“Free-market economists tend to dismiss the value of longevity. Joseph Schumpeter’s term “creative destruction” has become shorthand for a messy but effective way of delivering valuable innovations and progress. No rational person in a free society, these economists say, would want to frustrate innovations that render existing products and companies obsolete but bring prosperity and benefits to the broader population. They add that no rational person in a free society would want to prevent new managers or owners from using existing assets more productively.
Up to a point, I support that 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.”