'Creative destruction' - A modern management mantra

Creative destruction, introduced in 1942 by the Austrian economist Joseph Schumpeter, describes the process of transformation that accompanies radical innovation.

In Schumpeter's vision of capitalism, innovation by entrepreneurs was the force that sustains long-term economic growth, even as it destroyed the value of established companies that enjoyed some degree of monopoly power.

Creative destruction epitomises the power of capitalism. The absolute relentlessness of creative destruction and entrepreneurship has become a defining feature of modern day free market capitalism.

"In a free economy, they never stop—never. Schumpeter wrote that all firms must try, all the time, "to keep on their feet, on ground that is slipping away from under them."

Someone, somewhere, is always trying to think of a way to do the job better, at every point along the value chain. Whatever has been built is going to be destroyed by a better product or a better method or a better organization or a better strategy.

This is an extremely hard lesson to accept, particularly by successful people. But business is a Darwinian process, and Schumpeter often likened it to evolution.

The creative destruction can occur within a large innovative company (big companies like Toyota, Microsoft), it can also to happen with start-ups, particularly since they now have so much access to venture capital.

An example of how this 'creative destruction' has happened in Maldives would be the case of Maldives National Shipping Limited.

After a prolonged difficult period of running old ships, in 2001, three other staff and me (Mohamed Hilmy) were abruptly changed from our Singapore jobs to Male'. This part is quite typical of the capitalist's creative destruction and I have no argument on that.

Here is where the issue is:

After we were changed, the new management set out to make a case that Abdul Nasir who worked under me has misused funds and that some bills were missing as the new management could not find them.

Since MNSL had shifted office, old records were kept in a store. For several months, Abdul Nasir was made to look for missing files and bills. Even though Abdul Nasir managed to somehow trace all the bills and showed them to the new management, they retained them for Audit but again declared them missing later.

They went on and prepared a statement of missing bills as unaccounted finance and forced Abdul Nasir to sign the statement. Whether it is right or wrong, once a staff member under me is held to account, I have to accept the responsibility for their actions.

Abdul Nasir has explained all this to the Anti-Corruption Board of Male'. He has shown the missing bills to them from the copies that he maintained with him .

There was no misuse of funds as cleared by the Anti-Corruption Board, as well as by an experienced independent auditor and a separate Singapore Audit firm. The auditor and the audit firm were both appointed by the Directors of MNSL earlier in 2002 for the same purpose on 2 difference occasions.

Yet, someone is selectively leaking the earlier accusations to the press to put Abdul Nasir and me in bad light.

Abdul Nasir voluntarily offered himself to the parliament office yesterday (ie the following day the issue was discussed in parliament and telecast the same night) to explain once again all of what he did with the Anti-Corruption Board for over two years.

Why does MNSL continue to do this?

My own feeling is that within the new management there are people who crave public glory by putting other people in bad light, completely disregarding how the company has operated in the past.

This is a reflection of capitalism in decay. More about this aspect in another post.