Innovating Our Way to the Next Industrial Revolution

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Much of what is being said about the New Economy is not all that new. Waves of discontinuous technological change have occurred before in the industrial age, sparked by innovations such as the steam engine in the 18th century; railroads, steel, electrification and telecommunications in the 19th century; and auto and air transport, synthetic fibers and television in the first half of the 20th century. Each of those technologies led to what economist Joseph Schumpeter called “creative destruction,” in which old industries died and new ones were born. Far from signaling the end of the industrial era, these waves of disruptive technologies accelerated and extended it.

What would constitute the beginnings of a truly postindustrial age? Only fundamental shifts in how the economic system affects the larger systems within which it resides — namely, society and nature. In many ways, the industrial age has been an era of harvesting natural and social capital in order to create financial and productive capital. So far there is little evidence that the New Economy is changing that.

The industrial-age assault on natural capital continues. Vague hopes about “bits for atoms” and “demassification” are naive at best, echoes of talk about “paperless offices” 20 years ago. The rate of losing species has not slowed. Most New Economy products end up where Old Economy products do: in increasingly scarce landfills. Globalization is destroying the last remnants of stewardship for natural resources in industries such as forest products: Today, buy-and-sell decisions are executed by faceless agents living on the other side of the world from the people and ecosystems whose futures they decide. Moreover, New Economy growth stimulates related growth in Old Economy industries — along with the familiar pattern of suburban sprawl, pollution, loss of habitat and competition for natural resources.

The New Economy's effects on social capital are more complex but no less disturbing.1 Industrial progress has tended to destroy cultural as well as biological diversity, despite the protests of marginalized groups like the Provençal farmers who oppose the globalization of food production. Likewise, although changes in traditional family and community structures have brought greater freedom for women and many ethnic groups, the past decade also has brought worldwide increases in divorce rates, single-parent families and “street” children. Global markets, capital flows and e-commerce open up new opportunities for emerging economies, but they also create new generations of technological haves and have-nots.


Several authors have made compelling business cases for environmental stewardship in recent years, including Paul Hawken, “The Ecology of Commerce” (HarperBusiness, 1993); Amory and Hunter Lovins, along with Hawken, “Natural Capitalism” (Little Brown and Co., 1999); and William McDonough and Michael Braungart, “The Next Industrial Revolution” (Atlantic Monthly, October 1998, 82-92; For radical ideas on performance management, John Elkington explains triple-bottom-line practices in “Cannibals With Forks” (Oxford: Capstone, 1997), while accounting theorist Tom Johnson, coinventor of activity-based costing, argues in “Profit Beyond Measure” (Free Press, 2000) that companies with outstanding performance, like Toyota, mimic nature in their accounting practices, focusing on complex patterns rather than fragmented metrics. Janine Benyus’ “Biomimicry: Innovation Inspired byNature” (William Morrow, 1998) offers a different slant on naturalism, suggesting that technologies in harmony with nature will arise when biologists work with product designers. Lastly, Arie de Geus’ “The Living Company” (Harvard Business School Press, 1997) and DeeHock’s “Birth of the Chaordic Age” (Berrett-Koehler, 1999) examine planning, leading and governing when organizations are seen as living human communities.

To support those interested in building more-sustainable enterprises, there are several Web sites focused on environmental education and planning (The Natural Step at, natural capitalism and hybrid cars (the Rocky Mountain Institute at, ecoefficiency (the World Business Council for Sustainable Development at, triple-bottom-line reporting ( and and organizational learning (

1. Social capital refers to “connections among individuals — social networks and the norms of reciprocity and trustworthiness that arise with them.” See: R.D. Putnam, “Bowling Alone” (New York: Simon & Schuster, 2000), p. 19. It is also the necessary context for developing human capital — skills and knowledge embedded in people. See: J.S. Coleman, “Social Capital and the Creation of Human Capital,” American Journal of Sociology 94 (1988): 95–120.

2. “Why Is Everyone So Short-Tempered?” USA Today, July 18, 2000, sec. A, p. 1.

3. J. Browne, “Respect for the Earth,” a 2000 BBC Reith Lecture, available from BP, London.

4. J. Browne, “Rethinking Corporate Responsibility,” Reflections 1.4 (summer 2000): 48–53.

5. See for Rocky Mountain Institute publications about the hypercar.

6. E.P. Gunn, “The Green CEO,” Fortune, May 24, 1999, 190–200.

7. The SoL (Society for Organizational Learning) Sustainability Consortium was established by BP and Interface and now includes established SoL members Royal Dutch/Shell, Ford, Xerox, Harley-Davidson, Detroit-Edison, Visteon and the World Bank, along with new members Nike and Northeast Utilities. The group's current projects —on product development, innovation across complex supply networks, new energy sources, and leadership and cultural change — are described at and are being studied through a National Science Foundation grant.

8. T. Berry, “The Dream of the Earth” (San Francisco: Sierra Club Books, 1990), 123.

9. Ibid., 131–132.

10. D. Boorstin, “The Discoverers: A History of Man's Search To Know His World and Himself” (New York: Random House, 1985), 108–109.

11. See P. Hawken, A.B. Lovins and L.H. Lovins, “Natural Capitalism” (New York: Little Brown and Co., 1999), p. 14; R.U. Ayers, “Industrial Metabolism,” in J.S. Ausubel and H.E. Sladovich, eds., “Technology and Environment” (Washington, D.C.: National Academy Press, 1989); and A.B. Lovins, L.H. Lovins and P. Hawken, “A Road Map for Natural Capitalism,” Harvard Business Review 77 (May–June 1999): 145–158.

12. These three strategies, in concert with ideas below, relate closely to the four strategies of “natural capitalism,” three of the four “system conditions” of “the natural step” described in J. Holmberg and K.-H. Robert, “Backcasting From Nonoverlapping Sustainability Principles — A Framework for Strategic Planning,” International Journal of Sustainable Development and World Ecology 7 (2000): 1–18; and William McDonough, “Hannover Principles: Design for Sustainability” (New York: William McDonough Architects, 1992). Available through McDonough Braungart Design Chemistry, Charlottesville, Virginia ( or downloadable from

13. K. Kelly, “New Rules for the New Economy” (New York: Penguin Books, 1999), 2, 5, 31.

14. S. Vandermerwe, “How Increasing Value to Customers Improves Business Results,” MIT Sloan Management Review 42 (fall 2000): 28.

15. A. Toffler, “The Third Wave” (New York: William Morrow, 1980).

16. Kelly, “New Rules,” 121–122.

17. C.K. Prahalad and V. Ramaswamy, “Co-Opting Customer Competence,” Harvard Business Review 78 (January–February 2000): 79–87.

18. R. Levine, C. Locke, D. Searls and D. Weinberger, “The Cluetrain Manifesto: The End of Business as Usual” (Cambridge, Massachusetts: Perseus Press, 2000), xiv.

19. Kelly, “New Rules,” 28.

20. B. Wysocki Jr., “Yet Another Hazard of the New Economy: The Pied Piper Effect,” Wall Street Journal, March 30, 2000, sec. A, p. 1.

21. P.F. Drucker and P. Senge, “Becoming a Change Leader,” video conversations, Peter F. Drucker Foundation for Nonprofit Management, New York, and SoL (the Society for Organizational Learning), Cambridge, Massachusetts, forthcoming.

22. A. Webber, “What's So New About the New Economy?” Harvard Business Review 71 (January–February 1993): 24–42.

23. K. Bradsher, “Ford Is Conceding SUV Drawbacks,” New York Times, May 12, 2000, sec. A, p. 1.

24. B. Yates, “On the Road: Pecksniffs Can't Stop SUV,” Wall Street Journal Europe, May 19, 2000, sec. A, p. 26.

25. D. Quinn, “My Ishmael” (New York: Bantam Books, 1997), 200–201.

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