We are once again in the midst of the creative destruction of industries. By way of background, the term “creative destruction” is from Joseph Schumpeter’s 1939 book, Business Cycles. He believed that business cycles were caused by innovation. Stu L. Hart and Mark B. Millstein in their 1999 article titled, “Global Sustainability and the Creative Destruction of Industries” (Sloan Management Review, ISSN 0019-848X, Vol. 41, Nº. 1, 1999) linked Schumpeter’s business concept of creative destruction to the business drivers of sustainability.
I agree with Hart and Millstein. A lot of people think that the current destruction we’re seeing is exclusively the result of the financial meltdown, but I believe creative destruction was in play well before the financial meltdown. The meltdown is accelerating this destruction, but innovation is alive and well, and for those who can survive this unprecedented economic environment, they will thrive.
Innovative companies are better positioned to survive beyond the recession. Constraints on carbon, water, materials, etc. will require companies to do more with fewer resources. More importantly they will have the opportunity to create the new products and services that will thrive in this new business environment.
Most large corporations developed in an era of abundant raw materials, cheap energy, and limitless sinks for waste disposal. This is no longer the world we live in. Hart and Milstein argue that “the emerging challenge of global sustainability will catalyze a new round of ‘creative destruction’ that innovators and entrepreneurs will view as one of the biggest business opportunities in the history of commerce.”
Businesses that view sustainability as an opportunity will drive the creative destruction process and build the foundation to compete in the twenty-first century.