Innovation is not a single moment of catharsis, upheaval, or revamping. It is not a change in the form of a one-hit product; instead, it is a continuous process.
BY FAISAL HOQUE | April 22, 2014
In his 1942 book “Capitalism, Socialism, and Democracy,” the Austrian-American economist Joseph Schumpeter introduced the notion of the innovation economy, in which the market isn’t driven solely by efficiency, but by great shifts in supremacy. He characterized capitalism by its “violent bursts and catastrophes,” a process he colorfully dubbed “creative destruction.”
Schumpeter saw the shifts occurring in the world in his day, the movement away from rigid standardization and toward the fluidity that we now know. He argued that evolving institutions, entrepreneurship, and technological change are at the heart of economic growth. He also said that the incentive to innovate is what makes capitalism the best economic system.
Although they were formulated 70 years ago, Schumpeter’s ideas about innovation have only recently entered into popular conversation, most notably with Clayton Christensen’s “The Innovator’s Dilemma,” published in 1997. Christensen saw how organizations were fixated on the desires customers expressed rather than seeking out their unspoken, unmet, or future needs. When that need-meeting was coupled with the ability to produce goods at rapidly reduced costs, a company could become disrupted, the word which Christensen coined. This is a topic we explore extensively in our new book, “Everything Connects.”
Consider cell phones and landlines, Amazon and bookstores, Warby Parker and the eyewear industry, Blockbuster and Netflix. As companies become the entrenched, they also become vulnerable, for they settle into inward-facing habits, making them vulnerable to younger organizations. To be an incumbent — or become an incumbent — is to invite disruption.
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