Creative Destruction vs. Created Destruction | FTI Consulting

Creative Destruction vs. Created Destruction

Corporate Finance & Restructuring

May 27, 2020

Exploding Lightbulb

Creative Destruction, sometimes referred to as “Schumpeter’s gale” after the Austrian economist who popularized the concept nearly eight decades ago, is a theory of economic innovation which describes the “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.”

This process of internal destruction typically takes many years, during which time the decay of an incumbent economic order or process continues until it collapses and forces a new structure to emerge. 

Creative Destruction tells you that, eventually, the new replaces the old. However, sometimes the imperative to change is imposed suddenly and unexpectedly, often at an inopportune moment. When this happens, you enter a world of Created Destruction.

At present we are seeing huge changes in how business is getting done today due to the COVID pandemic. Take a moment to consider how it challenges the norms that were thought of as “givens” just months ago. 

In other words, the speed of destruction in established processes and practices is at a level infrequently seen in history. What used to take years or decades to implement, is now being changed, out of necessity, in a matter of months. And for those of you who believe that things will revert to old norms in a post-COVID world, I would argue that in many cases it will be difficult, if not impossible, to “unring the bell.”

Huge changes are happening across nearly every industry. For instance, in healthcare, which represents 20% of the domestic GDP, telehealth is fundamentally changing delivery and payment models. 

In commercial real estate, tenants across industries are giving serious thought to the amount of real estate needed to support their businesses in a post pandemic world. And throughout all industries, the use and deployment of field-level sales forces, throughout all industries, is being reconsidered.

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Scott Bingham

Senior Managing Director, Leader of U.S. Transactions