In the middle of the last century, economist Joseph Schumpeter presented the idea of creative destruction which causes current ideas, technologies, equipment, skills, and more to become obsolete. He wrote creative destruction “incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism.”
Globalization appears to have hastened the pace of creative destruction in ways Schumpeter may not have imagined. The current issue of PWC’s Strategy + Business pointed out:
“Business operates today in a world of accelerating change. In the United States, it took 76 years for half the population to own a telephone. The smartphone achieved the same penetration in less than a decade. It took France 100 years to double the share of its over-60 population within the labor force, from 7 to 14 percent. China, India, and Brazil will make the same leap in less than 30 years. Due to the whirlwind pace of global forces, a phenomenal amount of value can be created or destroyed more quickly today than at any other point in history.”
Strategy + Business suggested most companies will face disruptions during 2015 as the ways in which they reach customers and the products and services they provide to customers evolve. The magazine pointed out seven industries that are on the cusp of significant change including automobile manufacturing (where brand is less important than it once was), shipping (which will be competing with 3D printing), healthcare (where consumers are becoming more influential), and telecommunications (where companies are being challenged by nimble and responsive rivals).
Change may open new investment opportunities and, sometimes, may make companies which have been good investments less attractive.
Weekly Focus – Think About It
“What we need to do is always lean into the future; when the world changes around you and when it changes against you – what used to be a tail wind is now a head wind – you have to lean into that and figure out what to do because complaining isn’t a strategy.”
–Jeff Bezos, Founder and CEO of Amazon