Image credit: Gerd Altmann • Freiburg/Deutschland | CC0 Public Domain | Image location

I am aware that some unquestioning followers of Joseph Schumpeter will find this note irksome. However, please hold your horses, as it is important to see the negative impact of Schumpeter’s famous theory on innovation & the-hero-entrepreneur. At least, intellectual honesty demands that we see how the rediscovered hero in Schumpeter fairs in this age of Digital everything.

For starters, Schumpeter propounded that “incessant innovation” and “the entrepreneur” as the reason for all economic progress. This progress will be achieved through “creative destruction” of the old with the new.

Nothing fundamentally wrong with these ideas, which are structurally correct in the framing of the words & language. Who can deny that innovation is the cornerstone of growth & all established enterprises of today were start-ups of yesterday? However, they yielded economic value only when they reached a size and not necessarily as start-ups.

Many people have mistakenly ascribed acts of nature & even spirituality to describe the profoundness of “creative destruction”. These are gross misinterpretations of Schumpeter’s original idea.

To understand Schumpeter’s motivations, step back a bit and see from where his ideas originated. For Schumpeter destruction of Capitalism through means other than Marx’s violent theory was his motivational aspect. At his core ideology, he believed that the destination is socialism & possibly communism and not the spirit of free enterprise. Schumpeter came from the era of world wars when the incessant battle of ideologies was being fought & colonist Europe was exploiting the wealth of other nations. Most thinkers of that era only propagated ideologies of war making & dominance through direct or other means.

Some of the worst violence had the ideological cover of thinkers like Marx, Clausewitz, etc. and in the world of economics by people like Schumpeter.

Schumpeter’s impact on our times

Schumpeter hero worship of the Entrepreneur left the established corporations and professionals listless about their work purpose and made the elusive high point of a career to be an Entrepreneur. It pushed an entrepreneur away from the mainstream world of business to a sort of an abandoned island of heroism. It also pushed Innovation to be a black box & a random concept, which only an entrepreneur could somehow magically unleash.

Most business leaders and consultants (not being academic thinkers like Schumpeter), picked on the “destructive” to justify mass laying-offs, irrational exuberance of financial innovations & subsequent crashes, which we know about quite well. Such wanton destruction can be squarely laid at the door of Schumpeter-inspired corporate war making models & strategies. These strategies were a zero-sum game with a competitor as the core target.

The counter-narrative to Schumpeter

Last 30 years of innovation has shown, that tremendous economic value can be released by both start-ups and established companies. How else do you explain the massive economic miracle of China without even a single famous name to support it (Jack Ma is just one name & is a result of that larger economic miracle)?

Innovators in the last 30 years have built on the shoulder of other willing innovators. None of them were looking to “creatively destroy” established corporations; they just were trying to solve an everyday business problem. Airbnb was not attacking Hotel Hilton business model, it was instead creating a canvass to serve a different market segment.  It is highly unlikely that a sea front property of Hilton can be in the same market as an Airbnb affiliate room.

By now millions of digital professionals have built the internet, working in both large & small companies without being named as father or grandfather of innovation, that Schumpeter so craved.

The new age digital professional (or innovators, as you wish to name yourself) are creating value on a regular basis in the following way:

  • Without hero worship or attention seeking or ideology vending
  • Liberal and open about helping other professionals
  • Quite workers
  • Do not see wars, discrimination or “any kinda” destruction as the way to live or work

Way forward for the Digital Corporation

The corporate world today needs a simple-to-do strategy canvass for innovation and creating value. The black box of “innovation & the-hero-entrepreneur” of Schumpeter needs to be buried.

Clear and doable methods, tools & mechanism needs to be enabled for the rank & file workers, who can then handle Innovation as an everyday operation and achieve the true potential as digital professionals & digital corporations.

If you have a Schumpeter on your rolls or as your management consultant, “creatively” fire him. It will do wonder to your business to enable Digital Transformation for your rank & file which is working diligently for you.
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Gentler references of Joseph Schumpeter that you may read: