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don's blog creative destruction

Creative Destruction

After 146 years in operation, the Ringling Bros. and Barnum & Bailey Circus is folding its tent(s), while a new kind of circus, Cirque du Soleil, entertained more than ten million people last year in 130 cities around the world.

 

So what happened? Creative destruction happened—the incessant product innovation mechanism by which new ideas and processes replace outdated ones. Joseph Schumpeter, who coined this term back in 1942, considered it “the essential fact about capitalism.”

 

The book Blue Ocean Strategy noted that “Cirque created a blue ocean business in a previously unknown market space. In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid. In red oceans—that is, in all the industries already existing—companies compete by grabbing for a greater share of limited demand. As the market space gets more crowded, prospects for profits and growth decline. Products turn into commodities, and increasing competition turns the water bloody.”

 

So, if creative destruction is an essential fact of capitalism, we shouldn’t be surprised when it happens, right? But we are. It’s hard to think about the Blue Ocean when you’re swimming in shark-infested, blood-red ocean waters. But there is something you can do—three things in fact:

 

  1. Red-teaming forces you to attack yourself before someone else does. The Red-team is a group from your organization that figures out where you’re weak and vulnerable. Red-team your organization, your value proposition, your membership strategy or your event. Get help from the outside; you can’t be hard enough on yourself without a trusted provocateur.
  2. Know your Net Promoter Score (NPS). USAA has an NPS of 75; Costco, 79; and Apple, 89. Most associations are in the teens. If you don’t know what an NPS is, click here. If you do know and don’t measure it, start. If you measure NPS and you’re not where you want to be (over 50 should be your goal), determine what you need to do to get there. It will take time, but it’s worth it.
  3. Ask yourself: Who at our organization is the most eager to disrupt; who is pulling us to look at things differently; and who is challenging the status quo, asking the hard questions and not afraid to challenge our conventional thinking? If you don’t have this person, appoint yourself. Who else will do it?

 

If you always do what you always did, you’ll always get what you always got.

 

Disruption only hurts when you’re the one being disrupted.