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What Is Creative Destruction?
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What Is Creative Destruction?

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A brief introduction to creative destruction.

A brief introduction to creative destruction.

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  • 1. What isCreative Destruction?
  • 2. Christian Sandström holds a PhD from ChalmersUniversity of Technology, Sweden. He writes and speaks about disruptive innovation and technological change.
  • 3. The value of theold is destroyedby the new.
  • 4. The value of old technologies…
  • 5. … is destroyed by new technologies
  • 6. You know the song ”Video killed the radio star”? That’s Creative Destruction!
  • 7. The term CreativeDestructionwas used by JosephSchumpeter,an Austrian economist.
  • 8. To Schumpeter capitalism leads to eternal structural changes in firms, industries and economies. And he argued that Innovation is what drives this process…
  • 9. Quote Schumpeter:”In capitalist reality … it is notthat kind of competition(price) which counts but thecompetition from the…
  • 10. … the new commodity…
  • 11. … the new technology…
  • 12. … The new source of supply…
  • 13. …the new type of organization…
  • 14. - Competition which … strikes …existing firm … at their foundationsand their very lives…
  • 15. … this kind of competition is … much more effective that the other … and [is] the powerful lever that in the long run expands output” (End of long quote)Old and New computer Performance? Resources?
  • 16. Quote Schumpeter:”A railroad through new country,i.e., country not yet served byrailroads, as soon as it gets intoworking order upsets all conditionsof location, all cost calculations, allproduction functions within itsradius of influence; and hardly any’ways of doing things’ which havebeen optimal remain so afterward”.
  • 17. Why does it look like this along a smallcountry road in Alabama?
  • 18. If a new highway (an innovation) is builtnext to the country road, noone’s goingto drive on the old road…
  • 19. … The value of the old isdestroyed by the new creation…
  • 20. Here’s another example…
  • 21. Well, actually it is not!The photo is taken in New Orleansafter the terrible Hurricane Katrina…
  • 22. The views are terrible and strikingly similar!Innovations can create the samekind of views as a hurricane disaster…
  • 23. And now a little game…The next slide contains 4 photos2 are from Hurricane New Orleans 2 are from old country roads Guess which ones are from New Orleans!
  • 24. Don’tcheat =)
  • 25. Tricky?Here’s theanswer…
  • 26. TENNESSEE NEW ORLEANS COUNTRY ROAD NEW ORLEANS ALABAMA COUNTRY ROAD Amazing how hard it is to tell the difference!Innovation is really about Creative Destruction!
  • 27. Yesterday’s and today’s capitalist economy isall about Innovation and Creative Destruction.
  • 28. Innovation was what drove the 19th century economy…The telegraph Railway and the steam engine Iron and steelNew energy (coal)
  • 29. … And it drives today’s global economy as well Oil The container The transistor Plast
  • 30. ”From the steam engine to the search engine”
  • 31. Surviving Creative Destruction is a challenge for firms…
  • 32. … Surviving Creative Destruction isa challenge for industries…
  • 33. …a challenge for societies
  • 34. It’s a challenge for people… The tractor innovation destroyed the peasant’s job
  • 35. Other innovations create new jobssomewhere else in the economy…
  • 36. So, Innovation and Creative Destruction drive structural change in societyShare of Swedish population working in agriculture, industry and services over time.
  • 37. Summing it up…Innovations Destroy value at one place, and Create a larger economic value somewhere else.
  • 38. Image attributionshttp://www.flickr.com/photos/psd/40890499/http://www.flickr.com/photos/8401248@N04/2480947481/http://www.flickr.com/photos/45097561@N00/2719658555/http://www.flickr.com/photos/mikebaird/2931160632/http://www.flickr.com/photos/urbangarden/336062325/http://www.flickr.com/photos/lexrex/193012741/http://www.flickr.com/photos/davipt/299545533/http://www.flickr.com/photos/boelaars/1020257996/http://www.flickr.com/photos/freewine/594751479/http://www.flickr.com/photos/germanium/1370966194/http://www.flickr.com/photos/seeingthings/301095573/http://www.flickr.com/photos/keso/108805307/http://www.flickr.com/photos/digitalparadox/171660308/http://www.flickr.com/photos/7175652@N02/2309545221/http://www.flickr.com/photos/pathenson/2170695936/http://www.flickr.com/photos/splat/456591147/http://www.flickr.com/photos/enigmatic/342506270/
  • 39. Find out more:www.christiansandstrom.org