Economist Joseph Schumpeter has been credited with popularizing the term "creative destruction," which was his way to describe capitalism and the manner in which a new idea or technology will replace an established or existing one. The technology industry has proven this concept repeatedly, with products continually facing extinction as newer and more innovative rivals take their places. Below are four more recent examples of products that face the threat of extinction from technology shifts. (For more, check out Why It's Tough To Stay On Top In Tech.)
TUTORIAL: Economics Basics
The GPS device, which consumers have widely adopted as a standalone gadget to be installed on the dashboard of a vehicle has quickly given way to GPS software that comes preloaded on a smartphone or tablet computer. The wide availability of wireless data services also means that directions and traffic can be downloaded in real time, which has made the pre-loaded functionality of earlier GPS devices almost completely obsolete. Regulation that is making the use of mobile phones while driving illegal could help keep standalone GPS devices from becoming completely extinct, but demand has fallen sharply as the latest software is largely available for free for many consumers.
Technologies that allow consumers to watch movies at home have evolved constantly over the past three decades. The advent of Beta and VHS movies and related playing devices in the 1980s eventually shifted to digital video discs, or DVDs in the 1990s. More recent developments have seen the introduction of high definition DVDs, with the Blu-ray disc technology having been adopted as the standard. This has given way over the past couple of years to streaming technologies that allow consumers to watch films online by either paying a subscription for a library of titles, or paying to watch a single movie over a set period of time. With increasing bandwidth of wireless data services, the DVD could soon face its own extinction.
Listening to Music
The manner in which consumers access and listen to music has followed a similar path to the manner in which they watch movies. Cassette players quickly gave way to compact discs (CDs), which just as quickly gave way to the iPod and ability to store and retrieve music from a digital library. The shift to streaming is currently taking place where consumers have the option of paying an annual or monthly subscription for the right to access a library of music. Free subscription options also exist for consumers willing to listen to commercials instead of paying a fee. CDs are quickly going extinct, as is traditional radio, where consumers have little ability to customize what music they listen to. (To learn more about music, see Facing The Music: The Recording Industry's Power Struggle.)
The traditional software business model has consisted of the creation of a full software system that is purchased by a consumer or business through either a digital download or download from a physical disc that resembles a DVD. Then, every few years, the software developer would release a newer version that the user would have to purchase again, if he or she wanted to obtain the new functionality.
Over the past couple of years, more innovative software programmers have offered cloud-based computing that users access over the Internet. Instead of being stored on a user's hard drive, the software is instead located on a centralized server where updates can continually be added by the developer. The shift could create subscription-based software models and make the traditional business model obsolete.
The Bottom Line
For consumers and related users of technology, the extinction of products and newer, better alternatives is a welcome form of creative destruction. For the underlying firms creating and selling the older technologies, it can mean extinction. For this reason, firms do their best to evolve or offer a diversified mix of goods and services that can help them survive. Those that are able to adapt to a quickly evolving system of creative destruction can end up making quite a bit of money for their owners. (For related reading, check out Why You Shouldn't Buy New Tech Toys.)