What About Schumpeter's Process of Creative Destruction?

Having just returned from presenting a paper on corporate longevity at the Strategic Management Society's conference in Sydney, I am pleased with the very positive response to my research on common behaviors of 100-year-old companies. The academics, business executives, and consultants in attendance encouraged me to pursue publication and wider dissemination of the research saying "I think you're really on to something here." One of the reasons this response was so encouraging is that in the past I have often been challenged to justify why I would research old companies in the first place. Free market economists tend to dismiss the value of longevity: Doesn't the principle of creative destruction imply that the old need to die to make way for the new? That vanishing companies and lost jobs are inherent parts of a growing economic system?

My response to this question has often been that I'm not saying a company should live forever, just that most "die" prematurely, causing much more trauma to employees, customers, suppliers, and communities than is necessary. But I think former McKinsey managing director Ian Davis had a better response in his reflections on corporate longevity published in the September 2014 issue of McKinsey Quarterly:  "Up to a point, I support that [creative destruction] argument. But it needs to be examined and challenged constantly if the underlying idea is not to be abused. Not all destruction is creative, and not all creativity is destructive. The demise of a company is not damaging only for its stakeholders. Sometimes, it may also be an inefficient way of innovating in the economy or an industry, because it breaks up established and tangible assets, such as R&D know-how and strong consumer and supplier relationships. A company that learns to adapt and change to meet market demands avoids not just the trauma of decline or an unwanted change of ownership but also very real transaction and disruption costs. Corporate endurance should not be an end in itself. That said, in a very real sense, survival is the ultimate performance measure."

I couldn't agree more.