Destroy creatively in order to reconstruct creatively

Destroy creatively in order to reconstruct creatively 

A decade ago, in the year 2010, I got to know the economic concept called 'creative destruction. I was really happy to learn the views of Vijay Mahajan, the founder of the Basix group, he is known to be a 'Father of Indian Microfinance'. Microfinance was initially started as a helping hand to the poor and needy people to lift them from poverty. It acted as one of the poverty alleviation tools. Later on, it got embroiled in a commercial activity. This results in many institutions started working into the segment and it became a huge industry. The industry was the only sole stakeholder of financial inclusion because no bank was ready to include unbanked into the mainstream.

There was Dr. C. Ranjarajan Committee on financial inclusion which had emphasized a lot on the importance of Micro Finance Institutions in India. But, the early year 2010 was hit by a black swan event, few farmers committed suicide because of arduous recovery practices of some microfinance

institutions. That was the beginning of declining of MFI's. MFI's as an industry had not reinvented the wheel to lend and operate, not linked the lending with the object of utilization, which resulted in excess borrowing. This excess borrowing formed a bubble. And finally, that bubble burst to cease many MFI's. 

The miasma created over this could never ever get settled. Banking products from banks came into the picture and replaced the MFI model, not completely but to a greater extend.

The above-cited example entails the story of MFI's, who over a period of time not innovated their innovations in order to be sustained in the future. Those old models became obsolete and obliterated completely. In the year 2020, another black swan event happened, COVID 19 pandemic which crippled most of the economies around the world. Still, this pandemic continues to play havoc around the world, this year is also getting affected badly on personal as well as professional fronts. 

The failure of MFI's occurred due to they didn't destruct their earlier way of working. Whatever we do, it always needs further innovation, or else it becomes obsolete. The MFI's saga draws attention to an economic concept called 'Creative Destruction'. The term coined by Joseph Schumpeter refers to the incessant product and process innovation mechanism by which new production units replace outdated ones. This has many macro as well as microeconomic implications. The year 2020 marked the beginning of the pandemic and it continues till this time. It has been proved that the earlier models of business delivery have had not being able to execute. I happened to host the AI mentoring for women technologists and it has been concluded during that session 'the earlier models of AI (Artificial Intelligence) prediction had failed as the current unprecedented situation was never taken into account.

We used to operate in direct connection mode, once we are adopting things so-called Social Distancing or remote working we kind of failed to scale. This pandemic may end or may not end, the resilience and animal spirit of the corporation has to be regained. And in order to regain the business confidence Schumpeterian creative destruction will help to restructure. I think at this juncture we all should try to innovate to a greater extent in order to survive in sustainable manners. 

 

 

Faith

Amol