By Lucy Wright
‘Move fast and break things.’ The motto of Facebook founder and CEO Mark Zuckerberg encapsulates a sentiment which could be aptly applied to the attitudes the economic structure in which we currently reside. Our fashion is fast, our media is churned out by the minute, our transport uber quick. Yet this defining image of ambition and drive, the dynamism and destructiveness of the snappy slogan, contrasts starkly with persistent news articles portraying a British high street in decline, hanging on by a thread, as mass shop closures decimate the retail sector. Our economic landscape is evolving, fast, and it may render itself almost unrecognisable to consumers and producers alike.
Coined in 1942 by Austrian Economist Joseph Schumpeter, creative destruction outlines the ‘process of industrial mutation that incessantly revolutionises the economic structure from within, incessantly destroying the old one, incessantly creating a new one’. Essentially, Schumpeter conceptualised the idea that capitalism necessarily dictates a dynamic and evolving economy, one in which industries are frequently shaken up by innovation, by means of external threat or incumbent efforts. The concept is often cited in the defence of monopolies. Such arguments follow, that rather than the existence of permanent monopolies persistently gobbling up consumer welfare, high profit incentives will lure entrepreneurs and inventors into creating bigger, better, more beneficial products for us to consume. Creative destruction is integral to a flourishing economic circle of life – wilting firms die as new and stronger competitors emerge.
Perhaps the most quintessential rise and demise of a firm examined under the context of creative destruction is that of the fall of Blockbusters, primarily known as a home movie and video game rental service. When its last 300 stores closed their doors for the final time in 2013, Netflix, the world’s first online DVD rental store, had firmly established itself as a major streaming service with two million customers in the United States alone. The only certainty in life is death – Blockbusters echoes the fate of so many businesses when it failed to predict the magnitude of impact that the internet would have upon the industry it once dominated. You better start swimmin’ or you’ll sink like a stone. Blockbuster. Blackberry. BHS.
In the Channel 5 documentary, The Trouble with Topshop, notions of creative destruction are hinted at when the brand’s inability to foresee the disruptiveness online shopping would have upon its once assured business model. As archetypal British fashion retailers Topshop and New Look have become almost characterised by their hundreds of store closures, exclusively online brands such as Nasty Gal, In the Style and BooHoo are capturing the attention, and the sales, of consumers who have changed the way they shop. Impacting not only the fashion industry, this movement of the market place of the masses towards an overwhelmingly online experience has been cited as a major factor in the collapse of global British travel group, Thomas Cook.
Once hailed as a hallmark of British identity, Thomas Cook, founded in 1872 as Thomas Cook & Son, was nationalised by the British Government in 1948 following the second World War and remained government owned until 1972. Thomas Cook specialised in package holidays, operating from two segments: as a tour operator and an airline. On Monday 23rd September 2019, the firm ceased trading and entered into administration. The collapse has witnessed 21,000 members of staff, 9,000 of which are based in the UK, left jobless as well as the closure of 560 high street stores across the country.
The backdrop to the demise reveals a number of challenges the firm has been facing in recent years. Lack of clarity over the British exit from the European Union and persistent efforts to finance an impossible and accumulating amount of debt have been stated as catalytic ingredients in the formula of collapse. In the context of creative destruction, however, it is perhaps reasonable to suggest that Thomas Cook’s backward looking outlook to their business model, combined with their inability to dominate the online segment of the industry they operated within, have proven to be detrimental to the brand altogether.
In terms of their package holidays, Thomas Cook witnessed a multi-pronged attack. For those consumers opting for more traditional lodgings such as the hotels and apartments offered in their bundle deals, the soaring popularity of travel comparison websites, Expedia, Booking.com and Lastminute.com to name but a few, offer an infinitely bigger variety of options at a range of price points. Thomas Cook had hoped to profit from the revival of tourism in destinations they are renowned for: Egypt, Turkey and Tunisia, but recent years have seen a general shift towards an increasing demand for city breaks. With the entrance of Airbnb, the start up revolutionising the travel industry by offering a more authentic and often more affordable experience, an image of an outdated Thomas Cook, with its bricks and mortar business operation, began to emerge at the dawn of this new era of travel.
In recent months it did appear that Thomas Cook was catching wind of the changing tastes and expectations of its consumer base. Its Cooks Club collection promised travellers a trendier alternative to its large scale lodgings, hoping to rival the likes of those boutique hotels found on sites such as Mr & Mrs Smith. Too little, too late, it seems.
Move fast and break things. The collapse of Thomas Cook will eventually join that ever expanding list of victims of creative destruction, to the triumph of capitalism, driving innovation and improved consumer experiences. Yet it will also serve as a harrowing reminder of the destruction which remains in the wake of creative destruction. The loss of jobs, livelihoods, the uncertainty created for the hundreds of thousands of holidaymakers left stranded abroad or those left without their holiday – the reality starting to sink in of when existing large firms fail to successfully evolve, or when their market ceases to exist. Move fast and break things. Even Facebook itself is trying to move away from the ideology in an era of increasing responsibility and corporate accountability. Creative destruction may perhaps be a force for good, but we witness, yet again, the high cost of collapse.