Creative Destruction

Creative destruction is a concept that focuses on the development of new economic markets form the obliteration of previous economic orders. In its most basic essence, it attempts to explain the way in which certain goods and processes are replaced with higher quality products, and more efficient production techniques. Thus, companies that fail to recognize and accommodate the new demands of evolving economies will ultimately become irrelevant. In order to match the changing market, organizations must abandon assumptions of continuity, and transition to a state of discontinuity, that will in turn, increase their chances of survival.

In order to create corporate cultures based on suppositions of discontinuity, organizations must explore key concepts that foster the development of new environments, and consequentially the creation of innovative ideas. Models that fall within this spectrum include: transversal learning, systems thinking, behavioral economics, and corporate social responsibility. In the next paragraphs we will analyze the meaning of each, and determine their respective importance to the concept of creative destruction.

Systems’ thinking implies that the different parts that compose a given system are both interdependent and interconnected, and thus, the alteration of any will inevitably affect the function of the whole. In essence, it describes the process of understanding how things influence one another within the larger plane. Moreover, transversal thinking follows the same principles as system’s thinking. It attempts to explain how different disciplines are derived from concepts across other areas, promoting a notion of interrelationship within different fields.

Furthermore, behavior economics, as opposed to standard economics, explains how humans are irrational beings, and thus, prone to illogical decision-making based on emotions and thoughts, rather than rational assumptions. This concept aims to make markets more accurate, by recognizing weaknesses in human behavior, and correcting them accordingly. Lastly, corporate social responsibility is the process through which organizations take responsibility for their actions and encourage an overall positive impact on the environment and their various stakeholders.

By adopting a transversal thinking approach, that is, merging the previous concepts into a whole, organizations will be able to formulate new management philosophies and control process that will ultimately help them transition from a state of continuity, to an optimal state of discontinuity, ensuring long term success. However, it is important to analyze each concept separately through careful analysis in order to achieve the conversion successfully. This can be done by means of systems thinking, which aids in the creation of smart and enduring solutions by allowing managers to work with the systems basic drivers, and consequentially