Whereas creative destruction occurs when a superior technology, product, or service comes along and destroys the old with the new, disruptive innovation begins with the arrival of an inferior technology, which then crosses the line from inferior to superior and, in doing so, displaces market leaders. The most well-known study on disruption directly relevant to market creation is the influential idea of disruptive innovation. The concept of disruption echoes Schumpeter’s insight. So today digital photography is the norm, and photographic film is seldom used. For example, the innovation of digital photography creatively destroyed the photographic film industry by effectively displacing it. The word displacement is important here because without displacement, creative destruction does not occur.

But, in his view, this creation is dependent on destruction.ĭestruction occurs when an innovation displaces an earlier technology or an existing product or service. The real engine of economic growth, he argued, is therefore the creation of new markets. Creative destruction is the iconic term coined by the Austrian economist Joseph Schumpeter, who observed that although competition in existing markets is good, diminishing returns eventually set in as buyers’ needs are satisfied and profits are competed away. In speaking with executives, entrepreneurs, and government leaders, one consistent pattern we’ve observed is how often they associate market creation with the concepts of creative destruction or disruption. Creative Destruction and Disruptive Innovation Are Only Part of the Picture Read our Q&A with co-author Reene Mauborgne here. Using this model, we can understand how these existing partial views fit together in the big picture. So here we build a holistic model of market-creating strategy that shows not only the available strategic options and how they produce blue ocean shifts, but also their corresponding growth consequences. Without having a complete picture, efforts to make a blue ocean shift will miss many opportunities and may even be misdirected.

But they are also partly wrong, because each offers an incomplete picture of how markets are created.

Blue ocean