what is creative destruction 
creative destruction is the dismantling of long standing practices in order to make way for innovation and is seen as a driving force of capitalism understanding creative destructionthe term creative destruction was first coined by austrian economist joseph schumpeter in 1942 schumpeter characterized creative destruction as innovations in the manufacturing process that increase productivity describing it as the process of industrial mutation that incessantly revolutionizes the economic structure from within incessantly destroying the old one incessantly creating a new one investopedia alison czinkotabasically the theory of creative destruction assumes that long standing arrangements and assumptions must be destroyed to free up resources and energy to be deployed for innovation to schumpeter economic development is the natural result of forces internal to the market and is created by the opportunity to seek profit creative destruction theory treats economics as an organic and dynamic process this stands in stark contrast with the static mathematical models of traditional cambridge tradition economics equilibrium is no longer the end goal of market processes instead many fluctuating dynamics are constantly reshaped or replaced by innovation and competition as is implied by the word destruction the process inevitably results in losers and winners producers and workers committed to the older technology will be left stranded entrepreneurs and workers in new technologies meanwhile will inevitably create disequilibrium and highlight new profit opportunities in describing creative destruction schumpeter was not necessarily endorsing it in fact his work is considered to be heavily influenced by the communist manifesto the pamphlet by karl marx and friedrich engels which decried the bourgeoisie for its constant revolutionizing of production and uninterrupted disturbance of all social conditions 1 netflix is a modern example of creative destruction having overthrown disc rental and traditional media industries principles of creative destructioncreative destruction across industriescreative destruction can be seen across many different industries as all companies often strive to be better many businesses seek new ways to disrupt the status quo and seek new paths to better business opportunity some examples of those industries are below companies don t technically need to embark on creative destruction however by not doing so they risk the occurrence of falling behind their competition limitations of creative destructionthough creative destruction can lead to many long term positive aspects of economic growth and innovation it does come with downsides as old industries and technologies are replaced jobs may be lost this can lead to unemployment and hardship for those who are displaced due to the nature of their previous employment relating to an antiquated industry it can also take time for new jobs and industries to emerge the benefits of creative destruction may also not be evenly distributed wealth and power may become concentrated in the hands of a few individuals or companies that are able to succeed in the new markets this is often the case for those who have the best access to power capital or influence those who have already succeeded are also the most likely to have the best opportunity to embark on creative destruction the process of creative destruction may also have negative environmental consequences new technologies and products may have unforeseen environmental impacts that are not immediately apparent and the process of replacing old technologies with new ones may also have an environmental cost it may sometimes take years for enough evidence has been collected to truly see the long term implications of certain forms of innovation creative destruction examplesexamples of creative destruction in history include henry ford s assembly line and how it revolutionized the automobile manufacturing industry however it also displaced older markets and forced many laborers out of work the internet is perhaps the most all encompassing example of creative destruction where the losers were not only retail clerks and their employers but also bank tellers secretaries and travel agents the mobile internet added many more losers from taxi cab drivers to mapmakers the winners beyond the obvious example of programmers might be just as numerous the entertainment industry was turned upside down by the internet but its need for creative talent and product remains the same or greater the internet destroyed many small businesses but created many new ones online the point as schumpeter noted is that an evolutionary process rewards improvements and innovations and punishes less efficient ways of organizing resources the trend line is toward progress growth and higher standards of living overall 