The economist Joseph Schumpeter coined the term “creative destruction” to describe the disruptive force of entrepreneurs creating new, more innovative products and services that eliminated older, entrenched entities.
He wasn’t using the term to describe companies forced to change or die due to a global event like the coronavirus.
In stories like this one, about Avalon International Bread in Detroit going from 135 employees to one, we see the destruction caused by the economic shutdown:
As of March 16, we employed 135 people and delivered to over 100 restaurants, cafes and grocery stores. We were just starting to ramp up statewide distribution. And after a frenetic and challenging five years of growth, we had built up the personnel, demand and operations to take our business to the next level.
Eight days later, we were down to one employee: our 25-year-old chief financial officer, who has proved to be wise beyond his years. The other 134 employees were laid off.
These stories are heartbreaking. They illustrate the fragility of small businesses, the interconnectedness of markets, and the limitations of one-size-fits-all solutions.
But while every business is hurting, some have flexibility to experiment, to find creative changes to their business model that respond to the constraints of the situation.
A time to pivot
Sara Deseran, the marketing director of San Francisco taqueria chain Tacolicious, notes that, “’if restaurants don’t pivot and don’t listen to what everyone wants and needs right now, they’re not going to make it.’” Open Table reports that restaurants across the country are experimenting with new business models:
Curbside sommelier service. Do-it-yourself pizza kits. Reheatable family-style meals. Toilet paper delivery. As restaurants settle into the social distancing lifestyle, they are creating a wide-ranging set of offerings designed to both cater to this COVID-19-fueled moment in time and also keep them in business.
Other innovations include:
- Tamworth Distilling in New Hampshire began making hand sanitizer in March, donating most of their production to healthcare workers and selling the rest under the label of “Live Clean or Die!”
- Ledbury, a Richmond, Va.-based men’s clothing company, began producing cloth facemasks locally and at their factories abroad, selling some but donating large quantities to hospitals, social services organizations, and small businesses trying to operate under new guidelines
As we’ve written before, many of the innovations keeping businesses open (especially restaurants and food services) are due to relaxing laws that restrict competition and operations.
No entrepreneur expects their competition to include a global pandemic. Seeing the new business models companies are creating to survive provide each of us with a task when we return to normalcy: to support innovation and the natural process of “creative destruction.” This pandemic will end, and when it does, we all should embrace the entrepreneurial spirit and seek ways to encourage creativity and remove barriers outside of a crisis.