California Business Minute™

Hi, I am Tim Johnson and welcome to the California Business Minute.

Austrian economist Joseph Schumpeter popularized the term ‘Creative Destruction’
In his book Capitalism, Socialism and Democracy, 1942 to describe how capitalism
renews itself through seemingly sudden convulsions, the idea, new creative and
industries flourish as older ones, stagnant ones diminish. This happened during the
industrial revolution and is apparently happening as we transfer into the information/technology
revolution. 

There are numerous types of innovation-generating creative destruction in an industry:
-New markets or products
-New equipment (autonomous aerial vehicles)
-New sources of labor and raw materials (carbon fiber)
-New methods of organization or management
-New methods of inventory management
-New methods of transportation
-New methods of communication (e.g., the Internet)
-New methods of advertising and marketing
-New financial instruments (zero down, no interest, adjustable loans)

In 1995, Harvard Business School authors Richard L. Nolan and David C. Croson published
Creative Destruction: A Six-Stage Process for Transforming the Organization. The book
advocated downsizing to free up slack resources, which could then be reinvested to create
competitive advantage.

Should we call this current financial crisis and economic transition Creative Destruction 2.0?

I am Tim Johnson and this has been the California Business Minute.