Change creates opportunity. Societal, cultural, technological, and/or economic changes create disruption in the market. These forces, known as macro trends, create new needs in the market and make many existing companies’ business models lacking or even obsolete.
Generally, macro trends lead to subtle changes over time that can be almost imperceptible to many of us. At some point, a savvy entrepreneur recognizes the change and seizes the opportunity by launching a new venture.
The coronavirus and governmental reactions to the pandemic accelerated change from its normal subtle and evolutionary pace to sudden and widespread disruption that none of us have seen before. It is why I call this a “Mount St. Helens” recession.
Change came down on us like a sledgehammer!
Massive Creative Destruction
Austrian economist Joseph Schumpeter coined the phrase “creative destruction” to describe the role of entrepreneurs in the process. As macro trends create change in markets, entrepreneurs are the ones who launch the businesses that replace the old with the new. Most of the time, existing businesses are too invested in the status quo to become change agents. It takes the entrepreneur as an outsider to move the market forward. And as markets move forward, old products and businesses face away into our distant collective memories.
The dual crises of pandemic and economic shutdown accelerated creative destruction from a process that happens over years and even decades, to a massive scale that is happening in many industries in a matter of days and weeks.
Don’t Forget the “Creative” Part
Government officials and public policy makers tend to focus on the “destructive” part of creative destruction. In the short run, the destructive side of the process eliminates jobs and creates uncertainty. So public officials try to do what they can to protect the status quo. Some of this is due to good intentions and some of it is due to pressure put on them by companies impacted by the process of creative destruction.
Schumpeter argues that if we let it work its course, creative destruction is what creates real economic growth over time, which will lead to an even stronger economy with more jobs than before. The challenge is that it can be a painful process in the short term for all of those impacted by the disruption.
Today, governments around the globe are pumping out untold amounts of money to shore up existing businesses impacted by this sudden event. Some of this is probably well founded policy due to the magnitude of what is occurring. However, in doing so, we run the risk that the “creative” part of the creative destruction process may become stymied.
The Lens of the Entrepreneur
If we let entrepreneurs do what entrepreneurs do in times of change, we may see an entrepreneurial renaissance that is unparalleled to any in our recent history. We need to accept that nothing will be as it was, and look at our future through the lens of an entrepreneur, who seeks opportunity out of the massive changes that are happening in our world.
For example, Andreas Kluth argues that when we get to the other side of the current crises, one possible result is a world that is seeking “simplification” in everything that we do. Kluth writes:
“Thanks to Covid-19, we may now be at such a turning point. As a first sign of rapid simplification, global supply chains are dissolving, and often being reassembled in much more rudimentary ways. Simplification may also cause upheaval in our health care, tax and welfare systems, as it becomes clear that those who rely most on medical or financial help cannot even navigate the complexities of getting it.”
Bernard Marr examines the impact of coronavirus on technology:
“As the ripple of COVID-19 careens around the globe, it’s forcing humankind to innovate and change the way we work and live. The upside of where we find ourselves right now is that individuals and corporations will be more resilient in a post-COVID-19 world.”
Marr goes on to make nine major changes in technology and work.
Politico reached out to thirty-four experts from a variety of disciplines to sample how they see the post coronavirus world. Many of them see a world full of opportunities for entrepreneurs to not only create new businesses, but even help shape new industries.
It continues to be important to pay attention to new infection rates, hospital capacity, the supply of test materials and personal protective equipment, and death rates. It is still an utmost matter of public safety.
We also must be aware of unemployment rates and business failures. The impact of dramatic economic upheaval requires short-term public and humanitarian assistance.
However, it is also time to start to look ahead to a post coronavirus world. It will be a new world, one created in part by entrepreneurs.
Which of the many predictions of the post-coronavirus world will be correct? We won’t know until those businesses succeed.
The truth about entrepreneurs is that, as individuals, we are not very good at predictions. What we are good at, is bold and courageous experimentation. The cumulative outcome of these experiments is a multitude of successes that help forge positive changes.
We can’t foresee where entrepreneurs will take us over the coming years. We need to actively foster entrepreneurship and to trust that the process of creative destruction will result in an array of amazing solutions that will shape our future way of life.