Creative Destruction: The Parallels between VTubing and Industrial Policy
By Shazly Zain
February 21, 2025 12 PM PT
Lightbulb idea. (AbsolutVision / Unsplash)
The start of the new year brings about a series of commentaries on the future of the industry. Vtubers are no exception to this phenomenon. Already, comments about the ever-accessible streaming technologies, content format changes and 3D animation have all been cited as the major developments for the Vtubing landscape in 2025.
While these developments will be pivotal in the coming months, it is challenging to predict truly innovative ideas. Innovation is a difficult concept to predict. Path dependency often inhibits people’s abilities to posit truly innovative ideas and even the major developments cited above are, at best, improvements to existing innovations and ideas.
Innovation in Industrial Policy
This challenge in positing future innovations is a major concern within industrial policy. Industrial policy normally has a negative connotation in Western countries but a positive one in Asia. Such policies can be seen as heavy-handed government measures to promote the development of specific industries at the expense of others. Japan for example, through a combination of government policy and the keireitsu conglomerates implemented the country’s industrial policy, focusing on manufacturing, electronics and heavy industries. They were of course, successful. Similar industrial polices were implemented with success in other countries such as Singapore and South Korea, each with different objectives but similar economic growth outcomes.
The main drivers of these successful industrial policies are the combination of dynamic catch-up strategy and creative destruction.
Dynamic Catch-up
This economic theory works on the principles of forerunners setting the pace in terms of technological advancements and industrial development, and latecomers who are later entrants, journeying on the same paths laid out by these forerunners and eventually overtaking them.
Creative Destruction
Joseph Schumpeter, industrial economist and theorist, first coined the term creative destruction when examining the historical economic developments of countries. Initially used within the manufacturing industries, he found that economies developed faster if they were able to innovate and implement these innovations into the manufacturing process effectively. It was a continuous process of destroying the old and implementing the new.
For example, during the 1950s-60s, the US was the main leader in the electronics industry. The best microchips were made by American firms. The Japanese government, through Ministry of International Trade and Industry (MITI), implemented a targeted industrial policy on the microchip industry. This policy included a focused effort to learn best practices from American firms, improve on these processes and diverting both public and private capital into local Japanese conglomerates (keireitsu) to build up their microchip manufacturing capabilities. This came at the expense of other industries such as agriculture, but it was difficult to argue against the results. By the 1960s, the best microchips were being made in Japan and these Japanese chips not only match but surpassed their American counterparts by some measure.
Eventually, the same thing happened with South Korean chips supplanting the Japanese as the main leaders before it too was supplanted by today’s chip powerhouse TSMC.
Predicting Innovation
Figure 1: Innovation Curve
The main advantage forerunners have is their position as market leaders. Just like the Americans with microchips or companies such as Cover Corp, forerunners have the first-mover advantage to develop the markets to suit their interests. They are the ones defining the innovation curve.
Latecomers such as Japan in the earlier example and newer Vtuber agencies enjoy a simple advantage over forerunners. Sitting well within the innovation curve, Latecomers have room to innovate as they move towards the forefront of the innovation curve. This is why latecomers are often seen as highly innovative. The room manifests itself as major groundbreaking improvements in processes and capacity.
For forerunners, being on the edge of the innovation curve means they are charting into the unknown. This carries enormous risk of failure. Being comfortably within the innovation curve means that latecomers know success is more certain.
Cover Corp as the Forerunner
Earlier this year, Cover Corp CEO, Motoaki Tanigo “Yagoo” shared his new year message with fans. In his message, he spoke at great lengths about the immense growth the company and the vtubing industry has seen in 2024. Yagoo also spoke of the need to create a sustainable growth model, ensuring sufficient infrastructure and human capital was available to properly support talents and drive growth.
The main challenge that Cover Corp faces is that of the unknown. As market leaders, many look to Hololive and Holostars talents (and their supporting infrastructure) as leading examples within the Vtuber landscape. This unfortunately means that the cost of failure is much higher for these talents and the company in general.
Cover has mitigated these risks by launching smaller outfits such as hololive DEV_IS which have greater liberties to experiment since they are meant to be different from the usual talents. Holostars (both English and Japanese) can also use their smaller audiences as a strength to safely experiment since failure is not as costly while the upside to a success is significant.
Innovation is a constant process of experimentation. While latecomers can tap on the past industry experience of forerunners to catch up to the market leaders, forerunners such as Cover Corp need to pioneer the journey ahead. Risk management will be the order of the day in their journey of creative destruction.
Op-Ed by Shazly Zain, Public Policy & Qualitative Researcher
Shazly has spent the last seven years providing strategic advice based on innovative, mixed-Qualitative and Quantitative methods in both commercial and sociopolitical research.
Beyond his professional work in the public policy and government relations space, he likes using games & pop culture as unconventional inspirations for his public policy musings. Shazly is also a massive fan of the Tempus boys and owns a reasonable number of Gura merch.
Follow or connect with him on LinkedIn here.
