The current IT-revolution has exacerbated the pace of “creative destruction”, a term coined by Austrian economist Joseph Schumpeter. According to his theories, a well-functioning, free economy constantly produces new methods of production, which replace older inefficient methods.
In other words, new methods come from entrepreneurs who are the driving force behind disruptive technologies. It is precisely this reason we are in desperate need of new dynamic business creators, who understand how to manage the economy.
The Death of Business
For the first time ever, the business death-rate in the U.S exceeds the creation rate. Such a trend has troubling effect on the health of the economy; small-businesses are the main force behind new job creation.
Although demographic forces are an important reason for the declining entrepreneurship rate, it cannot alone explain the trend. A more credible reason could be found from the new tech start-up industry.
Who Creates Jobs?
The Silicon Valley based start-up culture has been in the spotlight ever since the Great Recession. Driven by low interest rates, the new business creation rate appears to be higher particularly in the tech industry. However, the life-cycle of an average tech start-up is rather short. Furthermore, start-ups do not employ new workers at the same scale as, for example, the manufacturing/mass production industries.
Management Innovation with Capital “I”
A small scale employment rate in the tech start-up industry doesn’t mean that there are no success stories. A company called Wincher.com has managed to tap into the positive ripple-effects of the SEO and web traffic tracking business.
Although Wincher has mostly contributed to “creative destruction” of older industries, companies such as Wincher also drive innovation in management. To be more specific, managing companies in which the millennial generation constitutes the majority of the workforce is much different than managing, for example, Baby Boomers.
We Need Less Government, Not More
One way to spur entrepreneurship is for the government to step out of the way with its regulations and red-tape. Such strategy has been proven to be the best force behind “creative destruction”.