Work to be done is innovation’s invisible hand

Back in 1776 Adam Smith in his book “The Wealth of Nations” discussed the concept of the ‘work to be done.’ This has fascinated me for what we need to do for achieving any new innovation, it is the ‘work to be done’ that generates and pushes boundaries beyond the existing.  This ‘classic’ book has become regarded as the one that described the birth of modern capitalism as well as economics.

Adam Smith also introduced the concept of ‘the Invisible Hand as a core part of his thesis, that man’s natural tendency toward self-interest – in modern terms, looking out for No.1 – results in prosperity, not just for the individual but for society.  ‘The invisible hand’ is essential for free markets and capitalism, through how it generates wealth in competition for scarce resources. By maximizing their own interest as the direct intention, this ‘invisible hand’ also stimulates those around you and in the society you belong. As you seek to leverage your own assets, you are promoting society as a whole. Today this can be more by design, or through an unintended consequence of how knowledge flows.

Arguably the ‘invisible hand’ can today be seen as realizing all our potential, individual and collective, exploiting all available existing assets for benefit and gain. We call these our tangible and intangible assets.  Often overlooked, or under-appreciated are those more intangible assets, that can significantly differentiate, are surely today’s ‘invisible hand?’

The make-up of intangible assets

There are many thoughts around what makes up our intangible assets but these can be summarized as made up of 1) human assets– the knowledge, skills, experiences, our abilities to organize these within our thinking, 2) structured capital as the pool of knowledge made up in our institutions, our rules, norms, knowledge diffusion across broad communities, 3) the social capital that forms today more around our networking that relies on infrastructure, access to knowledge, exchanges and relationships.

It is the ability to combine our tangibles with our intangible capitals that allows us to think and explore all that is around, to discover and exploit the potentials within this ‘work to be done’.

The volatile world we are dealing with today.

Today we seem to live in more volatile times where it becomes more important for us to focus on the work to be done is, not the work done. We have to keep focusing on the future. The ‘work done’ is the accumulated knowledge; the built up ‘stock’ that has contributed and been embodied in the organizations results to date, seen in the past where innovation has contributed in part to this. We have built up ‘know how’ and competencies in the ‘work done’ but this needs improving upon and challenging.

The ‘work to be done’ is where we push forward and explore greater possibilities. Part of this is focused on how we are going to adapt to change, to add more knowledge. For instance, we have operated in the past in far more of a mass production era, where systems could be designed for stable, more homogenized markets, where we could extract the maximum effectiveness and efficiencies. The ‘work done’ was equivalent to the ‘work to be done’ due to this predictability. This is not the case anymore, markets have fragmented, and we set about to design for the individual’s needs or in modular approaches for example.

We are in a ‘race’ to win

Today much has changed; we are faced with rapidly evolving technology diffusion. There is a race among nations and organizations to ‘win’ in global markets. This is causing increasing disruptive forces to come into play, where constant change is becoming more the norm and the emphasis has changed from ‘just’ efficiency and effectiveness but to be constantly adaptive, fluid and have increasing agility.

We focus far more on building in ‘tailored’ service, based on knowing the customers’ needs and understanding, on designing around new business models and in this, the ‘work to be done’ is becoming far more important than the ‘work done.’ It is the realization that it is the contribution of the intangibles assets, our growing intellectual capital, are becoming the real differentiation point to exploit the future potential.

The intangible assets provide the intellectual capital base, these allow us to react to changing demand for the required future value creation so we can effectively compete and sustain ourselves. This constant search for the ‘work to be done’ is fueling what has to be done.

Work to be done is the make-up of learning new skills, develop a greater dexterity and judgement based on what we need to ‘actively’ go out and seek. ‘Work to be done’ is searching for our future growth and well-being and this is derived through our future innovation activities. So much of this is made up of the intangible parts that can combine with what we know, what we have previously achieved, in work done, to provide the new wealth of organizations, as we participate more actively in the knowledge sharing economy of today and the near future.

We can’t remain islands of limited knowledge, we must seek out others to combine and achieve the work to be done. We are arguably in the network era, yet so many are failing to optimize their intangible assets and exploiting different organization dynamics that would greatly benefit their growth, especially when you operate with scarce resource.

Today’s need is for increasing interactions, linkages and seeking new knowledge to stay competitive in global markets.

As we rely increasingly on our growing ‘interactions and linkages’ we need a system to manage this. Absorptive capacity was introduced as an idea and first explored by Wesley Cohen and Daniel Levinthal in a 1990 article (“Absorptive capacity: a new perspective on learning and innovation”) and can provide us the knowledge learning path for building a real “knowledge exchange” process. Innovation ‘feeds off’ knowledge, they are inseparable, like twins, needing each other.

We can learn to exploit innovation, both in learning internally through the process of purposefully searching, doing and using what we gain and externally, by exploring new discoveries, collaborating, exchanging and generally interacting and so gaining fresh expertise, insight and knowledge.

As organizations seek increasingly outside their own walls, the appreciation of how they are managing knowledge, learning and interpreting this, is becoming a critical aspect of a more ‘open’ collaborative innovation to be successful. There is a growing need to absorb, integrate and apply this in new and novel ways for accelerating the innovation performance.  As we seek out more to compete in global markets, the more the knowledge increases in complexity we add more to the ‘work to be done’.

Markets are in constant flux, rapidly changing and we need to manage all the new insights. The more we are relying on knowledge flowing into the organization the more we have to strength our inter-dependence and collaboration efforts to extract the knowledge we are acquiring for it potential value. There is a consistent self-interest in doing this for our prosperity as well as others – the invisible hand.

Are organizations recognizing the value of structuring their knowledge flows?

This is the make-up of much of the work to be done in managing the knowledge flows. We need to recognize the importance of this shift from (physical) ‘work done’ to (intellectual) ‘work to be done’ and reconfigure the changing capabilities and capacities required, so as to grow our future ‘wealth’ of organizations, of nations and within ourselves to learn and respond. We needs to understand that today’s ‘ invisible hand’ is how our intangible assets are increasingly crucial and need to be actively managed, for this essential work to be done.

Forget ‘work done’, that’s in our past, it is already in the (knowledge) bank, we need to focus on the work that needs to be done so we can compete and thrive, there is so much more to understand and learn from as the challenges become more demanding to deliver on our innovation efforts.

There’s so much work to be done.

Our future progress is tied up in offering meaningful work, providing that sense of purpose. Building greater capabilities to quote Saul Kaplan “are the amino acids of innovation.  They are the building blocks that enable value delivery”. We are looking at increasing “the random capability collisions” where new innovation will happen at different intersections that combine knowledge from global markets, other competitors, different cultures and a variety of disciplines.

We need to build new capabilities that are far more market orientated, from co-creation and knowledge acquisition, from sense making, tapping into collective memories across a vast network of understanding. We need to unlearn, we need to reflect. All of these are in the ‘work to be done’ to stay ahead, be relevant and compete in today’s world. A world that is far, far different from the world seen by Adam Smith and what he saw needed doing.

The value in his observations are still valid today, the ‘invisible hand’ is as important today through our successful utilization of our intangible assets as we exploit new knowledge and apply this to innovating our future. One that combines our need with societies, not just based on growth but also on well-being as well. It is knowing the ‘work to be done’ that is so necessary for innovation and much of this remains hidden, waiting to be discovered.

Advertisements

4 thoughts on “Work to be done is innovation’s invisible hand

  1. Paul,

    I’m afraid you’re repeating one of the greatest pieces of *MISREPORTING* of Adam Smith ever. Nearly everyone does it – but he *NEVER SAID* as you state “that man’s natural tendency toward self-interest – in modern terms, looking out for No.1 – results in prosperity, not just for the individual but for society.”

    Adam Smith long noted the importance of human values in understanding future (economic) choices and outcomes. Smith’s idea of the “invisible hand”, that individual self interested behaviour would inevitably lead to collective benefit, was always assumed by Smith to be constrained by those individuals’ ethical and moral “sympathy” for their fellow humans.

    i.e. Smith said individuals would choose not to act in ways that would harm the collective good even if it would benefit them individually because their values, in Smith’s case based on belief in a Christian God, would tell them that such actions would be considered morally wrong.

    Smith set out these ideas in his earlier work, one he considered more important than The Wealth of Nations, The Theory of Moral Sentiments, 1795 (J. A. Brown & Forster, 2012; C. B. Handy, 1994, p.10; Stevens, 2011, pp.6-8,

    BTW Smith is credited by many as being the first environmental, or perhaps even ecological macro-economist (http://thesustainableadamsmith.org/)!

    Brown, J. A., & Forster, W. R. (2012). CSR and Stakeholder Theory: A Tale of Adam Smith.
    Journal of Business Ethics, On-Line First, 1-12. doi:10.1007/s10551-012-1251-4

    Handy, C. B. (1994). The age of paradox. Boston, Massachusetts, United States of America:
    Harvard Business School Press.

    Stevens, D. E. (2011). Rediscovering Adam Smith: How The Theory of Moral Sentiments can
    explain emerging evidence in Experimental Economics. (No. 2011:04). Glasgow,
    Scotland, United Kingdom: University of Glasgow, Adam Smith Research Foundation. (www.gla.ac.uk/media/media_215455_en.pdf)

    Like

  2. Antony,

    Firstly thanks, I have been getting a bit of flax on this article. No I was not quoting but was drawing from others, in my research on this, growing limited by the day (!) who had interpreted it in this way. I gather others have also fallen into this “trap”.

    Some have suggested (actually a fair few) and still regard this as very open to interpretation although it might be partly because they did not work back into the earlier works, although one or two are professors who I assumed would have done .

    I certainly gather the earlier book “The Theory of Moral Sentiment” discusses this more. We come back to individual self- interest runs through all and that it did lead to collective benefit and this is where I saw the connections with what I was attempting to draw parallel with today and intangible assets and unintended consequences. I resisted the moral, ethical part, more as this was not where I wanted this piece to go.

    So you are right I am misreporting but not as a direct quote from Adam Smith as you suggest but in how some have offered their interpretation on this.

    One person commented on one of the LinkedIn groups the following

    I viewed Adam Smiths invisible hand after reading Milton and Rose Friedman 1979 book “Free to Choose,” very positively that if I strive to do my best we all gain, and I do not need to be concerned about the actions of those around me. Everyone that is doing his best together makes a better society. My best interest is to do the ‘work to be done.’ Adam Smith wrote, ” an individual who “intends only his own gain” is led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.”

    I also picked up on Adam Smith’s warning, “I have never known much good done by those who affected to trade for the public good.” and ,” an individual who intends only to serve the public interest by fostering government intervention is ” led by an invisible hand to promote” private interests, “which was no part of his intention.”” With some governments I am not sure about the later statement of being not intentional.

    Milton pointed out that Adam Smith never considered government role in dealing with natural resources. Ones best interest is to pollute them because it eliminate a cost. So Milton suggested that government define a value for air and water.

    Adam Smith would say just strike out and act the direction you pick is your best guess that is good enough.

    Another commented

    Paul, building on an excerpt from your blog message:

    “Adam Smith also introduced the concept of ‘the Invisible Hand’ as a core part of his thesis, that man’s natural tendency toward self-interest – in modern terms, looking out for No.1 – results in prosperity, not just for the individual but for society. ‘The invisible hand’ is essential for free markets and capitalism, through how it generates wealth in competition for scarce resources. By maximizing their own interest as the direct intention, this ‘invisible hand’ also stimulates those around you and in the society you belong. As you seek to leverage your own assets, you are promoting society as a whole. Today this can be more by design, or through an unintended consequence of how knowledge flows.”

    That paragraph could be the seed of apparently endless conversations with my friends, colleagues and clients. (-:) And the apparently endless nature of the dialogue is due to differing definitions, beliefs and experiences about particular words/ideas.

    For example, the notion of “self” and “self interest” can be *heard* in many different ways …

    I am self absorbed, unconscious of other people’s needs.

    I am selfish and ego-centred, not caring much about others.

    I am myself only when in relationship with others.

    I am self motivated, able to do what needs to be done, without undue influence.

    I am self actualised when I am conscious of my social role and able to do/be it.

    I am self realised, when I am conscious of the deeper meaning of everyday life.

    Then a third suggested- much in line with your observations

    Adam Smith first used the term ‘invisible hand’ in his first book “A theory of Moral Sentiments’ when he referred to it in his later book ‘Wealth of Nation’ it was in reference to humanities essential socialness – their moral nature – the question that all people ask themselves ‘if I do this .. what will others think’. In this way he argued that our essential moral/social self will always shape our actions in a way that can make us appear ‘praiseworthy’ or at least ‘blameless’.

    The moral foundation of the invisible hand is generally overlooked by neo-classical modern economists.

    A very good synopsis can be found in a Yanis Varoufakis’s interview at EconTalks here:
    http://www.econtalk.org/archives/2013/02/varoufakis_on_v.html

    But you see we economists always make the mistake of reading The Wealth of Nations without The Theory of Moral Sentiments. And Smith never expected us to do that. He thought we would build, upon, the Theory of Moral Sentiments the invisible hand. But economists don’t do that. To their great detriment. Russ: Yeah, I agree. But I just wanted to add that footnote, because Smith wasn’t so interested in creating public virtues out of private vices. He was aware of it. But he was also interested in creating private virtues and hoping that would lead to even more public virtue. I think.

    It’s not that he didn’t recognize ‘self-interest’ but that he understood that all human activity -including economic activity is contextualized / embodied in their human experience.

    My present view

    So, some correction from assorted views, some additional thoughts- very healthy. I still feel the intent behind the article- the link might be more ‘tenuous’ but I think it should be left out there to flap and dry in the wind.

    All I can do is acknowledge using the invisible hand, great idea at the time has crept up and given me a bang on the back of the head!

    I still think invisible hand = intangible assets. As one individually improves, so does the broader community. Your thoughts?

    My regards and thanks
    Paul

    Like

  3. Pingback: Putting some dynamic tension into the system | innovationfitnessdynamics

  4. Pingback: Exploring the Value Of Your Innovation Capital | Paul4innovating's Blog

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s