While visiting my hometown, I came across this dilapidated building, an old laundry (below left) we used to visit weekly when I grew up. In the 70's, washing machines were small and nobody had a dryer. For the big comforters and bed sheets, we used this laundry. Over the years, revenue decreased dramatically because people bought dryers. The company hung on for more than a decade but had to close down more than 15 years ago. The building is still there and taking up space
This (above right) is used to be the biggest department store in my hometown. Built in the 70's, it featured three stories, a cafeteria style restaurant, very unfriendly sales people and my parents must have gone there at least once a week. It was the place to be.
Due to changing customer needs, the store changed ownership 4 times in the last 5 years and finally closed down in 2009. The building is still there and might remain empty for decades to come.
Creative Stagnation is utterly depressing
These are just two expressions of an utterly depressing mood I encountered in my hometown: Surrounded by ruins of a glory past, people feel handcuffed and have no way of moving on. This is not a typical example for the German economy (it's actually doing very well, thank you very much) but it's a typical example for creative stagnation.
Creative Destruction was originally derived from Marxist economic theory which refers to the linked processes of the accumulation of annihilation of wealth under capitalism. In the 50's, the term "creative destruction" has become more readily identified with the Austrian-American economist Joseph Schumpeter, who adapted and popularized it as a theory of economic innovation and progress. Creative Destruction is a very disruptive process. It devalues, if not destroys, past investment and labor skills. There are some deeply human challenges involved when supporting creative destruction. What are we going to do help people adjust to changing times? At one point, coal workers in Germany were subsidized by the government with $350,000 per person to keep the industry alive. Each employee received $60,000 yearly, the rest went to the company to stay competitive. Why not give the employee $350,000 for one year and help them find a new vocation through training, etc?
Do we need creative destruction in the advertising industry?
I just spoke at ad:tech Singapore and I was quite struck by the fact that Asian agencies are fighting the same battle we started a few years back: Compensation, traditional vs. digital vs. social, Procurement, integration, synergy – you've heard it all. Just like in the US and Europe, the current institutions (holding companies/advertising agencies) are too powerful to let go. They are almost like the "too big to fail" banks. With the one exception: they are making profits again, they seem to be doing very well in the current environment.
Is this the calm before the storm?
Was the 2008 storm the real event or just a little breeze before the big one hits? I'd say: Brace yourself.
We are about to encounter the real period of creative destruction. What we've experienced so far was nothing, just a little warm-up. Sure, the print industry had to suffer dislocation, just like the radio industry. They were too fragile to weather any storm. Over the next decade, the Internet will crash like a tidal wave across entire industries, sweeping away the old and infirm and those who are unwilling and unable to change.
Holding on to the old thinking and agency structures will lead to certain demise. Instead of weathering the creative destruction and reconstruct, I hope agencies will use this as an opportunity to start fresh. Stop hanging on to outdated legacy systems, obsolete hierarchies and, most importantly, calcified thinking.
Reconstructing the advertising in the next 10 years might not be enough to deal with these revolutionary changes. These forces might be so strong to force brands and agencies to destroy the current structure altogether to be able to focus on a positive and profitable future.
New things are always scary, it's very human to hold on to old structures. Don't forget, we've survived Gutenberg's press, digital cameras and film, radio and computers themselves. This is just another instance of metamorphosis and radical change under creative destruction, and for it to be weathered, the same processes of reconsideration and reconstruction will need to apply.
Now, let's start tearing down.
Uwe Hook is the CEO and Co-Founder of BatesHook, Inc. (www.bateshook.com) and a veteran of the advertising and marketing industry with the goal of building connections between people and brands. Uwe can be reached at firstname.lastname@example.org.
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