Creative destruction: When innovation means job losses

Creative destruction is an economic concept that describes the process by which innovation disrupts and replaces outdated industries, technologies, or business models. The term captures both the positive and negative aspects of progress—while new innovations create opportunities and drive economic growth, they simultaneously destroy existing jobs, industries, and ways of working.

We all know that the old order must make way for the new. Today, ‘disruption’ is welcomed because it is caused by innovation and creativity. Without creative destruction, we would still be depending on snail mail to communicate. The concept explains how innovation disrupts and replaces outdated industries, technologies, or business models—making way for progress while leaving behind what no longer serves us.

The term ‘creative destruction’ was coined by Austrian economist Joseph Schumpeter in his 1942 work Capitalism, Socialism and Democracy. Schumpeter argued that this process of industrial mutation “incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.” While the concept has roots in earlier economic theories, Schumpeter’s formulation became the definitive framework for understanding how capitalism drives innovation and change.

Human resources as a function has felt the effects of creative destruction too. With industries evolving, it is HR’s responsibility to help employees adapt to changing roles as the old ones become obsolete. By adapting to technological changes, HR is actively discarding conventional hiring practices and increasingly relying on artificial intelligence to speed up the process of recruitment.

It is in this context that organisations worldwide are redesigning their structures to make the workforce more agile, doing away with hierarchies and ensuring cross-functional collaboration. When it comes to change management, it is the HR function that helps foster a culture of adaptability and continuous learning.

While some jobs today are safe from automation, others are emerging that require superior skills in areas such as AI, data science, and so on. It is HR’s responsibility to help employees get trained for new roles and equip them with the right skills to stay relevant and bridge the skills gap. Those who end up losing their jobs as a result of creative destruction are also offered support by HR in the form of outplacement, career guidance, and in some cases, emotional assistance.

Yes, HR is not merely being affected by the creative destruction phenomenon, but actively participating in it—balancing the drive for innovation with the human cost of progress.