Creative destruction or destructive creation?
Joseph Schumpeter coined the phrase ‘Creative Destruction,’ the premise in which new innovations destroy established enterprises and create new markets. Clayton Christensen, coined the term ‘Disruptive Innovation’ where he used a data driven approach to prove how well established incumbent companies get disrupted by new entrants who create asymmetries in skill and motivation that stops the incumbents from responding to their threats.
Now, we are talking about innovations and creative destructions that relinquish the old and make way for new to sustain the growth engine. It is a positive story.
But there is another side to the innovation story. Various studies suggest that 50 -80% of new product development efforts fail, and not all innovations have a positive impact on the end user.
A Cincinnati research agency AcuPoll goes further, saying 95% of new products introduced each year fail. Also, not all products that succeed in the market create positive impact.
A successful innovation may help a target customer group but they are not necessarily the most impactful when we assess them for their effects on the environment and the larger ecosystem.
Have we moved into an era of destructive creations from the era of creative destruction?
In the name of convenience, we create so many tools and utilities which may look like solving a problem for some people but they end up hurting the ecosystem by creating more problems. These problems exist both in the developed and developing world but they manifest in different ways.
I was in India last year. With the rapid industrial development, the face of India is changing dramatically. Massive shopping malls and well-built roads are a common scene wherever you travel.
Too many cars, too many motor bikes and too much pollution are making the conditions extremely difficult.
A common sight is women covering their faces with a cloth wrapped around the face to protect themselves from the extreme pollution in the cities. Automobile and motor bike manufacturers produce so many innovative new products but there is not a single product to take care of the after effects of their innovations.
While I was happy to see the infrastructure developments, I am highly concerned that the growing GDP and the rising incomes cannot ensure clean air to breathe, which is the most basic need that I have to provide to myself.
I returned back to Switzerland and was waiting at the Genève airport for my train. The first smell that greets you in the platform of the train stations in Switzerland is the cigarette smell. A bed of cigarette litter lined the tracks in the station.
Cigarette manufacturers make so many great innovations ranging from packaging innovations to new products but there is not a single product that takes care of the litter produced.
People don’t prefer to carry ash trays or disposable ash trays as their bags or their trousers are going to stink heavily. There are loads and loads of cigarette litter lying in the environment and they cause massive problems.
Aren’t they destructive creations? It not just affects the person who uses it but also other people, and most importantly the whole environment.
My new realization is ‘innovation’ doesn’t end at the product level or the service level, or even at the business model level. It needs to ensure that it takes care of the product and the aftereffects that arise from the consumption of the products.
The metrics of measuring the impact of innovation need to consider not just the impact around addressing a pain point for the consumer, but also how well the impact is sustained through the entire lifecycle of the product.
Otherwise, the impact created by the solution to address a pain point for one target customer group, in the case of low cost cars, providing safe and secure driving for middle class Indian families, will lead to the creation of new pain points like lack of parking space, too much traffic in the roads, getting rid of greenery and most importantly, lack of clean air to breathe.
Strategy is a choice around resource allocation and these choices have to be made in a way that all the stakeholders in the society benefit from these innovations, and not just a few segments of the society.
Innovations need to create impact, but the impact needs to be holistic around the entire lifecycle of the product.
Creative destruction is healthy but destructive creations are not. Balance and Equanimity is important in our resource allocation processes.
SOURCE: World Economic Forum