https://innovateuk.blog.gov.uk/2016/02/22/creative-destruction/

Creative destruction

Kevin Baughan talks about the role of disruptive change in driving the fourth industrial revolution. 

Joseph Schumpeter

You could be forgiven for thinking that “Creative Destruction” is a paradox, juxtaposing as it does, the unpalatable connotations of destruction with the inspirational emotions of creativity.

It was the Austrian American economist, Joseph Schumpeter, who captured so vividly the “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one”.

Schumpeter did not envisage for one moment that this “gale of creative destruction” would lie at the epicentre of today’s economy. Rather, his ground-breaking social theory, which starts with a detailed analysis of the works of Karl Marx, envisaged:

The obsolescence of the entrepreneurial function” because “so many more things can be strictly calculated that had of old to be visualised in a flash of genius.

His term “Creative Destruction” lives on and captures perfectly both the exhilaration and distress, which accompanies disruptive change.

Disruptive change

Creative destruction, storm

Opportunities abound for disruptive change in today’s innovation-led economies:

  • The arrival of Airbnb, a hotel service with a business model, which has no need for traditional hotels.

Indeed, within my own career, I have been in organisations, which have been both the disruptor and the disrupted and I have witnessed first hand both the exhilaration and distress, which emanates from a gale of creative destruction.

This train of thought was triggered when a colleague sent across a copy of the ITIF (Washington think tank) report: “Contributors and detractors: ranking countries impact on global innovation”.

The ITIF placed the UK in 3rd place, behind Finland and Sweden and described all three as “Schumpeterian”. They described (as only a Washington think tank could) the US, in 10th place, as “Adam Smithian” and Germany, in 12th place, as “EU Continentalist” but we will resist the temptation to be side-tracked from our exploration of creative destruction.

This perspective of the UK, as a Schumpeterian economy, also resonates with our Secretary of State’s article for the Sunday Telegraph, where the Rt Hon Sajid Javid MP, begins by recognising that:

Today, we are living at a time of rapid technological change with innovations in fields such as big data, robotics, drones and synthetic biology holding the potential to revolutionise the way we work and live our lives.

My colleague Neil Johnston, discusses in an earlier blog the work of Innovate UK in exploring the “impossibility” of emerging technologies.

So are such revolutionary changes in our economy driven solely by “technology push”?

Schumpeterian opportunities

Longer-term readers of my blog will know that I have discussed before the 2x2 grid, in the figure below, which was created by Eddie Obeng to describe the sources of opportunity for innovation.

The eagle-eyed will also notice that in this version I have updated several of the quadrants. In the past, I had described the “push” opportunities on the left as revolutionary and the “pull” opportunities on the right as evolutionary but this doesn’t fit with an Schumpeterian outlook.

Schumpeterian economies

Industries today don’t just sit and wait for the storm to arrive, they have woken up to the risks of a Schumpeterian economy and many now proactively reinvent themselves: collaborating, investing and acquiring the revolutionary start ups who might otherwise be sowing the seeds of their destruction.

Quite understandable then that Microsoft snapped up Swiftkey, not just for its predictive text algorithms, but for its growing expertise in artificial intelligence. Swiftkey set out on its journey with funding from Innovate UK to create its proof of concept.

Innovate UK’s revolutionaries

The great thing about Eddie’s grid is that it reminds us that innovation opportunities don’t just come from push but that they also come from pull and that they don’t just come from a focus on technology but from a focus on people.

Technology revolutionises performance; creativity revolutionises experiences and the UK excels at both.

No surprise then to be classified as Schumpeterian. The role of Innovate UK is to take the strongest of those opportunities and ensure that they turn into economic growth for the UK.

Its role is to find and grow Schumpeterian revolutions right across our economy. Through the disruptive technology push of new discoveries like Quantum, and the creative push, of talented innovators such as Lauren Bowker of the Unseen whose fusion of fashion and chemistry has truly redefined consumer needs and desires.

Through the reinvention of existing industrial sectors right across the economy from the “light-weighting” of automotive to “precision-farming” in agri-tech.

And last but by no means least, through the opportunities created in response to the changing needs and desires of our societies, which triggered transformative programmes focused on low carbon vehicles and low impact buildings.

Existing industries have a huge advantage – a customer base from which they can understand the direction of their markets but they also have a huge disadvantage – inertia. They have existing customers to serve, existing products to maintain, existing supply chains to operate and an existing monthly pay roll to meet.

Innovate UK’s role is to create the revolutions, including sector reinventions, which will enable them to weather the storms ahead. Such as the one already underway by Jessi Baker’s Project Provenance Ltd, which has used Innovate UK funding, to enable immutable digital authentication across retail supply chains using blockchains.

UK Motorsport – A continuous revolution

At the Innovate UK conference last year, Chris Aylett, CEO of the MIA, spoke to the lessons that the wider UK industry could learn from our world-leading Motorsport Cluster.

If the world’s F1 fans watch you compete every two weeks against some of the best engineering companies on the planet, you never leave the eye of the storm. Creative destruction is no longer an event to be anticipated it is a way of life as your product is continuously disrupted and reinvented.

In his presentation Chris highlighted how the Motorsport industry is increasingly taking its advanced capabilities and revolutionary culture into cross-industry collaborations, with McLaren F1 solving the challenges of data transfer at Birmingham Children’s Hospital and Williams F1 tackling the goal of low carbon refrigeration at Sainsbury’s.

Bringing about groundbreaking collaborations between businesses and research and between businesses that have never worked together before, lies at the very heart of Innovate UK’s mission.

If you would like to learn more, about accelerating British innovation through cross-industry collaboration, register your interest to join us on March 10th at the Williams HQ in Wantage, Oxfordshire.

Vive la révolution!

You can follow me on twitter: @KevinBaughan

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