What is the difference between Schumpeter’s “Creative Destruction” and Christensen’s “Disruptive Innovation”?

Rokon Zaman

Disruptive technologies drive creative destruction for offering us increasingly better quality products at a lower cost. Such reality is raising questions for clarifying this phenomenon. The line of questions often leads to a non-conclusive debate. Let me try to shed light to bring some clarity. The primary purpose of creative destruction is to offer a substitution, which is better and often cheaper than the incumbent one, to the existing product. But the substitution may show up primarily in two different forms. The first one is the improved version of an existing product, and the second one begins the journey in a rather primitive form, often around a new technology core, and consequentially grows as a substitution.

In a general sense, the society is in a constant flux of generating ideas of getting the job done better. In order to get the job done better with new ideas, we give up a prevailing way of doing things—giving birth of creative destruction. As a matter of fact, human civilization has been progressing through a series of creative destruction. For example, human beings developed metal tools to give up stone tools. Similarly, we opted word processing software to write letters, consequentially causing creative destruction to typewriters. Even a simple idea of changing the way of doing things leads to creative destruction to older approaches.

Creative destructions have been taking place in our personal, family, and most importantly, in professional spaces. It has been taking place in both the open market and command-driven economies. I presume, this question is about to find the meaning of these two related phrases within the competition space of firms in the market economy. Creative destruction, sometimes known as Schumpeter’s gale, is a concept in economics that since the 1950s has become most readily identified with the Austrian economist Joseph Schumpeter who derived it from the work of Karl Marx, and popularized it as a theory of economic innovation and the business cycle. As stated in Wikipedia, according to Schumpeter, the “gale of creative destruction” describes the “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one”. Both the scale and scope of transformation driven by creative destruction varies though.

In the first form, the substitution is offered to existing customers in creating the appeal of replacement or terming the previous version obsolete. In doing so, innovators add features and improve existing features to the product—often by taking advantage of the advancement of the same technology core. For example, subsequent versions of iPhone or LED Televisions are examples of this category of creative destruction. Once the latest version shows up, the previous version loses the market, as often, the latest version is better as well as cheaper. If we look into the evolution of LED television, subsequent versions are better as well as cheaper. This creative destruction allows the innovator to keep creating a larger market and placing less innovative competitors in a weaker position. It appears that Clayton Christensen articulated this form of innovation as sustaining innovation. Some people may term it as incremental innovation as well.

On the other hand, disruptive innovation, as described by Prof. Christensen, does not focus on bringing a better version of existing products in creating an enhanced appeal of the product to the same group of customers. Rather, the innovator focuses on innovating a solution around a new technology core, having the potential to be a substitute to the targeted product. Often the innovation emerges in primitive form, creating virtually no appeal to the existing group of customers.

For example, digital cameras caused disruption to film-based cameras. But initial emergence in the 1980s created no appeal to film camera owners to replace their cameras with digital ones, as at that time, digital cameras were very primitive. Who did buy those cameras? Often children were gifted with them to make fun of taking pictures—who later became serious customers of digital cameras. But the underlying technology core was amenable of rapid progression in making subsequent versions of digital cameras better as well as cheaper. In the course of time, the quality of digital cameras became so good in the later 1990s or in the early 2000s that they became a strong substitute to film cameras causing disruption to the film based imaging industry. The uprising of the smartphone is another example of creative destruction fueled by disruptive technologies. Often this form of innovation is termed as radical innovation.

It appears that Prof. Schumpeter broadly attempted to explain the role of innovation in economic dynamism, without giving adequate clarity in different variations. On the other hand, Prof. Christensen established a demarcation line between two important forms of creative destruction. By the way, these two creative forms of destruction require different forms of strategies to succeed as well as survive. Creative transformations of music and portable computer storage industries offer important lessons about creative destruction, causing disruptions.

It’s also to be noted that not all cases of creative destruction cause disruption. For example, subsequent releases of the iPhone caused destruction to previous versions, but without causing disruptions. On the other hand, the emergence of the digital camera caused disruptions to the film based imaging industry.

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