By Charles F. Moreira
In my around 25 years of writing about computing, communications and information technology, I’ve often encountered the term “creative destruction”, especially in relation to new technologies or technology products, systems or services.
In the context of communications and information technology, “creative destruction” can occur when a new and more innovative technology is available which enables greater convenience, efficiency, competitiveness, ease of use, versatility, greater affordability, greater functionality, greater connectivity and so forth, and is preferred by industries or businesses over the earlier technology used for similar purposes, and in some cases drives the old technology and its supplier out of the market or a market segment.
The term “creative destruction” is attributed to Austrian economist Joseph Schumpeter, who introduced it as a theory of economic innovation and business cycle, in his book Capitalism, Socialism and Democracy, published in 1942.
It may come as a surprise to many in government, the business and management consultancy communities, that according to several sources, including Wikipedia, Schumpeter derived the term “creative destruction” from the writings of Karl Marx and Frederick Engels in their Manifesto of the Communist Party, published in 1848, almost 100 years earlier.
In their manifesto, Marx and Engels describe the tendencies within capitalism towards crisis in terms of “the enforced destruction of a mass of productive forces”, and proposed socialism as an alternative socio-political-economic system to supersede capitalism – whereby industry is owned and controlled by society led by the working class, and where production is planned to provide for the needs of society and not the private profits of capitalists, thus a form of “creative destruction”.
According to Schumpeter, “creative destruction” describes the “process of industrial mutation that incessantly revolutionises the economic structure from within, incessantly destroying the old one, incessantly creating a new one”.
The theory of “creative destruction” assumes that long-standing arrangements and assumptions must be destroyed to free up resources and energy to be deployed for innovation. It treats economics as an organic and dynamic process, in stark contrast with the static mathematical models of traditional Cambridge-tradition economics.
Basically, Schumpeter views economics as a series of dialectical processes, rather than a static concept. Equilibrium is no longer the end goal of market processes. Instead, many fluctuating dynamics are constantly reshaped or replaced by innovation and competition, whilst economic development is the natural result of forces internal to the market and is created by the opportunity to seek profit.
The word “destruction” implies that the process inevitably results in losers and winners. Entrepreneurs and workers in new technologies will inevitably create disequilibrium and highlight new profit opportunities. Producers and workers committed to the older technology will be left stranded.
Latter day examples
Fast forward to the present or the fairly recent, when the widening availability of affordable personal computers and printers in offices and homes, coupled with word processing applications, especially from the early 1980s onwards, replaced typewriters used to write business letters, orders, quotations, delivery orders, invoices and so forth in Malaysia throughout that decade.
In the days before the Internet and e-mail, word processing software let businesses produce printed quotations quickly by altering a few details in earlier quotations instead of having to type each new quotation from scratch.
This gave them a competitive advantage over suppliers which still used typewriters, and this compelled these companies to adopt computers and word processing software to get back on a level playing field, and soon almost all companies were using computers and word processing software, as well as spreadsheets, relational database and other productivity software, whilst office staff had to upgrade their skills accordingly to keep their jobs.
At the same time, some prominent typewriter manufacturers were driven out of the office equipment market altogether, whilst others managed to survive and even thrive by shifting towards production of printers, whilst others successfully redefined themselves towards providing office or business-related services.
Also, whist those typewriter technicians, engineers and production workers who successfully adapted to designing, maintaining and producing printers were able to keep their jobs, their colleagues who could not were soon out of work or relegated to some obscure job.
Stay tuned for more examples in Part 2