Creative destruction and empathetic leadership

Drucker Breakfast - leaders discussing a problem

Last month, Emergn and the Global Peter Drucker Forum co-sponsored an ‘executive breakfast’ session with Adrian Wooldridge, political editor for The Economist and co-author of the new book, Capitalism: in America: A History.

I’d previously written about some of my takeaways from Adrian’s talk, specifically on the distinction between entrepreneurs and inventors, and why innovation requires having a foot in both camps to work. In this post, I want to dive into another major theme that Adrian had focused on and that I found especially interesting: creative destruction.

Defining creative destruction

As Adrian described it, creative destruction is essentially all about moving economic activity from one area to another where you’d reap higher rewards. And it’s a concept that acknowledges the unfortunate reality that, in an economic sense, creativity can produce some destructive consequences.

One obvious example is outsourcing, where you’re “destroying” jobs in one town or country to create new jobs – and generate greater productivity, revenue or both – in another. Of course, this no longer applies only to auto plants or manufacturing jobs, which is what usually comes to mind when we think of jobs that are relocated overseas for bigger returns. Major tech giants like Facebook and Google are essentially in the business of creative destruction, in large part because their customers do a lot of the work for them. They can get away with eliminating a lot of roles in their field – not just moving them from one country to another, but ending them outright – because they can get the same work done with algorithms that collect and process the data already being handed to them their end users.

Is there value in creative destruction?

Outsourcing jobs or eliminating redundant positions through technology are not exactly popular trends with workers already. So given all the above, it’s worth wondering: what exactly is so good about creative destruction?

Adrian explained that traditionally, creative destruction delivered value not just by driving revenue for the companies that pursued it, but also by significantly reducing the costs of goods and services for the rest of us and, in turn, improving the overall quality of life. Creative destruction drives growth and productivity, which in turn drives improved living standards via lower prices and higher-quality products.

This tolerance for creative destruction, as Adrian put it, is also directly linked to the rise of entrepreneurism in the U.S. in particular. Guys like Mark Zuckerberg and Elon Musk not only propose ambitious, almost outlandish visions for the future, but are given the tools and environments to build companies that can deliver those visions at scale and generate enormous value. As a culture we foster and encourage these kinds of entrepreneurial mindsets and the innovation they create because they drive enormous economic changes. Creative destruction is a huge part of that: the willingness to build in any direction goes hand-in-hand with the willingness to destroy and rebuild in any direction, too.

As Adrian himself admitted, the impact creative destruction has on jobs shouldn’t be overlooked or ignored. On top of that, creative destruction might not even be a sustainable business model in the long run. However, it’s worth keeping in mind that this path has traditionally led to some of the most radical and significant innovations of our lifetime – changes that were ultimately positive for humanity.

Striking the balance through empathy

The concept ultimately reminds me of the debate around AI: does this innovation cause more harm than good? The potential harm is important to always keep in mind, but we shouldn’t also ignore the tremendous good it has to offer either – particularly in improving lives. At the end of the day, striking the right balance on creative destruction is going to boil down to our capacity to develop empathetic leaders.

This was one of my biggest takeaways from the 2017 Global Peter Drucker Forum: all too often empathy is a missing piece in today’s business leadership, and that effect is only exacerbated by further digital disruption. For as much as innovative technologies can create new economic value in the grand scheme of things, we can’t ever forget that people are at the heart of every business. And it’s incumbent on leaders and innovators to bend technology in a way that ultimately benefits those people – both customers and workers.

Check out my first post, on the difference between entrepreneurs and inventors and emphasizing the ability to build organizations and scalability as a key plank of innovation.