Course overview
Explaining startups
Creative destruction and disruption

II.Creative destruction and disruption

Change and development increase creative thinking, which leads to better and more efficient ways of working. On the other hand, they also lead to old ways of working dying out. In history, creative destruction has altered the lives of people who used to make a living doing such things as driving horse carriages, developing photos and operating telephones professionally.

Innovation and change go hand in hand

It’s clear that the ability to create and innovate will shake the world. A study conducted by the University of Oxford suggests that over the coming decades, 47% of today’s professions could cease to exist.

This doesn’t mean that half of the working population will be unemployed in 2030, but rather that these people don’t have the required skill set for any existing job at that time. Having mastered the skills needed to be a chauffeur, electrician or insurance analyst might be worthless when a car drives itself, a robot does all the electrical work and artificial intelligence is in charge of data collection and analysis.

The situation can only be solved by developing new and innovative ways of educating people and developing methods for continuous learning – while also updating social security systems to support the changing environment. Creativity destroys, but it has always been followed by progress.

Making predictions about the future is hard. Even though the Oxford study above is often cited to support a given vision of the future, the truth is much more complex. For example, a new OECD report suggests that automation is a threat to only 9% of jobs as opposed to the 47% suggested by Oxford. The MIT Technology Review recently collected a list of predictions concerning the future of work and automation. The result of the analysis was that the predictions vary from dystopian pessimism to over-optimism.

Automation and robotics may have an effect on many jobs, or it might be that the effect will be radically smaller than predicted. The only thing we know for sure is that automation, AI, 3D printing, nanotechnology, VR, AR, platform technologies, biotechnology and many others will have an effect on how we work, send messages and live our everyday lives.

Seeking disruption

Many startups are looking for disruption. Disruption means to do something radically better and more cost efficiently to such a degree that the old ways of working have no chance of survival. Often a disruption arises from a product that is inferior to what is offered to the mass market, but services a niche audience better. In the past decade, many disrupting companies based on digitalization and removing the middleman now exist.

For example, the music business has been disrupted many times. First vinyl records were replaced by CDs. Carrying a CD player around started to feel foolish after the iPod was introduced. The most recent wave of disruption has come in the form of streaming services like Spotify, where you can listen to any music anywhere.

These examples have all disrupted their industries by simply understanding that things can be done in a smarter and more efficient way. The technology itself is not groundbreaking in these cases, but what is groundbreaking is how the technology is used. Disruption can also be achieved through technical innovation – for example, the company Beyond Meat actually developed new technology to create their food products.

Slow and steady doesn’t win the race

Bigger companies and government organizations are often very slow to react to these changes. Sometimes their slowness results in the Goliaths of the corporate world being defeated in record time. Digital cameras destroyed the film giant Kodak. Smartphones removed Nokia from its leading position as a mobile phone producer. Spotify destroyed the CD business and Netflix did the same for the movie rental business. These kinds of radical changes are caused by fast and agile startups, which big corporations find extremely difficult to compete with.

However, it’s not impossible for big companies to survive and also drive change. Recently, Apple has mainly been successful thanks to iPhone sales but it is now seeing stagnation in the mobile phone market. In response, they are already focusing on several other products – for example, iPads and wearables – while also launching many new services. Apple’s core purpose has stayed the same, but they are changing their product focus.

Another example is Nokia. Their famous slogan is “Connecting people”. Previously, Nokia connected people through phones, but now it’s one of the largest network infrastructure providers in the world. Big companies can drive change by shifting their culture and working methods to become more entrepreneurial and innovative. However, it’s not easy.

The only way for us to keep up with change is to be the source of that change. This is something that Finland has started to understand in recent years. In 2019, statistics showed that Finland attracts the most capital in Europe for early stage startups as a percentage of GDP.

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AVP is the entrepreneurship education program at Aalto University. Students in multidisciplinary teams do hands-on exercises and gain tools, ready to be used to construct a startup or to renovate an existing company. We teach students to build like an entrepreneur.

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