We are residing in a dynamic world that is constantly changing. The days of using traditional technologies are gone. It has become more important than ever to cope with the latest trends and technologies.

An Austrian-American economist, Schumpeter developed Creative destruction, inspired by Karl Marx. It talks about bringing change in the existing technologies and paradigms. In this article, we are going to discuss everything you need to know about the theory of Creative Destruction by Schumpeter.

Schumpeter’s creative destruction

When the long-standing procedures, practices, services, or products and other disruptive and innovative one's decay, it is known as creative destruction. It is formulated on the principle that the old and traditional assumptions need to be shattered so that the innovations can have an advantage over the existing energy and resources.

Schumpeter’s ideas

Based on the principles of demand and supply, the economy is formulated. Competition is a major factor that influences market prices. According to the view of Schumpeter, capitalism is dynamic, innovative, and continuously changing process. Over here, the latest processes and ideas challenge the previous or existing ones and eventually change the traditional paradigms. For example, Amazon’s Kindles are replacing traditional printed books.

According to the creative destruction perspective of Schumpeter, capitalism's large engine is an imbalance and cannot make the market equilibrium. This imbalance is called 'creative destruction' by Schumpeter. According to him, innovation turns into chaos. Obsolete or non-innovative products closed companies, and irrelevant workers are responsible for the chaos. He believes that such negative outcomes are crucial for bringing improvements and new solutions in life's quality, and greater economic growth will follow it.

Only the companies having a powerful strategic vision will be able to survive creative destruction. Indeed, there will be losers like workers and producers who continue working with the obsolete technologies. However, there will be winners as well, like the fast-movers, innovators, and entrepreneurs who will establish market disequilibrium and will be exploring profitable and new opportunities.

Schumpeter’s creative destruction, sustainability, and Corporate Social Responsibility (CSR)

When the matter is about sustainability serving as a management tool, everyone is going over a creative destruction moment. Several businesses are still working in the business-as-usual, old paradigm, and are ignoring the impacts of the supply chain regarding the materials they buy and convert, the waste they generate, and how the wastes are disposed of, or what kind of energy they make use of.

There is a conventional method of constant improvement, and several companies are developing it. Rather than making true CSR reports and strategies, they are putting together some cosmetic actions and announcing some green policies. But, still, a radical transformation and development of efficient sustainability strategies are necessary. It will make the companies resilient, and help them in cost-reduction, and explore new markets potentially.

Conclusion

The innovation’s waves obsolete the traditional models and force everything and everyone to innovate. And this transformation is drastic. The radical transformation will prepare the companies for the risks related to the future. If you lack the potential to cope up with the changes, it is more likely for you to get erased. Thus, craft a strategy, and face the challenges ahead.

"The essential point to grasp is that in dealing with capitalism we are dealing with an evolutionary process."- Joseph Schumpeter.