concludes, “The invisible hand of apps and cloud has become exponentially more prominent for enterprises than ever before, making a decade’s worth of progress in just a few months.” Although Poonen and Adam Smith perceive the invisible hand as a force for good, without careful oversight, the invisible hand can cause both social and corporate damage. Villanustre asserts, “Responsible AI is the right thing to do. It helps ensure that any AI system will be efficient, comply with laws and regulations, operate based on ethical standards and prevent potential for reputational and financial damage down the road.” It can ensure the invisible hand of the digital enterprise continues to promote beneficial social and economic outcomes.

 

Footnotes
[1] Sanjay Poonen, “Why Digital Transformation Is the ‘Invisible Hand’ of Our Time,” Channel Futures, 19 April 2021.
[2] “Invisible hand,” Wikipedia.
[3] F. Eugene Heath, “Invisible hand,” Britannica.
[4] Alison Job, “Capabilities for the competitive digital enterprise,” ITWeb, 5 October 2020.
[5] Shashin Shah, “Why Digital Transformation Remains Your Best Chance to Survive the COVID-19 Onslaught,” Business 2 Community, 31 August 2020.
[6] Trevor Miles, “Let’s be clear: Digitization is not the same as Digital Transformation,” Kinaxis Blog, 8 December 2017.
[7] Judith Hurwitz, “Artificial Intelligence (AI): 3 imperatives to support business agility,” The Enterprisers Project, 20 April 2021.
[8] Flavio Villanustre, “Make Responsible AI Part of Your Company’s DNA,” CMS Wire, 8 April 2021.