The Depression-era economist and political scientist, Joseph Schumpeter (1883-1950),
worried about the stagnation of capitalism and globalization long before globalization
was a thing (and he wondered whether capitalism would even survive). The term
“creative destruction” that Schumpeter championed was a way to describe a
process in which the old ways of doing things are destroyed and replaced
by new, better ways. This idea is especially
pertinent for today’s pandemic-era economic and socio-political climate: we
know things must and will change, perhaps drastically, but no one knows how it
will shake out. And how we handle the changes ahead will make all the
Schumpeter posited that the disruption of existing
industries would pave the way for innovation and new players. A staunch
defender of capitalism, he maintained that it can only be understood as an
evolutionary process of continuous innovation and “creative destruction.” That revolutionary idea has been accepted by
many modern thinkers, but the pandemic is putting creative destruction and what
comes out on the other side into sharp focus and urgency.
Capitalism he wrote, “is by nature a form or method of
economic change and not only never is but never can be stationary.” The problem
he saw was that the success of capitalism would lead to a form
of corporatism featuring values hostile to entrepreneurial
capitalism. Does this sound familiar? Looking at today’s emerging version of
capitalism and multinational corporation dominance of markets it is very
familiar. Schumpeter also worried that this process would hinder entrepreneurship.
Schumpeter’s classic Capitalism,
Socialism, and Democracy is more than a dire judgment of
capitalism’s future. It is also a defense of capitalism because capitalism
sparks entrepreneurship. Schumpeter was among the first to lay out a clear
concept of entrepreneurship by identifying the distinction between an
inventor’s inventions and an entrepreneur’s innovations. He noted that
entrepreneurs innovate not just by figuring out how to use inventions, but also
by introducing new means of production, new products, and new forms of
organization. These innovations, he argued, take just as much skill and daring
as does the process of invention.
Innovation by the entrepreneur, he continued, leads to
creative destruction as innovations cause old inventories, ideas, technologies,
skills, and equipment to become obsolete. The question is not “how capitalism
administers existing structures,” he wrote, “… [but] how it creates and
destroys them.” This creative destruction, he believed, causes continuous
progress and improves the standards of living for everyone.
The debate about how best to foster an innovative
climate of collaboration continues to the present day. Innovation and
continuous improvement are buzzwords in the outsourcing industry but creating a
framework for actually making them happen is why I think the Vested sourcing business
model is positioned to take on that challenge.
I appreciate the challenge and the tension implied in
the concept of creative destruction.
It’s disquieting but also encouraging that 80 years after Schumpeter
used the term it is needed now more than ever with the Vested model and tools of
collaboration, trust, innovation, continuous improvement, and sharing value to
achieve the win-win guiding the way.