Creative Destruction

This article in the New York Times - http://www.nytimes.com/2009/01/26/technology/26spend.html - tells the familiar story of innovation and creative destruction. Although most people have read these stories and understand them objectively, I understand creative destruction viscerally. When I went to work for AT&T in 1971, this firm had 1 million employees making it the largest and most enduring company in the world. Although a US Department of Justice Consent Decree caused the diverstiture of the Bell Operating Companies in 1984, AT&T still had 350,000 employees and was the largest company by market capitalization in 1992. What occurred during the next decade was hard to believe for those of us who had spent our adult lives being proud of our careers with "The Telephone Company". Deregulation, competition, globalization, spin-offs, acquistions, the Telecom Bubble and Collapse was the epitomy of "Creative Destruction". Even though AT&T survives as the largest telecom company, it has been sold, bought, re-structured, re-engineered, and fundementally changed. But the innovation that created its greatness - telephone, transistor, laser, and optical communications - have never regained their status as the primary drivers of the firm.

While a technology company is in rapid ascent (Google in the early 2000's, Microsoft in the 1980's and 1990's), there appears to be no stopping the profitable growth. The excitement makes these firms the darlings of the business world and the place that the most talented graduates want to work. This virtuous cycle extends until a new "more innnovative" company takes the mantle leaving the previous superstar (IBM since the mid-1990's, GE since the early 2000's) struggling for modest growth.

During the current economic and financial crises, new innovative firms will emerge somewhere in the world to shine for the next few years.