Why Has Creative Destruction Sped Up in Recent Times?

by on August 9, 2012 · 1 comment

A reporter recently interviewed me for a story and asked a terrific question: Why is it that business model disruption and creative destruction seem to have sped up in recent times?  My guess — and excuse me if this seems too obvious — is that it must have something to do with the very nature of intangible, digital technologies of the new economy versus the tangible, analog technologies of the old economy. That is, in markets built largely upon binary code, the pace and nature of change becomes relentlessly hyper-Schumpeterian precisely because digital technologies and platforms are more easily disintermediated and leap-frogged than earlier tangible technologies and platforms were.  And so we get creative destruction on steroids.

Consider, for example, what constituted a “social networking site” in the old days versus today. Our old social networking sites and services in the past were town squares, parks, school parking lots, shopping malls, as well as media like newspapers, magazines, and even the mail. When we socially networked in those environments, we were creatures of our fixed, “real-space” environments as well as their many natural constraints. Disrupting, replacing, or even replicating those environments, technologies, or platforms was a monumental undertaking precisely because of the enormous costs associated with doing so.

Today, by contrast, our social networking spaces are increasingly intangible and digital. Disruption becomes much easier, and significantly cheaper, in a digital environment. This explains how the walled garden communities of the late 1990s (AOL, CompuServe, etc.) disappeared in less than a decade and gave way to sites like MySpace, which itself has already been disrupted by the likes of Facebook and Twitter, among others. And so the cycle continues, and it seems to be speeding up, probably because so much more of our modern economy is built on foundations of code.

This is not to say that every digital age giant will be easily displaced or disappear overnight. But the possibility of that happening has increased exponentially compared to the relative likelihood of the disruption of comparable platforms and technologies in the past.  The lesson here seems rather straightforward: tangibility matters.

[For further reading on this point, see “The Laws of Disruption” by Larry Downes and I also discussed some of these issues in my paper, “The Perils of Classifying Social Media Platforms as Public Utilities.”]

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