What Creative Destruction Is

Creative destruction is when an individual or company creates a brand-new type of product that in essence leads to the destruction of its competition. The DVD made VHS tapes become worth pennies and led to them never being used anymore. Polaroid used to practically have a monopoly on instant photography before digital cameras came around which also suffered from creative destruction because of cameras in cell phones. Creative destruction is powered by business people who create new products, improve technology, discovers a better supply source, finds a better method for industrial organization, or pioneers a new and more efficient way to produce.

Creative destruction is why companies fail when someone or something better comes along. Companies closing can always be a sad experience especially if you’re employed by a company that isn’t going to survive competition from new products and technology. What’s scary is that governments will sometimes use corporate welfare to keep companies alive because they want the jobs to stay in the marketplace. Corporate welfare is problematic and useless when creative destruction is taking place. You could have thrown trillions of dollars at the VHS industry it simply wouldn’t matter. If the VHS industry didn’t change and adapt to the technology of their time they’d still lose to DVD’s and digital alternatives end of story.

Creative destruction is why it is essential for you and your company to ensure that they have a product that is up to date. Innovation is the driving force behind long term economic growth and is necessary for us to keep advancing. Never dump your life savings into a disappearing industry and always ensure that your competition doesn’t have a much better system. Ruined companies are a painful thing to deal with, but these ruined companies are also inevitable. This is an inevitability that is necessary because it paves the way for new companies and new jobs to get created. Creative destruction sets the stage for economies to grow and is not something we should fear and attempt to delay.