The History Of Creative Destruction Business Essay

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To sustain competition, the companies are pragmatically driven by profit-making goals more and more focusing on rapid growth. At that, it is becoming more and more complicated to make any long-term predictions of the factors that would ensure steady growth. The global financial crisis alone has devalued numerous expert forecasts regarding the stability of corporate shares, and therefore many companies failed on world stock markets. Therefore, the contemporary situation necessitates the analysis of the recent changes in corporate behaviour with regard to their competitiveness and profitability.

This report is based on the analysis of topic-related articles reflecting the concepts of transversal learning, systems thinking, behavioral economics, and CSR/Ethics.

Executive summary

Due to globalization, the majority of business companies keep on track with rapid changes under the competitive conditions of a diverse global marketplace. As more and more markets are globally expanding, diverse workforce is one of the key factors which ensures high level of competitiveness and productivity. The contemporary globalized marketplace requires maximum flexibility and diversity from the companies to survive international competition. Therefore, companies are permanently adopting innovative schemes to affect target customer and to cover most markets in various countries through the operation of their distribution networks.

The term 'creative destruction' coined up by Joseph Schumpeter assumes the forces that make corporations come closer to market. Accordingly, corporations become markets themselves. Therefore business experts advise companies to apply creative approaches to enhance the market presence and advance the level of corporate operations. The knowledge and analysis of these forces is the subject of this research. Based on the concept of continuity corporations constantly implement innovations and therefore change the internal and external environment they operate it (Foster and Kaplan, 2001).

The Austrian economist Joseph Schumpeter analyzed capitalist system to understand how innovations can benefit the companies. To this end, Schumpeter claimed that the implementation of innovations would be most effective in small-sized organizations since they are more flexible compared to the large companies. However, in the contemporary conditions this theory is arguable since large corporations possess more strategic resources and market power to effectively manage change and implement innovations (Foster and Kaplan, 2001).

For the most part, corporate managers are unable to cope with the ongoing challenges due to the failure to properly cope with the issues, involving:

(1) Strategic planning and analysis;

(2) Motivation of highly-diverse workforce;

(3) Adjustment of strategic thinking to both short-term and long-term priorities etc. These failures initially take place in the internal environment while adversely affecting the entire performance of today's organizations. Worse than that, on the external level of organizational performance, these failures become evident to the companies' stakeholders, suppliers, partners, and most importantly customers. Furthermore, while doing business in the age of pragmatic enrichment, many companies tend to win the competitive advantage while forgetting about and/or ignoring the core ethical and moral standards of business performance. In many cases, for instance, corporate management fails to adhere to the corporate social responsibility commitments before their communities and immediate environments and customers they serve.

Considering this, most of today's organizations develop and implement new approaches and attitudes towards current business activities, as well as corporate vision of optimal problem-solutions. Namely innovations help organizations to save costs, reduce the risks, and optimize benefits during the transition process.

Innovation management is a complex concept that assumes but is not limited to the process of managing evolving technologies and knowledge, products and services, as well as human resources. Technological and performance innovations are the key drivers that boost organizations to reconsider their structures, management processes and applied business models. Innovation is the key driver of gaining and sustaining a competitive advantage. Thus, in business terms any innovation bears close relationship to management and financial functions to boost corporate profitability. Therefore, the company's capacity of proper managing change and innovation is high on the contemporary managerial agenda, and therefore the value of innovation should be clearly comprehended (Foster and Kaplan, 2001).

The ability to manage innovation is crucial on strategic and operational levels since managing innovation as a multifunctional ability integrates market management and organizational and technological change to enhance corporate competitiveness and organizational effectiveness. Accordingly, the implementation of innovations in organization requires managers to be able to manage organizational changes in an innovative way, including: assessing the need for change, designing and planning changes, and implementing the latter in compliance with corporate policies and organizational capacities. At that, while managing the implementation of internal change and innovation, managers should consider external political, socio-economic and cultural factors since there is no organization that operates in isolation. Therefore marketing factors, consumer preferences and price-level dynamics etc should be always taken into account while investing resources into the process of change and innovation management.

Not less important is the emphasis on the compliance of the corporate governance with corporate culture. The former is not shaped merely by the set laws and regulations that determine corporation's activities within the framework of both internal and external business environments. It is culture that impacts the shape of corporations and the behaviours of all the participants in corporate governance mechanisms. Apparently, the scope and quality of the corporate culture differs from corporation to corporation which depends on the cultural background and the function of the corporate governance.

Anglo-American model of corporate governance is oriented towards stakeholder supremacy. The proponents of the Anglo-American model of corporate governance should reconsider their approach to the stakeholder involvement and roles within the framework of the contemporary competitive corporations. The globalization of capital markets and emergence of multinational corporations necessitates the harmonization of business, legal and ethical values on the international agenda.

On the other hand, most critics of the stakeholder doctrine claim that it had not much success within the framework of the Anglo-American business model so far. Worse than that, its dangers are apparent. The diverse groups of stakeholders should manage corporations on the basis of mutually-shared values, which is not always possible. In practice, diverse stakeholders hold opposing views on such important issues of corporate management as environment-related issues, dividend distribution, and job security etc. Therefore, the recent debates regarding the problem of stakeholder involvement in the corporate governance have involved much criticism of the stakeholder concept of corporate governance per se. Most of the critical remarks concern the threat assumed by the concept to private-property rights as well as the distor­tion of the conventional perceptions of accountability in the corporate environment.

The recent ethical debates are controversial, and it seems that corporations designate their individual 'flexible' models while managing stakeholder involvement. It is also obvious that theoretical assumption on corporate governance do not coincide with the reality of stakeholder involvement, and therefore corporations seek their unique balance of business-oriented purposes and ethical values under the competitive conditions of the global marketplace. Worse than that, the stakeholder model of the corporation attempts to operate business system like the political system. However, such approach is ineffective from both ethical and business perspectives. The politicization of business endangers the takeover process, and therefore disables corporate managers to maximize shareholder wealth. Hence, corporate governance theorists and practitioners should introduce an innovative approach towards the optimal stakeholder involvement considering the most recent corporate governance trends as well as the variety of business and ethical issues that shift the contemporary operation and management of competitive corporations.


The introduction of innovations, as an indispensable part of change management, should be given high priority while in many cases conservative organizations and workforce mainly fear innovative changes. Only flexible organizations are able to follow the increasing pace of change. Furthermore, such flexibility is based on constant 'learning'. The concept of organizational learning assumes that learning organizations acquire necessary knowledge and skills to be further applied to gain a competitive advantage. Therefore, only learning organization is capable to introduce effective changes and manage innovations. The ability to manage innovation is crucial on strategic and operational levels since managing innovation as a multifunctional ability integrates market management and organizational and technological change to enhance corporate competitiveness and organizational effectiveness.

Considering this, the following conclusions are central:

(1) In the course of change management, innovation is applied as a source of competitive advantage;

(2) The scale of organizational structure does not affect the company's capacity to innovate effectively;

(3) Only flexible learning organizations are able to innovate and therefore implement substantial changes;

(4) Numerous internal and external factors should be taken into account while managing change and innovation. Thus, to remain competitive, the overwhelming majority of the contemporary companies emphasizes on flexibility and learning as the core prerequisites of any innovation and change process. In addition to this, it is noteworthy that creativity is a core of innovation, and therefore companies strive for unique solutions not to be further applied by the competitors.


It is the high time the companies launched their strategic re-building and re-positioning on the domestic and global markets. To launch such considerable strategic renovation much will depend on the position and decisions made by the stakeholders and their core priorities. Under the conditions of strategic change, the companies should adhere to the peculiarities of the immediate environment within which they operate and which they serve. This task necessitates careful re-consideration of current customer demands, financial affordability of target markets, as well as the competitive strategies applied by the major rivals. Further on, the companies should shift their strategic focus towards the uniqueness of strategic approaches that would distinguish them from the competitors and would enable to win a comparative advantage on the highly-competitive marketplace. Eventually, the companies should ensure own sustainability as an indispensable component of their strategic thinking and business action to withstand all the challenges in the long-run.

Competitive companies therefore mainly concentrate on the maintenance of sound organizational structure, proper human resources management (HRM), effective marketing, and technological advancements that altogether enable the company to maintain high level of flexibility, hold competitive advantage, hire the nest talents on the market, and provide customers with the incomparable quality of their products and services.

Performance evaluation indicates the correlation of planning and implementation stages of the management system, considering the set goals, available resources, and timeframe and particular circumstances. Overall, on each stage of strategic management, the company should apply reasonable and flexible approach to sustain a competitive advantage and win more customers in the future. The flexibility will surely help the company to cope with the challenges of permanently changing and highly competitive global environment

Due analysis has indicated that there is no universal panacea to managing change and innovation as the contemporary business environments are global, highly-dynamic and competitive. Nonetheless, modern researchers continue offering more and more applicable solutions to suit companies in different circumstances. To remain competitive, the overwhelming majority of the contemporary companies emphasizes on flexibility and learning as the core prerequisites of any innovation and change process. In addition to this, it is noteworthy that creativity is a core of innovation, and therefore companies strive for unique solutions not to be further applied by the competitors (Foster and Kaplan, 2001).