Cannibalise definition

To cannibalise your assets means that you create a new product which eat into sales of your old products.

For example, suppose Microsoft have good sales for its X Box. If it introduced a new superior product, like the ‘X box mark 2’. Nobody would want to buy the old X Box. Therefore, sales of the existing X box would plummet. So although its sales of the X Box mark 2 might increase, they are at the expense of the original. This is what we mean by ‘cannibalise’ in business.

In the world of technology, firms would probably see it as essential to release new products. In tim,e the X Box would become less attractive compared to its rivals. Mobile phone companies are doing it all the time. Most phones tend to have a life span of 6 months before becoming redundant.

Creative destruction

This evolution of brands and technology is sometimes referred to as ‘Creative destruction‘. Creative destruction is a term popularised by the economist, J.Schumpeter. Schumpeter argued that to make progress, in a modern economy, it was often necessary to brush away the old, outdated technology. Thus Schumpeter would argue that if some old inefficient business went bust creating unemployment, it may be bad in the short term, but necessary in the long term.

Marxism and Creative Destruction

In Marxist theory, creative destruction refers to the process of how capitalism was often destroying capital (e.g. after war or economic crisis) to enable more to be produced in its place.