Leaders can turn creativity into a competitive advantage


In 1985, Peter Drucker made a hopeful case for an entrepreneurial society in which innovation and the creation of new businesses would more than compensate for job losses stemming from the retreat of manufacturing industries in the U.S. and other developed economies. Since then, the U.S. has increasingly come to rely on innovation and entrepreneurship to drive growth — but we haven’t achieved the scale of entrepreneurial society we need to offset the effects of globalization and automation.

One reason for this is the increasing speed of change itself. Technological innovations like high speed trading and digital marketing enable competitors to emerge, thrive, and disrupt companies far faster than ever before. This “VUCA” environment rewards innovation but it also punishes failure more harshly. The result is that while we may be creating many new businesses we are destroying existing ones faster than ever before. The average lifespan of companies in the Fortune 500 has dropped precipitously over recent decades.

A second reason is that our assumptions about good management practices are out of date. Since the 1980s, management practices like the Toyota Production System that promote efficiency, quality, and scale have done wonders to lift the quality and profitability of global manufacturing. But in a business environment that is spectacularly unpredictable in almost every way, efficiency is no longer the most sensible — or at least not the only sensible — strategy.

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