This is precisely the conclusion that Richard Foster and Sarah Kaplan made in their best-selling book, Creative Destruction: Why Companies Built to Last Fail and How to Transform Them Successfully. Foster, a McKinsey co-CEO, and Kaplan, who worked under him for many years as an innovation expert, argue that the accelerating pace of change in markets has ended a more than 70-year era of corporate development.

Based on a study of the activities of over 1 thousand corporations from 15 industries over a 36-year period, Foster and Kaplan showed that the corporate equivalent of Eldorado - i.e. There has never been a “golden” company whose performance consistently exceeds the market average. Management aimed at survival does not guarantee long-term investment performance for shareholders of even the best and most reputable companies.

In fact, the authors believe, the opposite is true: in the long run, the market always wins. If the management philosophy and control processes operating in the company are based on the thesis of the continuity of corporate existence, then negative processes begin to develop. The firm's ability to mobilize the forces of "creative destruction" - a term coined by the Austrian economist Joseph Schumpeter () - and to effect changes at a pace and scale consistent with shifts in capital markets is reduced.

This article is an excerpt from the first chapter of Foster and Kaplan's book. It makes the case for abandoning the belief that a company must continually evolve and emphasizes the importance of overcoming the barriers that make it difficult to transform corporate culture, even in the face of a clear threat from the market.

When corporate culture becomes a killer

What should a corporation do to become “more market-oriented”? The general recommendation is to increase the rate of creative destruction to the level achieved by the market without losing control of current operations. But while this is sound advice, it is difficult to implement.

A survey of several hundred managers from many American and European corporations found that they were satisfied with their own professional performance, but dissatisfied with their ability to implement change. Executives asked, “How do great innovators do this?”, confident that such innovators existed. They were also interested in what is the driving force behind an innovative breakthrough and how a company can go beyond its core business. However, the main question was: “How to find new ideas?”

The problems behind these questions arise from the inherent tension in companies between the need to control day-to-day operations and the need to create a corporate environment that allows new ideas to flourish—and therefore old ones to die out. This may require the sale of traditional assets, radical changes in the sales system, and costly acquisitions of other firms. But whatever these difficulties, we believe that most corporations will sooner or later understand that it is impossible to compete with the market on equal terms, much less win in this struggle, without abandoning the desire for continuity.

The current Apocalypse (the transition from a state of continuity to a state of discreteness) is characterized by the same degree of uncertainty. American business will never be the same—the rules have changed once and for all.

Some companies have already made the transition. Under the leadership of Jack Welch, General Electric Corporation dealt with the “end of the world”, increasing its own efficiency as a result. Quickly closes the gap between Johnson & Johnson's own and market performance. Corning successfully decoupled itself from consumer durables and became a leader in high-tech fiber optics. The French cosmetics company L'Oreal also appears to be on the right track: it has found a new way to form an organizational structure and promote its concept from one country to another. But these are only exceptions. Few dared to go on the road, and even fewer who successfully completed it to the end.

Cultural impasse

For half a century, sales of Bayer-branded aspirin drove the growth of Sterling Drug. When Johnson & Johnson released the aspirin-free painkiller Tylenol, Sterling Drug refused to bring Panadol, a popular drug in Europe, to the American market. Sterling Drug was afraid of undermining Bayer's aspirin's leadership position in the American market. Instead, it made an unsuccessful attempt to expand the Bayer line beyond the American market, and was eventually absorbed by Eastman Kodak.

Thus, due to fear, the company lost its mobility and ability to change the fifty-year-old foundations of its existence. A strong corporate culture (decision making based on approximate calculations, the peculiarities of the information and control used in this case) became an obstacle to the development of Sterling Drug and ultimately played a fatal role. The company had locked itself in with an ineffective market strategy even though there were clear signs that it needed to do things differently.

The concept of cultural impasse (the failure to change corporate culture even in the face of a clear market threat) helps explain why firms have difficulty responding to market signals. This impasse results from the gradual hardening of a company's invisible internal architecture, the ossification of decision-making processes, control systems and mental models. It negatively affects the ability of corporations to innovate and get rid of unpromising business areas. Moreover, it indicates a steady decline in operational efficiency.

Most often, cultural impasse manifests itself in fears of displacement of an important product line (as in the case of Sterling Drug), conflict with important customers, or decline in earnings per share due to a strategic acquisition of another company. And although these fears seem justified to established companies, the market does not feel them. Therefore, the market is moving where companies do not dare to go.

Cultural impasse ends a series of “emotional” phases in the life of a company that are remarkably reminiscent of phases in human life. In the first years of a corporation's life, immediately after its formation, the dominant emotion is passion - the pure energy of creation. And when passion rules, information and analysis are ignored in favor of the principle: “We know the right answer, we don’t need analysis.”

As a firm matures, it develops an internal bureaucracy. Passion cools and is replaced by “rational decision making,” which is often just the application of a codified set of rules that have worked well in the past. At this time, data is collected, analysis is carried out, alternative options are formulated and scenarios are developed. At the same time, efforts are made to avoid information fraud. As rational decision-making becomes a corporate practice, all information relevant to a given issue begins to be directed to the appropriate manager, at the right time and in the form necessary for rapid analysis and interpretation. This is the triumph of rational decision-making—at least for a while.

This phase is often considered the normal state of a corporation, although our experience has been that, especially as the pace of business change increases, this ideal situation is rarely the case.

In fact, the dominance of rational decision-making indicates that business potential has become limited. At this point, fearing unpromising prospects, the company often resorts to defensive tactics to save the business from destruction. The same protective emotions arise in people in anticipation of a difficult situation. Managers now see the future primarily in bleak terms, and decisions are made primarily to protect existing businesses. The fear of abandoning old products in favor of new ones (i.e., triggering the displacement of some products by others), the fear of conflict with customers or a decrease in specific earnings per share due to the takeover of another company paralyzes creative destruction for a long time. These fears often hide the real threat for a long time, which means they prevent the necessary measures from being taken. The corporation finds itself in a cultural impasse, which becomes an obstacle to the emergence of a leader or management team that can save the day.

Reasons for getting into a cultural impasse

Why is this happening? The main problem is a set of unwritten rules, or mental models, that, once established, are difficult to change. Mental models are the company's key ideas, established judgments and assumptions, cause-and-effect relationships, corporate vocabulary and principles for interpreting management signals, as well as the stories told from year to year in the life of the company. Charlie Munger, a longtime friend and co-investor of renowned financier Warren Buffett and vice chairman of Berkshire Hathaway, calls them “theoretical models that help investors better understand the world.”

Mental models are invisible. They cannot be isolated or studied, but they are omnipresent. If they are successful, they allow managers to anticipate the future and solve problems. But once formed, such models become self-reinforcing, self-sustaining and self-limiting. And when they no longer correspond to reality, company management begins to make erroneous forecasts and make wrong decisions. In fact, the continuity thesis as the basis of management philosophy is one of the manifestations of a separation from reality, leading to distorted forecasting and incorrect decisions. Mental models are embodied in corporate control systems. Such systems are organized to achieve planned goals - be it controlling costs, capital investments or the placement of key personnel. Effective control means that an informed manager can, in principle, be confident that unpleasant surprises will not arise.

Unfortunately, such control systems can encourage defensive behavior within the company, including an inability to question the status quo, a reluctance to encourage diversity of opinion or to express points of view that differ from those of superiors, and unclear and inconsistent communication between employees. . And even if these shortcomings are known to everyone, it is not customary to discuss them. As a result, change becomes impossible.

In addition, corporate control systems weaken the ability of companies to innovate at a pace and scale that matches market trends. For example, the continuity thesis can reject arguments in favor of starting a new business because the inevitability of its success cannot be proven in advance. Under these conditions, ideas based on extensive development of existing capabilities and their corresponding mental models are likely to be encouraged.

Corporate control systems limit creativity because their use is associated with so-called convergent thinking. It focuses on understandable problems, allows you to quickly find already known solutions to them, and is based on concentration. The characteristics of convergent thinking are order, simplicity, routine, clearly assigned responsibilities, clear measurement systems, and predictability. It is perfectly suited to work on the basis of the continuity thesis and can be very effective at introducing small incremental changes, but it fails completely at radical transformation. If management philosophy is based on the thesis of discreteness, then its consequence is another type of thinking - divergent. In this case, the focus is on expanding the context of decision-making, with the emphasis on asking questions rather than finding answers as quickly as possible. For divergent thinking, it is extremely important to formulate questions correctly, and control over their solution can be transferred to more routine convergent thinking.

Divergent thinking is based equally on both broad and focused searches. Its use places equal emphasis on both careful observation and interpretation of facts. What is important here is both the ability for reflection and unhurried thought (requiring time to escape from a specific problem), as well as the art of quick decision-making (to avoid procrastination). We consider these skills to be the most important for divergent thinking. Unfortunately, traditional systems of corporate control, based on the continuity thesis, either gradually suppress divergent thinking abilities or kill them outright.

When mental models lose touch with reality, a corporation loses its “early warning systems.” Leaders who have an original vision of how the company can evolve are suppressed. Ronald Heifetz, co-director of the Center for Public Leadership at Harvard University's Kennedy School of Government, notes: “Leaders often get bumps and bumps when trying to make adaptive change. They are often silenced. Sometimes they are killed."

Take Abbott Laboratories, for example. She was very encouraged by the success of her strategy to create a strong position in the medical diagnostic and testing equipment market. The corporation sought to avoid the shocks that the US pharmaceutical industry experienced under the influence of government programs such as Medicare and Medicaid, which led to a significant decrease in market prices. However, she was unlucky - the CEO crushed three potential successors who tried to change the strategy.

Once a cultural impasse begins to dictate the decisions of a corporation's managers, its fate inevitably becomes sad (unless there are some major upheavals in the outside world).

How the market drives change

Markets, unlike companies, lack internal culture, leaders and emotions, and therefore do not experience surges of despair, depression, denial and hope. The market has no rich memory or remorse. There are no mental models either. The market is not afraid of the displacement of some types of products by others, conflicts with customers and a decrease in unit income. He simply waits for the forces involved in the game to do everything themselves: new firms will be created, and in the process of absorption of some corporations by others, the playing field will be cleared.

Markets tacitly allow weak companies to be put up for sale and give new owners the opportunity to independently decide on their restructuring or liquidation. Everything happens quickly, at the first sign of vulnerability. It is only when the government intervenes (for example, urgent measures are taken to save firms close to bankruptcy) that the market imitates the corporate response. Usually, he simply removes weak players from the field and thereby increases overall profitability.

Without process-oriented control systems, markets are a richer source of surprise and innovation than companies. Markets are based on discreteness, allowing for continuity. Companies, on the contrary, are based on continuity, trying to somehow cope with discreteness. The difference is fundamental.

Transformation of the company towards discreteness

The right of a corporation to exist does not last forever; it must be constantly earned. Robert Simons

The market shows the way to solve the problem. In an era of accelerating economic change, a special type of company has emerged as a response to the gap between the potential and actual performance of large corporations. These firms, primarily private equity firms, demonstrate the ability to change with the market and consistently achieve high profitability. The two types of such structures—investing in mature businesses and providing venture capital financing—are very different from each other, but both have some similarities to holding companies of the late 19th century. It is possible that private equity firms represent the embryonic industrial giants of the 21st century.

These companies have outperformed the markets for the last twenty to thirty years, longer than any other firm we know of. The difference between such financial partnerships and regular firms is the approach to creating an organizational structure. Partnerships have learned to achieve high levels of efficiency and conduct large-scale operations, engaging in the process of creative destruction at the same speed as the market - just as Joseph Schumpeter foresaw. Created on the basis of the initial assumption of discreteness, they subsequently found the best ways to embed or add continuity requirements.

Such partnerships never buy the company forever. Rather, they focus on medium-term (three to five years) value creation. Conventional corporations, on the contrary, focus either on current activities in the short term (less than one and a half years) or on very long-term (over eight years) research.

Private equity firms make money equally by building the potential of their properties and increasing the income from those properties. When such a firm acquires a stake in a business or buys it outright, it implements a “take-out” strategy: managers know what they must do in the next three to five years to create attractive long-term value for the next buyer.

Finally, private equity firms view their business as a constantly evolving “portfolio” of companies at different stages of development. Every year they deliberately sell some assets and buy others. At the beginning of their pipeline are many newly acquired companies; at the end there are many buyers waiting for them. The processes of searching for new acquisition targets and potential buyers develop simultaneously, and in this art, such partnerships have no equal.

Private equity firms differ from conventional corporations not only in their divergent thinking, but also in the depth and pace of their research activities. Additionally, by allowing acquired companies to retain their own control systems, private equity firms are free to focus on both creation and destruction. As a result, they can pay much more attention to creative destruction than traditional corporations and even their own subsidiaries.

What's ahead

The market changes faster than corporations, so in the long run its efficiency is higher. The point is not in the shortcomings of the daily work of companies, but in the features of their evolution. For a number of historical reasons, they were created for specific activities - the production of goods and the provision of services - rather than for evolution. To develop “in step with the market”, they need to improve their abilities to create and destroy, but they lack these two key elements of evolution.

To transform a corporation to shift its focus from current operations to rapid development, simple functional customization is not enough. Fundamental concepts of operational excellence are not suitable for an organization that seeks to develop at par with the market, i.e. at the same pace and on the same scale. The abilities to create and destroy cannot simply be “added”; they must be developed and organically integrated into the activities of the company. And only if, as a result of transformations, the company begins to develop at a “market step”, its long-term efficiency will increase. Markets generally work better than corporations because they place less restrictions on the entry of new companies and more pressure on the liquidation of unpromising ones. Moreover, in the markets all this happens faster and on a larger scale.

We believe that the corporation should be reshaped from top to bottom based on the thesis of discreteness. Managers must increase the intensity of creative destruction (which refers to the formation or acquisition of new firms and the elimination of the least effective units) without losing control of current operations. With high operational excellence, the pace of internal creative destruction will be the primary determinant of a corporation's competitiveness and long-term performance. Modern financial partnerships prove that such restructuring can indeed produce the desired results. They also show how to work.

To quickly create new businesses, companies must also master the nuances of divergent thinking, which is a prelude to creativity. The ability for such thinking can be possessed by a variety of people - hot-tempered or impartial, arrogant or shy, extroverts or introverts; in the process of negotiations they can be flexible or inflexible, attentive or absent-minded. But they all have one common quality. Mihaly Csikszentmihalyi, one of the leading researchers in the field of creativity and author of the book Creativity & Flow and the Psychology of Discovery and Invention, called it “cheerful pessimism.”

Francis Scott Fitzgerald describes this property this way: “The hallmark of a highly developed intellect is the ability to recognize the simultaneous existence of two opposing ideas while maintaining the ability to act. Such a person, for example, even realizing the hopelessness of the situation, is adamant in his desire to change it.”

Management based on divergent thinking (i.e., aimed at initially asking the right questions, and therefore allowing you to find the best solution) requires the creation of a rich information context that can become an incentive for the correct definition of problems.

It also requires organizing a control system by selecting and motivating employees, rather than monitoring their actions. It also requires significant resources (including time), knowledge of what to measure and when, and genuine respect for the abilities and potential of others. We also need to be prepared to release individual workers from liability when it is discovered that they do not meet the requirements. As a result, the successful coexistence of two types of thinking should be established - divergent and convergent.

Then, to improve long-term performance, the company needs to rethink its corporate planning and control processes. Traditional strategic planning fails most of the time—suppressing the very dialogue it is intended to stimulate. There is a need for new ways to organize dialogue and discussion between corporate leaders and their potential successors.

Finally, corporate control systems should be designed to simultaneously monitor ongoing activities and increase the rate of creative destruction. Control what you need and only at the right moments, and not everything you want at any time. If any control procedure is not vital, eliminate it. Don't get carried away with measuring: you need to reduce the time and number of intermediate steps between measuring and taking action. Increase the speed of response to your actions.

To do this, we need to introduce market controls wherever possible. Do not trust those control mechanisms that put more pressure than check. Let managers themselves determine the optimal set of control procedures in their areas of business (after all, they know the system in which they work better). Shift concern for the integration of control systems to the corporate level, rather than introducing a single system for all departments that does not depend on the characteristics of specific business areas.

Once these changes have been made, the corporation will be able to move away from the problems of minimizing risk (which inevitably leads to the suppression of creativity) and focus on stimulating creativity. This is exactly what you need to achieve extraordinary results in the long term.

Creative, creative or creative destruction- “a process of industrial mutation that continuously reconstructs the economic structure from within, destroying the old structure and creating a new one.” The concept was first used by the German economist Werner Sombart in his book War and Capitalism (1913) and popularized by the Austro-American economist and sociologist Joseph Schumpeter in his book Capitalism, Socialism and Democracy (1943).

Through the concept of "creative destruction" an attempt is made to explain many of the driving forces of industrial change. For example, the transition from a competitive market to a monopolistic one and vice versa. Schumpeter called the innovative innovations of entrepreneurs the force that could ensure long-term economic growth of a company, destroying the old values ​​of monopolistic companies. [ ]

Theory

In his book Capitalism, Socialism and Democracy, Schumpeter argues that “the fundamental impulse that keeps the engine of capitalism in motion comes from new consumers, new commodities, new methods of production and transportation, new markets, new forms of industrial organizations. The process of creative destruction is key to capitalism.” Schumpeter calls the entrepreneur not an inventor, but an innovator. The innovator demonstrates that a new product, process, or way of organizing can be effective and profitable, thereby disrupting the old organization. Schumpeter called creative destruction the process of transformation that accompanies radical innovation.

Examples

Creative destruction occurs when something new replaces something old. A clear example of such destruction is personal computers. The computer industry, led by Microsoft and Intel, has outpaced many computer manufacturing firms. Through a process of creative destruction, entrepreneurs created one of the most important inventions of the last century.

see also

Notes

Literature

• Schumpeter J. The process of “creative destruction” // Capitalism, socialism and democracy: Trans. from English / Preface and general ed.

Good afternoon friends!

Economics is the science of economics! How practical and pragmatic it sounds, doesn’t it?! And no romance! Rational! But no! Yes, yes, there are a lot of interesting things in economics, but in order to see this interest, you need to think logically and rationally! No, it’s not sad, on the contrary, there is a lot of pleasant and interesting things in logical and rational thinking! Yes, there are no such emotions as at a Sting concert! But economics is so interesting that all emotions are experienced inside! And discoveries from knowledge lead to joy!

Now let's get down to business! Today I will tell you about such a phenomenon in economics as CREATIVE DESTRUCTION. Amazing name, isn't it?! And in general, if you think about it, how can destruction be creative? Well, no way! But it can! And how. And we will sort this out with you today! We will understand this using an example; in this case, it will better explain this statement to us.

So, what is CREATIVE DESTRUCTION?! Term "creative destruction" , in his fundamental work "Capitalism, Socialism and Democracy" introduced by the outstanding philosopher and economist of the twentieth century Joseph Schumpeter. This is what he called the process of transformation of a market economy.

Word "creative" gives "destruction" positive value, despite the fact that many lose from this process, lose their jobs or go bankrupt. The majority, of course, win: labor resources and capital go to more modern and productive industries. So, instead of horse-drawn vehicles, cars appeared, instead of fountain pens, ballpoint pens appeared, and computers took the place of typewriters. In a word, these are processes occurring in the economy when, due to the above reasons, destruction occurs in some sector of the economy. These may be individual economic entities, or they may be an entire industry. Yes, yes, an entire industry may come to destruction, or at least to its fall. Unclear?! Agree! We need an example here! Let's take some industry. For example…. Automotive! How do you like it?! A huge sector of the economy, where a large number of people work, a lot of investment, and development prospects. Let's take, for example, a country like Tumba Yumba. You say there is no such country?! Yes, indeed no. But, we will use an imaginary country, and you will draw the analogy yourself. And so in the country of Tumba Yumba they produce cars, and their consumers are mainly citizens of Tumba Yumba. Why them? Since the country of Tumba Yumba is not very developed in the automotive industry, its cars are not popular and therefore not in demand on the world market. Because competitors create cars that are better, of higher quality and more reliable, and have gone far ahead in the development of the automotive industry. But in their own country, Tumba Yumba are popular because they are not expensive, and the people in Tumba Yumba do not have incomes at the level of other highly developed countries. Hence the demand for domestic cars Tumba Yumba. Everything is fine and everyone is happy! Cars go from conveyors to “counters”, and from “counters” to customers. So where is the destruction here? This is continuous creation, cars are being bought, investments are growing, prices are satisfactory. Yes, that's it! And everything would be like that. If not for one BUT! This is car quality!

Now imagine that economic growth has begun in the country of Tumba Yumba, which has led to an increase in the income of the population. To a solid increase in income. And then the following happens: residents of the country have extra money, savings grow, loans are issued. And they begin to purchase expensive goods, and in most cases the expensive ones are of high quality. And this applies to cars. Now residents of Tumba Yumba want, but not only want, but can also afford to buy foreign-made cars that are of high quality, comfortable and safer. And they start buying. Thus, the demand for domestic cars of the Tumba Yumba state is falling. And it drops significantly. The income of the Tumba Yumba car factories is decreasing, with all the ensuing consequences, which means bankruptcy is looming. Now comes the destruction. And the destruction is natural.

There is an exit. We need to create competing cars. With the same quality as other producing countries. But this is not an easy task. For many years, the Tumba Yumba factories did not care about the development of their production, their design, and quality. What for? After all, they buy cars anyway and it’s not bad. And you wouldn't care. After all, this is an investment of capital, expenses for designers, the best specialists, and the search for investments. And if no one steps on your toes, then why spend money on it. There is no need to fight for every customer, please him, study his needs. And this is entire marketing research with colossal budgetary costs.

However, now everything is going the other way. This is exactly what you need to do and invest in. And the producers of Tumba Yumba are starting to do this. But the train of automakers in other countries has gone significantly farther, and in the spirit of rivalry and competition, they have created cars of all classes at a high level, maximally satisfying the needs of consumers. And catching up with them is not an easy task. And then the decline in car production begins. Thus, the industry is gradually approaching bankruptcy. And bankruptcy is the dismissal of workers, specialists, managers, etc. and there are many of them.

In Tumba Yumbe this is about 8 thousand people. Now we know what people think about this. This is bad and the industry needs to be saved. So many people cannot remain without work. This is a catastrophe. This is bad, period! But we, you and I, are economists, which means our task is to find out what economics says. But the economy says that this is normal and the plant should close! Because he is not viable! Now attention! The closure of the plant will lead to creation in the economy and economic life of this state. But not immediately, but later! Those. in the short term this will lead to disastrous results, but in the long term to creative ones. We will not consider the effects of creative improvement in the long term; more on that in other articles. But they exist and they are solid! And, by the way, they cover all the effects of short-term destruction by several times, if not tens of times! So much for creative destruction. He is not visible beyond the horizon, this is the essence of a person, we cannot see beyond the nose. But economists are able to see a clearing behind the trees with dense foliage. Here we can agree and disagree, but the result will remain from our disbelief or faith. The science of economics is a science to give accurate and clear answers to questions.

Thank you for your interest!
To be continued…
Jalalov Remzi, especially for the Golden MSN Club® Millionaires Club

Periodically occurring great depressions are associated with the accumulation of structural imbalances and the exhaustion of the potential of the technological structures that dominated at the previous stage. Overcoming this kind of depression is achieved through creative destruction and modernization of the existing institutional and technological structure of the economy based on the spread of innovations of the subsequent structure. These depressions are global in nature, and countries that overcome them earlier than others gain additional competitive advantages, translating them into higher rates of economic growth.

Any new technology represents creative destruction. Transistors destroyed the production of vacuum tubes, photocopiers caused serious damage to the production of carbon paper, cars - railroads, television - newspapers. Instead of pursuing new business, older industries either fought against innovation or ignored it. However, both of these only led to a reduction in the scale of their activities.

CREATIVE DEVICE AS A COMPETITIVE FORCE

Schumpeter viewed competition as a dynamic process, encompassing the development and creation of new products and markets, new production and transportation technologies, and even new forms of business organization. Schumpeter called such innovations creative destruction, since the creation of new products and production methods simultaneously undermines the market (often monopolistic) position of firms committed to existing products and old business methods. According to Schumpeter

History is replete with examples of creative destruction acting as a competitive force. So, in

An entrepreneur can achieve all this with the help of an existing “resource”, into which he must “breathe” new life or find a new resource that will help create new consumer values, ultimately leading to the so-called creative destruction. The fact is that any resource becomes useful only when a person finds it in nature and gives it economic value, i.e. can obtain from it or create new goods or services with its help.

Innovations have a dual impact on the dynamics of economic growth, on the one hand, they open up new opportunities for economic expansion, on the other hand, they make it impossible to continue this expansion in traditional directions. Innovations destroy economic equilibrium and introduce disturbances and uncertainty into economic dynamics. According to J. Schumpeter, innovation is accompanied by creative destruction of the economic system, causing its transition from one state of equilibrium to another.

At first glance, it seems paradoxical that the development of an entrepreneurial business presupposes the need for creative destruction. Overcoming accumulated stereotypes, the entrepreneur, as an innovator, produces and creates an image

In this sense, our analysis is not so different from the second part of Schumpeter's hypothesis (see the quotation above). From a Schumpeterian perspective, the optimal market structure is certainly not perfect competition, but rather a kind of dynamic competition that allows for some degree of market power. Or, if we go from the opposite, it is a type of monopoly that allows a certain degree of competition. This is not competition from incumbent firms, but rather potential competition from new products or production processes that may replace the current monopolist's product or production processes. This is, according to Schumpeter, a process of creative destruction.

In nature, as well as in social production, as soon as its form has formed and reached the apogee of its development, the process of its positive negation, entropy, or creative destruction begins (Schumpeter).

It was also noted in Chapter 11.10 that the accumulation of capital ruins small and medium-sized commodity producers, dooming their business to bankruptcy. It acts as creative destruction and an objective law of socio-economic selection of everything advanced in the economy and washing out of it obsolete, ineffective forms of entrepreneurship. According to Schumpeter's famous expression, the action of this economic law reveals the destructive creation of more and more progressive production.

Foster R., Kaplan S. Creative destruction. - M. Alpina, 2005.

The real business cycle model is based on the assumption that the source of fluctuations in market conditions are technical and technological changes. The founders of this approach to explaining the economic cycle were K. Marx, J. Schumpeter and others. While studying the movement of real capital, they revealed a natural dependence of investment fluctuations on the average service life of equipment. It has been proven that the replacement of elements of the active part of physical capital is carried out once every few years, after which the demand of firms for such capital goods weakens. I. Schumpeter characterized this pattern as “waves of creative destruction,” during which the economy experiences ups and downs in economic activity.

The first economist to determine the special role of these processes in economic development was the Austrian I. Schumpeter. He actively and consistently criticized the views of most economists of the first half of the 20th century, who analyzed capitalism as an economic system operating within the framework of existing production and market structures, while the real problem of development lies in the creation and destruction of these structures. Schumpeter convincingly showed that in a market economy, competition based on the discovery of a new product, a new technology, a new source of raw materials, a new type of organization (for example, the largest firms) is of predominant importance. This competition ensures drastic reductions in costs or improvements in quality; it threatens existing firms not with a slight reduction in profits and output, but with complete bankruptcy. In terms of its consequences, such competition is as traditional as bombing and breaking down doors. This is the process of creative destruction - the deep essence of capitalism.

The need for high technology manifests itself primarily when the development possibilities of the traditional method have been exhausted, when the maximum productivity, speed, accuracy, standards of material consumption, coefficient of performance (efficiency), and indicators of the usefulness of manufactured products have been achieved. Competition in innovation, based on technological progress, is used as an offensive weapon to conquer the market. The incentive for the development and application of high technologies is the expectation of excess profits. This process was called the effect of creative destruction in 1949 by I. Schumpeter. In the absence of important innovative changes, the economy slides into stagnation. Typical types of changes include:

Studying the works of John Keynes, I was surprised to discover that Keynesian models very well describe the economy of collapse - the collapse of a centralized planned command economy, although Keynes's main idea is that active financial policy of the state, stimulating aggregate demand in the economy, can sharply reduce unemployment and promote rapid economic recovery in times of crisis. Using the Keynesian multiplier model in Phillips form, I was able to derive an equation for the breakdown of a centrally planned command economy. I thought a lot about how to transform this inevitable collapse of the socialist economy into creative destruction according to Schumpeter.

The crisis, being a negative phenomenon of economic development, performs an important stimulating function. The desire of entrepreneurs to stop the decline in production encourages them to take measures to reduce production costs, update it, introduce new technology, etc. Thus, the crisis becomes an element of the self-regulation mechanism of a market economy. According to the figurative expression of the famous economist, Nobel Prize winner J. Schumpeter, the crisis is “creative destruction.”

We are still far from understanding how to create an adaptively efficient economy, because allocative efficiency and adaptive efficiency do not always coincide with each other. Allocative efficiency rules ensure the safety and security of today's firms and decisions - but often at the expense of the process of creative destruction that Schumpeter spoke of. Moreover, the very nature of the political process encourages the growth of restrictions that support the existence of powerful social groups of today. But an adaptively effective institutional system existed and exists, just as an adaptively ineffective institutional system existed and exists.

One recent attempt to create a classical business cycle model is based on the idea that the most important type of economic shock that causes fluctuations in business activity is technological change. This approach, known as the real business cycle model, comes from the ideas of the great mid-20th century economist. Joseph Schumpeter, who believed that capitalism is characterized by waves of “creative destruction,” during which the continuous introduction of new technologies continually drives existing firms out of business.

The question, therefore, is only one: when in Russia - and this is no longer the area of ​​scientific analysis, but of politics - conditions will arise for replacing the bankrupt concepts of resource direction and the destruction of the industrial economy with a creative concept of scientific and technological development, in which the country's intellectual resources will play a decisive role.

First of all, this is to ensure effective circulation of goods, i.e. free movement of material resources and finished products. We are talking about the implementation of one of the most important requirements of a market economy - the unhindered movement of all types of resources and final products. In the administrative-market economy there was a natural distribution of resources and there was no developed commodity market infrastructure. The existence of such a system of resource distribution has led to many negative socio-economic consequences, including the destruction of incentives for the effective use of creative capital, not to mention obstacles to the informatization of the economy, the progress of science and technology.

This is exactly how the destruction of the Soviet economy happened. Therefore, it was so important to immediately develop and implement a comprehensive program of macroeconomic stabilization, which would allow directing the transition process in a creative direction to ensure the transition to a new higher level of economic organization, called the market order.

Andy Grove, president of Intel, called his book "Only the Paranoid Survive." He borrowed this title from Dr. Joseph A. Schumpeter, former Austrian Minister of Finance and Professor at the Harvard Business School. Dr. Schumpeter expressed this idea of ​​the survival of the paranoid alone in his book Capitalism, Socialism and Democracy. (Schumpeter is considered the father of the modern doctrine of growth and change in economics - dynamics, just as Lord Keynes is the father of the doctrine of stability in economics - statics.) It was Dr. Schumpeter who came up with the idea that capitalism is creative destruction - a continuous cycle of destruction of old, less efficient production and services, and replacing them with new, more efficient ones. Dr. Schumpeter believed that governments that allow capitalism to exist, destroying weaker and less efficient businesses, will survive and prosper. Governments that erect barriers to protect the less effective will be driven back.

New topics in the mini-texts include declining production in Cuba (chapter 2) ticket speculation (chapter 3) alternative views on why unemployment is so high in Europe (chapter 11) use of the dollar around the world (chapter 13) the problem of social benefits (chapter 18) the pros and cons of economic growth (chapter 19) market forces and the rising value of education (chapter 20) the inefficiency of Christmas gift giving (chapter 21) creative destruction as a competitive force (chapter 23) diamond The De Beers Corporation Monopoly (Ch. 24) Newspapers on Public Sector Failures (Ch. 31) Airline Deregulation (Ch. 32) Doctors vs. Economists over Health Care Reform (Ch. 35) Speculation in Foreign Exchange Markets (Ch. 38) China as new economic force (chapter 40).

I. SCHUMPETER. The concept of microdynamics, which combines the initiative, ingenuity and entrepreneurial spirit that people can develop when given the necessary prerequisites, was identified by Schumpeter as an important driving force for the technical and commercial development and success of not only organizations, but also nations. He proposed the concept of creative destruction. By this, Schumpeter meant the destruction of old, ineffective structures and their replacement with new, more practical ways of satisfying needs. Adherence to old structures and the retention of ideological foundations, of course, make it difficult to be receptive to new ideas and abandon old thinking. Thus, Schumpeter wanted to emphasize the role of variability and creativity as necessary components of success in any kind of activity.

Researchers from Great Britain and Canada F. Aguillon and P. Howitt proposed a model of endogenous growth associated with the characteristics of technological progress, and, in particular, with the nature of innovation.1 According to R. Solow, these scientists were able to give some accuracy to Schumpeter's vague idea of ​​creative destruction (reative distru tion).2 J. Schumpeter, in essence, considered the idea of ​​endogenous economic growth, linking the massive surge of innovation in certain periods of time with previous economic development, as mentioned above.

The process of introducing innovations does not proceed smoothly; it is characterized by jumps and jerks. Once one innovative entrepreneur, say, overcomes technological and financial difficulties and discovers new ways to make a profit, others tend to follow him. The inclusion of new entrepreneurs and firms in the process of innovation is accompanied by the destruction of values. Errors and miscalculations lead firms that are unable to perceive new things, firms that cannot adapt in response to market demands, to bankruptcy. It is characteristic that Schumieter called this process creative destruction, that is, the old economic system must give way to a new, more advanced economic mechanism. This is, according to him

The most influential exponents of the pro-Milken line were the writers of the Wall Street Journal editorial page. They clearly supported the anti-establishment policies of creative destruction that they believed Milken had authored, and demonstrated poor

A reference to the key mechanism of creative destruction in evolutionary theory, described by Schumpeter in Capitalism, Socialism and Democracy, is actively used in the controversy surrounding shock therapy. Let us recall that we are talking about dynamic competition, which arises in the economy with the influx of new enterprises implementing innovations and displacing old producers from the market. In relation to a transition economy, it should be noted that large new manufacturers can only appear from abroad, and the formation of new small enterprises is associated with great institutional difficulties. Thus, according to some authors, the departure of old state-owned enterprises in countries with transition economies, caused by the flow of bankruptcies, where they are launched, is not compensated by the influx of new ones2.

Corporate America's focus on shareholder value is helping to limit investment in outdated strategies—and even dismantle such investments—more than any altered model. It is the desire to gain leverage over the bottom line of economic activity that has given rise to Schumpeter's concept of creative destruction. More Moreover, there is hardly any reason to assert (as many do, although most often managers of lagging companies) that the capital market is more short-sighted than other corporate sovereigns - evidence of this is the growth in the number and value of high-tech and

Concept of entrepreneur as an economic entity taking on the risk associated with the organization of a new enterprise or with the commercial introduction of a new idea, a new product or a new type of service, first appeared in the book “Essay on the Nature of Commerce” by R. Cantillon.”

All the creators of economic theory, in one way or another, recognized the importance of entrepreneurial activity. Also J.-B. Say observed that the entrepreneur moves economic resources from an area of ​​low productivity and low income to an area of ​​higher productivity and profitability. However, no one has singled out the special independent role of the entrepreneur as one of the driving factors of economic development. Theorists of scientific and technological progress (K. Freeman) and management (P. DruckerO) clearly recognize that a consistent theory of entrepreneurship was first proposed by J. Schumpeter. But for a number of objective reasons, his pioneering works were not given due attention until the last quarter of the 20th century.

Neoclassical economic theory believes that the economy strives to achieve a state of equilibrium, and the behavior of enterprises corresponds to the principle of maximizing profits and minimizing costs. Growth theories based on neoclassical doctrine describe only the quantitative side of economic development. At the same time, some indicators - such as per capita income, capital intensity, labor productivity - may increase over time, while others - such as the share of income on capital or the share of labor costs in national income - may remain constant. But the dynamics of macroeconomic indicators alone does not reflect such qualitative shifts in economic development as the emergence of fundamentally new technologies, new types of firms, deep structural changes in industry, the birth of new institutions, etc. In phenomenological theories of growth there is no place for the root cause of economic progress.

Schumpeter attempted to identify the driving forces of economic dynamics. The purpose of his research was to build a theory of the so-called business cycles - wave-like alternations of periods of relative prosperity and depression, which were first discovered by N. Kondratieff, Schumpeter put forward a hypothesis according to which the engine of economic development, which he thought of as a cyclical process of structural changes born within the economy, is the innovative activity of the entrepreneur. Practical research in the field of scientific and technological progress has fully confirmed this vision of the function of an entrepreneur.

Schumpeterian definition innovation(innovations) is extremely comprehensive and includes, in addition to technical innovations, also organizational, managerial and marketing innovations, new markets, new sources of supply, financial innovations and new combinations of resources. He makes a clear distinction between invention and innovation, that is, between the original (even patented) idea for a new product or technological process that constitutes the subject of the invention, and the translation of this idea into a commercially marketable innovation. The design, development, production and marketing of a new product are not the same as inventive activities and, moreover, do not necessarily take place within the same organization. This differentiation is fundamentally important, although invention and innovation often interact, and the process of innovation serves as a catalyst for subsequent inventions. In addition, Schumpeter pointed out the difference between actual implementation and diffusion(diffusion) of innovation, that is, between the initial commercial introduction of a new product or process and its subsequent replication.

Entrepreneurship, according to Schumpeter, is not a position or even a profession, but rather a unique and rarely discovered ability to bring innovation to market through risky business. An entrepreneur is by no means the same as a capitalist: entrepreneurial activity is innovative by its very definition and, due to this circumstance, serves as a constant source of competitive economic restructuring and economic growth.

According to Schumpeter, the market must be thought of as an evolutionary process of continuously successive waves of innovation, which he called the process creative destruction. In his view, the success of a market system does not lie in the efficient achievement of a static optimal equilibrium, but in the ability to implement dynamic changes in technology and achieve dynamic growth through such changes.

Soon after the publication of Schumpeter's books "The Theory of Economic Development" and "Business Cycles", his theory of innovation was subjected to serious criticism, and he was unable to give adequate answers to some of the criticisms. In particular, S. Kuznets wrote" that Schumpeter practically does not discuss the conditions for the emergence of innovations and does not explain why a uniform and continuous influx of innovations is transformed into a cyclical process of economic dynamics.

Schumpeter really simply postulates the transformation of new knowledge into innovation as the result of the activity of a small number of exceptionally gifted entrepreneurs with outstanding intellect and business energy. This is not entirely consistent with the internal causality of economic progress that he constantly emphasizes.

In order to somehow relate innovations to waves of investment and Kondratieff cycles, Schumpeter implicitly assumes the clustering of innovations - after the successful implementation of some innovations, the next ones are more likely to appear in the same or in a related industry. Pioneer entrepreneurs, as it were, are preparing a springboard for the mass “landing” of imitating entrepreneurs and the wide diffusion of innovations. However, the objective conditions for the receptivity of the economic environment to the adoption of basic innovations remain unattended.

Undoubtedly, Schumpeter's view of capitalism as a system evolving through creative destruction is a huge contribution to economic theory. But the core of any theory of evolution is the idea natural selection. In relation to Schumpeter's theory, this idea required special development, clarification of fundamental concepts and a clear analysis of selection conditions. However, as it becomes clear only now, due to objective historical reasons, all this was difficult to achieve 60 years ago. And we can completely agree with W. Witt that the theory of entrepreneurship, no matter how important it may be, seems to be an insufficient basis for evolutionary economics.