Schumpeter’s creative destruction theory.
Beyond the need to adapt the management of organizations to the threats of crises, Joseph Schumpeter showed us that these periods of transformation are above all conducive to innovation.
Toyota’s organizational model, itself born at the end of the Second World War in a devastated Japan, is one of the most relevant examples. This new mode of organization, disruptive in the face of Taylorism and Fordism, has imposed itself throughout the world. Simplify through Lean to adapt and survive.
These innovations, through the disruption they bring, are secondarily “the” key growth driver for businesses and economies. Technical progress generates an increase in productivity and amplifies the economic growth of those who master it.
“It is now established that the correlation between growth in the standard of living and the rate of creative destruction is positive. The goal of fostering the process of creative destruction through innovation should be at the top of political agendas.”
Aghion & Al. 2021
But wanting to save your company from bankruptcy is not enough to launch an entire industry, a nation, an economy towards prosperity. Yield and productivity gains do not justify technological revolutions.
The sources of innovation are much broader than the simple search for systemic optimization. The ecosystems favorable to entrepreneurship, the creativity of the actors, the taste for risk-taking, the attitude towards failures, the targeting of investments (private equity) and the health of public-private research systems in the long term are also important factors of technological revolution.
The philosophy of the Toyota Production System integrating stakeholders into the strategy contributes fully to this dynamic of continuous progression of ecosystems towards the development of value for customers, employees, stakeholders and all the territories involved.
Innovation management
Schumpeter’s theory shows us that in every crisis there are opportunities and reasons for hope.
Decision makers are therefore immediately subject to two management responsibilities :
- Cushion the fall and change the plan without any visibility.
- Analyze the situation, set the vision and get your teams involved in a high-intensity dynamic.
For example, in the world of professional sport, the coach must adapt his project and his team in just a few days, in response to the results of the weekend and the strengths and weaknesses encountered in the field. To do this, he must analyze the performances achieved very quickly because high-level sport pushes the cursors of human abilities to the possible limits and places the training requirements for each detail at extreme degrees of precision. Management in times of crisis is similar to this management model.
The speed of bringing innovations to market is becoming a critical key success factor.
This need involves interweaving development and production, reducing times, accelerating processes and accelerating flows. In a globalized, interconnected world, ideas and technologies are spreading around the world at an unprecedented rate. Flows of people, materials, products, currencies and supply chains evolve at ever-increasing speeds, distances and volumes. The societal and environmental impacts are catastrophic.
“The crisis places human beings face to face with their own contradictions, reveals their dysfunctions to society, forcing them to take time to define their new identity.”
Devernaud, 2009
In modern economic history, most major global brands were created by replacing obsolete business areas. Most of the great innovations were not created by companies in the disrupted field of activity but by visionaries outside the ecosystem, because they saw it with fresh eyes as a problem to be solved or a hope to be realized.
Get rich from the world, from your future customers. Look for innovation elsewhere. Today, the consumer even becomes a co-creator and actor of innovation.
Paradoxically, the crisis is destroying companies and jobs, but for companies, it is becoming an opportunity to create, innovate and change the world.
Behaviors and consumers are changing. When these changes disrupt an activity, some giants go out of business and others find the necessary resources to challenge technology and launch new products and abandon their historical activity. Toyota itself made looms. The original philosophy of lean management was this desire to adapt to a new and uncertain environment.
An innovation can bury whole sections of the economy in a few weeks and render obsolete products, companies and professions that were leaders the day before. On the other hand, some unknown companies become global giants and are valued at several billion Euros in just a few months.
This hyper-digitalized world where science is evolving at exponential speed questions our ways of writing strategies and our ability to build teams placed in a position of trust to imagine, create and distribute everywhere products and services adapted to the aspirations of inhabitants and diverse territories.
In this permanent rewriting of the world, innovation could catalyze the energies to change and fix what needs to be. The business ecosystem and politics become stakeholders in innovation.
Politics must promote positive, societal, sustainable innovation and reconnect with people and find lasting answers to the financial issues that drive economies.
“Innovation is not born from the dream, innovation is born from the struggle.”
Simon Sinek
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