New Years Resolution – Embrace Creative Destruction

For my holiday reading, I’ve chosen a book called Why Nations Fail (written by Daron Acemoglu and James A. Robinson). If you haven’t read it, it explores why some nations are more prosperous than others.

Its central thesis is that nations that cultivate inclusive environments, where citizens are able to profit from their own hard work, are orders of magnitude more prosperous than those nations that cultivate extractive environments, where only the ruling class benefits from the work of its citizens. And it discusses the idea of creative destruction, or new technologies and methodologies replacing old business models – even at the expense of those who currently profit from those models.

Economic growth and technological change are accompanied by what the great economist Joseph Schumpeter called creative destruction. They replace the old with the new. New sectors attract resources away from old ones. New firms take business away from established ones. New technologies make existing skills and machines obsolete.

Daron Acemoğlu, Why Nations Fail: The Origins of Power, Prosperity, and Poverty

While their evidence is compelling at the national level, there is similar evidence of this at the corporate level. Kodak was the first to develop the digital camera. Yet they didn’t bring it to market because they (correctly) thought it would negatively influence their market dominance in the film industry.

Instead, the market shifted anyway. Instead of leading that shift, Kodak was left out. From the ruins of the film industry, a digital industry rose. Creative destruction had struck again. And ready or not, change came.

Stop Fighting It, and Embrace the Change

If 2020 has taught us anything, is that change is beyond our control. Yet for too many years, corporations have done all they can to stop it. They mock those that think differently. They buy up companies to squash competition. They hire lobbyists to influence law.

For 2021, I urge all of you to give up the fight and embrace the change. Follow the new ISO 56000 standard and continuously investigate new ideas. Communicate what ideas you as a leader consider valuable. And allow your employees and colleagues to profit and grow when they contribute new ideas to the cause.

A businessman who expects his output to be stolen, expropriated, or entirely taxed away will have little incentive to work, let alone any incentive to undertake investments and innovations.

Daron Acemoğlu, Why Nations Fail: The Origins of Power, Prosperity, and Poverty

While initially counter-intuitive to many, this long-term approach to growth is a proven strategy. Economically speaking, its how Britain grew its dominant global position in the 18th and 19th centuries and how the United States grew its dominant position in the 20th and 21st centuries. Organizationally speaking, it’s how Zappos established dominance in the online retail space and how DiVita returned from the brink of bankruptcy to dominate the kidney transplant industry.

The goal is to create an inclusive organization where the company is propelled forward by your brightest minds and ideas and everyone is given an opportunity to grow based on their contributions. And while it’s a continual journey that you will be embarking on, it is not one that they’ll be on alone.

We spoke earlier about the ISO 56000 standard. Use it as a foundation for building an agile and nimble organization. There are organizations like the IAOIP that are comprised of some of the brightest minds – engage with them. There are trainings and certifications that offer the skills your employees need. There are workshops that can provide you with a running start, instead of starting from scratch. Or allow us to perform a Gap Analysis so you know exactly where you stand against the ISO standard, and what you have to do to align.

But whatever you do, in 2021 please STOP FIGHTING fights that you can’t win. It wastes time. It wastes resources. And most depressingly, it wastes the energy of your friends, teammates and employees.

Embracing creative destruction is the only means of building a great and lasting organization. Make 2021 the year you stop fighting change, and start learning how to make it work for you.