In 1942 Joseph Schumpeter, an economist, coined the phrase “creative destruction” to describe the process by which innovation continually upends products and markets. After reading excerpts of his writings this week, I thought about three simple examples outlined below. But the key message is that product manufacturers cannot assume the products they sell now will be in demand in the future.
Consider the following examples:
- Men’s Wristwatches: It was a rite of passage when I was old enough to get my first wristwatch. To the great surprise of my mother, I did not break it. In fact, it is still in a drawer at home along with several others I do not wear anymore. I am still wearing something on my left wrist, a Fitbit. In addition to being a watch, the Fitbit monitors my exercise. Where my old watches were single purpose (tell time), the Fitbit is multipurpose, of which telling time is a minor aspect.
- Flip Phones: You can still buy a flip phone, but I do not see many in use. The original flip phone served two functions; making phone calls and, on some, sending text messages. Now, most of us, other than Mark Harmon (aka Leroy Gibbs on NCIS) use a smartphone. In addition to doing what the flip phone does, it also provides internet access, is a GPS device, allows you to get ratings on restaurants, among other things. The smartphone is a compact but powerful computer in your pocket.
- Future Cars: Google, Apple, Ford and other companies are redefining the notion of car use and, perhaps, urban transportation systems for the future. Ford just this week announced its intent to have a fleet of driverless cars by 2021. Interestingly, they are aiming for these cars to be used in ridesharing fleets. Uber is already testing a driverless vehicle as is Google. By reducing the cost of car operation, it will make it more attractive to people to “rent” the car only when it is needed. Of course, the smartphone makes it easy to find and order one to your location.
What does this say to product manufacturers? First, men’s wrist watches, flip phones, and automobiles are still being sold. However, in the case of wrist watches at much lower unit volumes than was true in the past. You can still buy a flip phone but probably not for much longer. Ford continues to sell cars although one of the implications of its strategy is it may be less involved in manufacturing and become much more of a technology company. The message is clear that even products that have been sold for years and are accepted parts of our lives are subject to great change. Product manufacturers need to keep their eyes open because their products could be next! Will you be the creator of new things or the one whose things are destroyed?