Business Insight Zone

The other day I jotted a note to myself about the reinvention of the 123-year-old Eastman Kodak, which has radically retooled itself as the photography market has shifted from its stronghold of film into the strange new world (for Kodak) of digital photography. In the margin I wrote “Schumpeter?” I was thinking of the famous Austrian economist Joseph Schumpeter, whose theories regarding “creative destruction” have profoundly marked thinking on capitalist business cycles.

Well, maybe G. Pascal Zachary and I are tuned into the same wavelength, because he just wrote a New York Times piece about how Schumpeterian destruction and innovation may govern the unfolding markets for products that address the threat of global warming. An excerpt:

But there are good reasons to believe that crying wolf is exactly what the brightest innovators ought to be doing, and not only in response to the challenge of climate change. As a general matter, high anxiety will lead to more intense pursuit of innovation.

In the history of economics, the ultimate wolf-crier was Joseph A. Schumpeter. An Austrian economist who taught at Harvard, Mr. Schumpeter in 1942 coined the term “creative destruction” to describe what he viewed as the engine of capitalism: how new products and processes constantly overtake existing ones. In his classic work, “Capitalism, Socialism and Democracy,” he described how unexpected innovations destroyed markets and gave rise to new fortunes.

. . .

Mr. Schumpeter brilliantly realized that innovation — so often extolled as the purest expression of the human spirit — has a dark, violent, even nasty side.

Every innovator, in short, makes a declaration of war. And every successful innovation is a destroyer.

Zachary’s war metaphor within the piece might be a tad overdrawn, but his main point is apt: What some businesses hear as a death knell, others will hear as opportunity knocking at the door. It’s to Kodak’s credit that it has managed to do this for itself, without going the way of the world’s buggy-whip makers.