Finding Opportunity in Upheaval

Last Updated Oct 21, 2008 7:11 PM EDT

The great economist Joseph Schumpeter popularized the phrase "creative destruction" to explain what primes the engine of capitalism: violent market upheaval. New products topple mature ones. Decaying old companies give way to young innovative competitors. If a business stands still, capitalism will soon sweep it into the dust bin of history.

Safe to say that Schumpeter would find the current business environment challenging but also a time with much opportunity for the nimble entrepreneur. As innovation expert Scott D. Anthony writes on Harvard Business Publishing:

"Real customers continue to face real problems. And as always, innovators who figure out different ways to solve those problems -- and make money doing so -- will have opportunities to create new growth businesses. In fact, the creative destruction unleashed by a crisis always opens up opportunities for innovation."

Anthony, the president of innovation consultancy Innosight, offers up the success story authored by On Deck Capital as an example.

The firm, occupying a funding niche somewhere between small banks and venture capital, offers loans to small businesses based on software algorithms rather than debt-to-asset formulas. Only six months old, On Deck Capital has written some $10 million in loans, with very few defaults.

"The current credit crisis and hesitancy of many banks to loan to even the best-run small businesses creates substantial opportunity for On Deck to extend its model," Anthony writes.

What are the market opportunities you see emerging from today's turbulent headlines?

  • Sean Silverthorne

    Sean Silverthorne is the editor of HBS Working Knowledge, which provides a first look at the research and ideas of Harvard Business School faculty. Working Knowledge, which won a Webby award in 2007, currently records 4 million unique visitors a year. He has been with HBS since 2001.

    Silverthorne has 28 years experience in print and online journalism. Before arriving at HBS, he was a senior editor at CNET and executive editor of ZDNET News. While at At Ziff-Davis, Silverthorne also worked on the daily technology TV show The Site, and was a senior editor at PC Week Inside, which chronicled the business of the technology industry. He has held several reporting and editing roles on a variety of newspapers, and was Investor Business Daily's first journalist based in Silicon Valley.