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The historical roots of disruptive innovation

Posted 23rd June 2011 at 02:08 PM by abraxalito
Updated 8th September 2011 at 03:10 AM by abraxalito

I've been chasing back a little of the history of CMC's idea which I expounded on in the last post. There's nothing new under the sun of course so I'm sharing here some of the writing of Joseph A Schumpeter as I find it pretty inspiring.

I first learned about Schumpeter from reading a book on management compiled from the extensive writings of Peter F. Drucker ('The Essential Drucker'). In one chapter Drucker sounds very much like he's reading from his crystal ball and predicts that where Keynes' ideas ruled the 20th century in economics, it would be Schumpeter's theories that reached ascendancy in the 21st. Having read some of Schumpeter based on that recommendation I'd say that Drucker was indeed spot on.

Here's a short taste of what Schumpeter has to say -

The first thing to go is the traditional conception of the modus operandi of competition. Economists are at long last emerging from the stage in which price competition was all they saw. As soon as quality competition and sales effort are admitted into the sacred precincts of theory, the price variable is ousted from its dominant position. However, it is still competition within a rigid pattern of invariant conditions, methods of production and forms of industrial organization in particular, that practically monopolizes attention. But in capitalist reality as distinguished from its textbook picture, it is not that kind of competition which counts but the competition from the new commodity, the new technology, the new source of supply, the new type of organization (the largest-scale unit of control for instance)–competition which commands a decisive cost or quality advantage and which strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives. This kind of competition is as much more effective than the other as a bombardment is in comparison with forcing a door, and so much more important that it becomes a matter of comparative indifference whether competition in the ordinary sense functions more or less promptly; the powerful lever that in the long run expands output and brings down prices is in any case made of other stuff.

From Capitalism, Socialism and Democracy (New York: Harper, 1975) [orig. pub. 1942]
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