Friday, October 02, 2009
In most discussions about entrepreneurship, the talk usually comes around to 'creative destruction'. This is a term created by economist Joseph Schumpeter. It describes the inevitable loss of value in enterprises that do not innovate.
Wikipedia's description: "In Schumpeter's vision of capitalism, innovative entry by entrepreneurs was the force that sustained long-term economic growth, even as it destroyed the value of established companies that enjoyed some degree of monopoly power."
If you are on the losing side, it is painful and sad when the market share of older companies is eaten by younger more innovative enterprises.
What's useful here is that innovation is available to everyone. Innovation does not have to equal high, unmanaged growth. Innovation can be increased value and service to your stakeholders (think of the excellent book, Small Giants). Indeed, innovation is limitless and never-ending by its nature. So yes, there will be creative destruction.
The next step is to build platforms for 'creative birthing'. I see 'creative birthing' as a way to prosper through the inevitable destruction by allowing ever-increasing numbers of individuals and groups to participate in innovation and entrepreneurship. Even as creative destruction overtakes the less nimble, people involved in those dying companies will have the advantage of easily participating in new, more creative and innovative launches.
Hybrid entity/governance models will likely emerge. New kinds of stakeholders will likely emerge (think of the great new work forming within the Slow Money Alliance). By supporting 'creative birthing' processes and platforms, I think economic regions can prosper. Those that don't help enable easier 'creative birthing' processes will eventually suffer.
In a previous post I linked to a study showing that regions with the highest business 'birth rates' (startups, which everyone celebrates) also had the highest 'death rates' of companies going under. Many places treat these business closures as failures, while the most successful places (highest birth rates) celebrate the culture of entrepreneurship and make pathways into that model easier.
Working in a social profit (non-profit) organization that is neither private or government, I feel a wonderful nimbleness to work on models to make entrepreneurship easier. Governments shouldn't do this stuff. Too often, private enterprise is locked in to their own form of 'creative destruction' and not interested in new options. The best enterprises don't do this, but they are typically a minority.
I think the local food processing cluster we are trying to build is a worthy experiment in 'creative birthing'. However, this is not 'The' experiment, it's 'an' experiment. There are countless other experiments possible across all types of enterprises and geographies.
There is no other way to deal with creative destruction than acknowledge it and build systems to temper and even utilize that destruction: creative birthing is here to stay.
I greatly enjoyed sharing some of these ideas with many new friends in the Regional Food Systems Working Group at the Leopold Center this week. The meeting was held at the beautiful Iowa Arboretum in Madrid, IA. I highly recommend a visit!
Wikipedia, 'Creative Destruction'
Prior post on birth rates / death rates
Slow Money Alliance
Regional Food Systems Working Group
Small Giants, by Bo Burlingham