We have all had some programming to follow the long-standing idea of going where the money is at, but the time has come to reexamine this notion. Innovation to meet changing market needs will destroy many mature industries and companies. In the recent global economic downturn we have already seen striking evidence the time has come to replace some existing large companies and industries. For example, companies producing energy from fossil fuels can only last so long as eventually these energy sources will not supply enough energy to meet growing demand and the needs of a burgeoning population. Prices are out of control and will soon, if not already, price many consumers out of the market. Should companies invest more in these energy sources or look for innovations to create energy?
Joseph Schumpeter (1975) coined the term “creative destruction” to describe this idea and explain economic cycles in which economic growth flourishes and then subsides. The down cycle happens because of the lack of innovations, stable demand for existing products, burgeoning costs of bureaucracy, rising income inequality, and tactics used by big mature companies wanting to exert their influence on the political process. “Creative destruction” moves economies from free markets to more socialistic economies, but Schumpeter looks at this phase of the cycle as a way to restore free market conditions conducive to entrepreneurship and contributing to economic growth.
In a socialist economic setting, spending on needed infrastructure stimulates economic conditions and supplies capital to entrepreneurs to restore creativity and induce the innovation process. Large oligopolistic companies fear this phase of “creative destruction” because it often results in their downfall and replacement by new companies innovating ways to serve emerging consumer needs (Foster, 2010; Norton, 1992).
Large oligopolistic companies ignore the emerging needs of consumers and focus on existing needs. Entrepreneurs see these companies not meeting many consumer needs and see the opportunity to innovate to meet these needs. For example, as income inequality grows widespread poverty results. This part of the population has unmet needs. Some examples include the need for affordable housing, education, and healthcare. Although these are existing industries, the key to solving these problems comes from the emerging knowledge industry (Foster, 2010).
Small business entrepreneurs should embrace business networking to gain intelligence and collaborate to find new solutions for emerging needs. Should entrepreneurs go where the money is at? I suggest not and now is the time to go where the money is not–yet. Learn more.
What emerging needs do you see and how can you contribute to making conditions better for entrepreneurship? I am interested in hearing your ideas.
Foster, J. (2010). Productivity, creative destruction and innovation policy: Some implications from the Australian experience. [Article]. Innovation: Management, Policy & Practice, 12(3), 355-368. doi: 10.5172/impp.12.3.355
Norton, E. (1992). Evidence of creative destruction in the U.S. economy. Small Business Economics, 4(2), 113-123. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=16845164&site=ehost-live
Schumpeter, J. A. (Ed.). (1975). Creative destruction from capitalism, socialism and democracy. New York: Harper.