Henry Ford began producing Model T in Detroit around 1908. In the 1960s, Detroit rose to the mountaintop and became one of the most important tech-cities in America, as entrepreneurs moved there, to pursue a future of starting a car company. The number of car startups in Detroit exceeded 100! And the future looked unbounded.
Then, OPEC (Organization of the Petroleum Exporting Countries) which began life in Baghdad (Iraq), in Sept 1960, started to work! OPEC’s work was to get members to control crude oil production in order to get more money per barrel in the international market.
OPEC contributed to the destruction of Detroit because prices of fuel went up even when Detroit car makers like Ford, GM and Chrysler were not paying deep attention to Japanese car makers who produced fuel-efficient vehicles. The American car makers have always liked their big cars, typically agents of fuel guzzling!
The Japanese introduced a huge shift, and made cars that used less fuel per mile driven, and consumers moved: expectation demand worked. Just like that, Detroit began a sustained decline as the big 3 car companies lost market shares with layoffs, and plant closings everywhere. Detroit has not recovered – in short, Detroit city went through bankruptcy, and the car makers were bailed out by the U.S. to ensure their continued existence.
Simply, Detroit was innovation. But Detroit declined. The modern American Detroit today is Silicon Valley. This is Google’s 21st birthday. Google’s impact cannot be overstated in our world; it has totally redesigned and transformed how we find and consume information. With Google, Facebook, Apple, Intel and amalgam of other companies, America has renewed even as Detroit faded.
With Uber and Lyft, adding a new layer on Detroit, U.S. will get a part of the game in most parts of the world, irrespective of the brand of cars people use. So, in Lagos or Nairobi, even if you are using Toyota for Uber, America will get a part of that revenue. Simply, creative destruction can come but nations with inherent internal capabilities will always emerge stronger.
Creative destruction can be described as the dismantling of long-standing practices in order to make way for innovation. Creative destruction was first coined by Austrian economist Joseph Schumpeter in 1942. Schumpeter describes creative destruction as innovations in the manufacturing process that increase productivity, but the term has been adopted for use in many other contexts.
The Lesson for Nigeria
In this video, I have shared what needs to happen for us to have that internal capacities to renew. Yes, as the Kano groundnut pyramid was declining, Nigeria could have made Eket a powerful city for energy technologies. As the palm oil declined in Owerri along with cocoa in Ife, Kainji dam could have been boosted to power the next industries in Nigeria. We must be prepared for shifts and re-alignment as a nation, across all the geopolitical zones. All the young people are going to Silicon Valley, not Detroit, and America continues to thrive. Nigeria needs to see itself as one nation in order to have a big picture perspective on how to manage creative destruction as it happens.
1. Register for Tekedia Mini-MBA here (Aug 10 - Dec 3). Four months, online, and costs $140 or N50,000 naira. We also have Certificate courses on logistics, startups, career dev, etc.
2. Read my new book, The Dangote System: Techniques for Building Conglomerates.