Creative Destruction

The mobile industry was built on change. Now what?

Photograph by Jacob Zukerman

In 1942, Joseph Schumpeter coined the term “creative destruction” in his book Capitalism, Socialism, and Democracy. Schumpeter theorized that capitalism sparks entrepreneurship, and that the technological progress of a state depends on its entrepreneurs or “wild spirits.” This entrepreneurial spirit spawns a perennial gale of creative destruction in which disruptive inventions and innovations render the status quo obsolete. Lately we’ve witnessed a great deal of destruction — sadly most of it not of the creative variety. The financial and automotive industries are crashing and burning only to ask for financial bailouts that in all likelihood will fail to help them reinvent themselves. In industries not accustomed to change, forging new paths can be painful.

In the mobile industry, however, creative destruction is a way of life, and that’s largely due to advancements in technology, advancements that Gordon Moore kick-started in 1965. Moore — just the kind of “wild spirit” Schumpeter envisioned — pointed out that the transistor density on an integrated circuit had been doubling every two years since integrated circuits were first invented in 1958. The phenomenon came to be known as Moore’s Law, and it continues to shape the consumer electronics industry in profound ways.

In fact, technology has allowed businesses — especially those in the mobile space — to excel in a world in which change and innovation are the norm. And yet the industry is bracing for a change to which it is not accustomed.

For years, growth in the mobile industry has been a sure bet. That’s no longer the case. With the recent global economic crisis, industry forecasters now expect mobile device sales to be lower in 2009 than in 2008, representing the first real slowdown since the introduction of the cell phone in the mid-1980s. Now we’ll see if an industry built on technological change can adjust to substantial economic change.

The Road Ahead

The big question for the mobile industry now is how to tackle what lies ahead. How can consumers be persuaded to buy another shiny new mobile device? Creative destruction is already taking place, charting a new course with the mobile and PC markets at the center of the storm. As these segments blur, analysts continue to predict the promise of enormous growth in the space between. Features such as speed and power are now common across both categories, encouraging new, more creative avenues for growth spurred by innovations and influences from less obvious players.

NVidia, a company known for making video games look more realistic on game consoles and PC's, recently announced the Tegra line of computers-on-a-chip. Tegra promises to bring the same supercharged graphics to mobile Internet devices, further blurring the line between mobile and PC in terms of capabilities and user experience. Camera makers including Kodak, Nikon, and Canon have incorporated wireless capabilities to automatically push photos to online storage and printing services. The GPS device maker Garmin is entering the mobile space with Nüvifone, leveraging its established GPS capabilities in a differentiated handset offering. These players entering new territories bring their core competencies and mash them against existing paradigms, in turn evolving the notion of a device and what it really means.

12