Why Schumpeter would be a great 21st century CMO
The Austrian-American economist Joseph Schumpeter is well known for coining the term “creative destruction.” The term refers to the cyclical phenomenon in economics whereby markets destroy themselves from one generation to the next. This phenomenon has accelerated and become more obvious in the 21st century as a result of the internet and globalization. Marketers cannot ignore the fact that markets, whether defined geographically, demographically or by product, cannot be counted on in the long term and have become more and more transient. The markets for instant cameras, for hand-held calculators, and more recently for MP3s have all but disappeared. The reason they’ve disappeared, or been destroyed, is simply that new technology, new solutions have been invented that have allowed users of these devices to get the same jobs done – record an important moment, speed up calculations, listen to music any time anywhere – in less time, more efficiently and often with more benefits. Not only are the important moments recorded, but they can be shared instantly with anyone in the world, the same patterns of calculations can be repeated on massive amounts of data with little human intervention, and music is accessed from a cloud. Those companies that harnessed creative destruction in these markets were a step ahead of the game and redefined their products and markets in terms of the new jobs they allow their customers to perform.
A CMO has many more tricks up her sleeve than defining products and markets. She can craft new pricing mechanisms, new distribution channels, new media, new messages, new ways to engage with customers and other partners, new ways to segment, new ways to create value with data and more. And she can do this dynamically and continuously, seizing destruction as an opportunity for creativity and value creation for her brand. Let’s be clear: destruction will happen anyway, the question is, are you harnessing its creative potential?
Creative destruction will and should spare no aspect of marketing in its path. Recognizing that traditional pricing strategies would simply lead to value destruction in the market for eye care allowed Aravind Eye Care, an Indian social enterprise to invent a creative “pay-as-you-can” pricing strategy. The resulting pressure on operational processes and service quality has yielded further creative solutions at the same time as high margins and the ability to reinvest in the business. From destroying an irrelevant pricing structure to creating a profitable best-in-class health experience.
Conventional wisdom dictates that women who buy fashion shoes want to try them on for fit and look. A creative destructions strategy allowed Zappos to reinvent the whole process by unbundling the different elements of the service experience (getting size advice from a salesperson, walking around the store to test the shoes’ comfort, imagining the look with different outfits, etc), and rebundling them online while adding unlimited customer support on the phone and free shipping and return. This required building the company’s strategy on a foundation of extraordinary levels of customer service, from an empowered call center to HR policies and throughout every aspect of corporate culture. From there, they were able to recraft the shoe buying experience, allowing customers the added benefit of trying on several pairs of shoes in the comfort of their own home and returning unwanted sizes and styles. Their success was such that they were acquired by Amazon for their core competence in delivering outstanding customer service. From destroying a less than perfect shopping experience to creating a model for customer centricity. And, today, they are making headlines again as a leader in holacracy, the “no managers” management style.
Destroying the traditional fashion industry supply chain model allowed Zara to invent fast fashion and establish itself as the world’s largest fashion retailer. Crushing the barriers between customers and employees to reap the benefits of their fans’ passion is recognized as a key factor in the highly successful turnaround of the LEGO Group. In all these examples, creative marketing strategies emanated from the ashes of a destroyed model.
What keeps the CMOs of large multinational companies up at night these days is the fear that a new start-up will make their own model obsolete overnight and rise from their ashes. The pre-emptive remedy we advocate is Schumpeterian marketing – destroy convention, rebuild a new.
There is, wrote Schumpeter in 1942, a “process of industrial mutation – if I may use that biological term – that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. ” As a CMO, Schumpeter would have driven the creative destruction bulldozer, getting ahead of the destructive forces and incessantly reinventing creative ways to create value.
© Marie Taillard, May 2015
By Dr Marie Taillard, CMC Director and L’Oreal Creativity Marketing Professor
© Marie Taillard, May 2015