Schumpeter Revisited – The Rise of Creative DestructionPeriodical 9 // December 2013

"Creative Destruction" – Schumpeter stuck firmly to his belief that strong entrepreneurs and continuous innovation are the most important pillars of economic growth. We started revisiting Schumpeter at our Annual Summit in September and enjoyed the most interesting and inspiring insights. In this edition of The Stern Stewart Institute’s Periodical, we are continuing with this discussion. But, first, let’s take a moment to examine our role as leaders and how innovation, changes and entrepreneurial thinking can be anchored in our companies.
When Schumpeter defined entrepreneurs as the driver of innovation, the world itself and the business world were not as complex as they are today. The role of entrepreneurs is not getting any easier as globalization makes our world appear smaller and smaller. Entrepreneurs are not only responsible for innovation, entrepreneurs are also responsible for steering huge enterprises and complex international organizations. Today’s organizational charts look more like a piece of modern art given that companies work in various sectors with global functions and are present at the local level all over the world.
No doubt, managing such companies is a bold venture for every management board. And since no management can embark on this venture without the support of the entire company, we find ourselves in a bit of a bind: Faster changing markets require much faster decision making, top management has to be involved and informed about all major issues and, lastly, top management has to make the “big entrepreneurial” decisions. At the same time, entrepreneurial thinking should be stipulated by every leader of the company, and business unit leaders should have as much freedom as possible to act like entrepreneurs. This is not an easy combination and certainly presents a challenge that seems akin to a tightrope walk. Nevertheless, it is a feasible one: Feasible with a company structure that clearly defines the decision-making processes and makes room for entrepreneurship on all levels and feasible in that management is focused on its tasks and stands strong at the helm of the company. So, for me, the focus is on recognizing that leadership means to lead as opposed to serve. Let's call for the creative destruction of corporate centers. We all have to focus more on giving strategic direction. We need to interface directly with the leaders of our businesses rather than with corporate functions. We need to build smaller but stronger leadership teams and, in doing so, focus on the important aspect of interacting.
For my part, I consider this a challenge we should all be willing to take. Let’s prove that not only concepts, products and businesses evolve, but that leadership also has to evolve in order to keep pace with the ever changing business world. But now, let’s find out just what it is that changes and turns the business world today. Have a look at how and especially where Schumpeter’s viewpoint is still very valid today. When you take the time to read through the articles, you will see what I mean. I invite you to see for yourself that creative destruction can be found in so many different fields. It is up to you whether you agree with me in saying that Schumpeter has been proven right again…