The Schumpeter column in the October 3rd-9th issue of The Economist discusses the anti-capitalism movement, which is focused on creating human-centric business solutions. Pope Francis—who was recently quoted as saying that we need to be “returning the economy to the service of human beings”—and presidential candidate Bernie Sanders are some of the most outspoken public figures for this movement.
The idea of “creative destruction” comes from Joseph Schumpeter, the late economist and political scientist and for whom The Economist column is named. This concept is based on the product and innovation lifecycle. Creative destruction is the process when new innovation (creative) replaces the old. Schumpeter’s theory states that the entrepreneur is the driver of innovation and capitalism. The rapid change that is caused by “globalization and digitization” is increasing the rate of creative destruction. People look to innovation to drive “good” capitalism (competition and innovation) forward over “bad” capitalism (monopolies and cronyism).
However, is innovation enough to drive business these days? Is the word “innovation” losing its meaning and relevancy? It seems like organizations are creating innovation just for its own sake. Over-innovation or the expectation of over-innovation doesn’t help either. Innovation is a double-edge sword. This expectation of constant innovation created by the focus on short-term goals and to the expectations of an on-demand world. This world is moving too fast for a standard innovation cycle to support an organization. We live in an environment where new and fresh ideas are expected all the time. However, stock prices drop when investors sense that the innovation isn’t seen to be going far enough. Apple’s stock price drop is a good example of this.
Innovation’s two-sided face creates more uncertainty in the market. The changes that are happening on a business and political level are creating anxiety and uncertainty for everyone. The analytical side of our brains gravitates towards information and data to search for stability and reassurance. But the reality is that Pope Francis is not far from the mark. People find comfort in human-centric solutions, ones that work for and connect to their needs, are implemented. This doesn’t make Pope Francis, Bernie Sanders, or even this post anti-capitalistic; they are simply recognizing the need for change within the system. A cup of hot chocolate brings comfort on a cold wintery day because it satisfies a person’s emotional (and physical) needs. This is how design-driven solutions can create a bridge between humans, technology and capitalism.
If we’re looking for change and innovation to bring stability and order to the capitalist system, where is it going to come from? Investment into research & development (R&D) indicates long-term planning, solutions and strategy. However, investment R&D has been decreasing since the year 2000. Although investments into R&D have been increasing over the past two years, there are other indications that organizations are still focused on short-term goals, such as shorter CEO tenures and stock buybacks. We live in an on-demand world with instant gratification leading the way. This all indicates that organizations are still focused on short-term financial goals instead of creating a path towards long-term stability.
We have operated within an open market capitalism model for so long that the change in the conversation and outlook is terrifying to most people—but the end of capitalism is not going to happen any time soon. But we do need to create a balance between the human experiences and needs when we look to create new solutions. This is where the economy is going to turn to for stability. Organizations such as PepsiCo, Nest, WhatsApp, Uber and Netflix are all creating design-driven business solutions that are connected to human needs and experiences. Although some of these companies are very large, adopting design thinking has made them more agile towards change and new growth opportunities. PepsiCo’s adoption of design thinking practices were well documented in the September 2015 Harvard Business Review.
Design is generally associated with the visualization of ideas and is a vague and commonly misunderstood concept. But, by connecting people, business needs and technology, the design thinking creative process can produce business-oriented, human-centric solutions. Unfortunately, many organizations are unfamiliar with this concept and in an unstable environment, are not open to understanding its value and benefits. This continues the cycle of uncertainty.
As our economies continue to reshape themselves, the good and bad aspects of capitalism will need to adapt to the rapidly changing landscape that is driven by people’s needs and their connection to technology. Our stability and comfort will arrive when the people’s needs are addressed by capitalism. The way capitalism is currently structured, good or bad, it will never comfort people’s non-monetary needs.
This isn’t “anti-capitalism,” but the evolution of Joseph Schumpeter’s creative destruction concept. We are in a period of coevolution. Rapid changes in globalization, technology and expectations are indeed evolving and reshaping each other at the same time. Capitalism needs to find a way to keep pace and bridge the parts together.
Instead of a “destruction” cycle, the idea of a creative disruption would make more sense to organizations now. According to Harvard Business School professor Clayton Christensen, “Disruption displaces an existing market, industry, or technology and produces something new and more efficient and worthwhile. It is at once destructive and creative.” Innovation looks to solve problems, but driving business that is directed to solving people’s needs is the way to build stability. Building creative disruptive systems that will solve human needs and will bring comfort and stability once those needs are satisfied. Connecting creative problem solving and business solutions together to build these systems is the role of design thinking.
The rapid changes in technology and its accessibility will continue to create an uncertain environment and drive the needs of the people and the economy. When business systems are purposely designed to achieve business success, the organization feels more stable and relaxed. Just like when we have that cup of hot chocolate, when our needs are met and satisfied, we are able to attain a sense of comfort and stability.