The Chrysalis Economy

Introduction

The Chrysalis Economy is three things in one. First, it is an early guide to new forms of capitalism that will eventually dominate the global economy. Second, it is an exploration of the evolving roles of Citizen CEOs and other business leaders in making sense of the new business environment – and in breaking through both the Values and Value Barriers. Third, it is an introduction to three simple management tools designed to help business leaders understand and manage the emerging sustainability agenda.

The three tools are: The MetaMatrix, which helps track corporate metamorphosis and distinguishes four main types of company or value web; the Sustainable Business Value Model, linking 10 forms of value added to 10 different dimensions of sustainable development; and the Learning Flywheel, mapping out a path for companies aiming for market-beating triple bottom line performance.

The book’s title signals my conclusion that the global economy is entering a protracted period of profound metamorphosis. Economic, social and environmental pressures are converging at a time of growing global interdependence to create the conditions for an era of dramatic technological, corporate and market transformation. As Chapter 5 in the book shows, there are strong parallels between the natural process of metamorphosis and the corporate and market transformation processes described throughout.

The subtitle underscores my core message: sustainability is now emerging as the #1 global business challenge. And a key part of the challenge is the growing tension between emerging social values and traditional forms of value creation. Business leaders and companies are racing to assess the associated risks. Many are also positioning themselves to exploit the potential opportunities. But below the surface lies a huge landmine, Catch-23, best stated as a three-pronged paradox:

First, Earth’s human population has quadrupled over the last century, with a further near-doubling forecast. Meanwhile, the 20:80 nature of today’s world, with 20 percent of the world population consuming 80 percent of its resources, is unlikely to be socially and politically sustainable in a world of some 8–10 billion. Remember: over 90 percent of these new people will be born into the have-not world.
Second, even at today’s levels of agricultural and industrial production, the global economy is causing unprecedented environmental problems, including ozone depletion, climate change, deforestation, dramatic species loss and the collapse of major fisheries. We currently consume some 40 percent of the world’s plant resources each year; can we expect to consume 70–80 percent without causing utter devastation?
Third, with the collapse of most communist regimes and the relative weakening of governments worldwide, business is increasingly expected to take the lead in delivering sustainable development (SD). Many business leaders welcome this emerging reality, but this is where the ‘catch’ comes in. Satisfying the new responsibilities is likely to be impossible without levels of public commitment and support – and government intervention – that are not currently available. As the political heat grows, it will be increasingly clear that new forms of both corporate and global governance are needed.

The obvious danger is that business will be in the hot seat, landed with responsibility for an evolving crisis that is far beyond its collective capacity to solve or even manage. But every crisis contains opportunity. Indeed, there are grounds for cautious optimism. We have already made striking progress in the areas of environmental and human rights. And, for the more commercially minded, we now stand on the threshold of market opportunities undreamed of in the last century. To have any hope of resolving the Catch-23 paradox, however, we must dramatically accelerate the processes of corporate, technological, economic and – ultimately – cultural metamorphosis.

The Chrysalis Economy

In the boom years of the 1990s, many people came to believe that wealth could be created in almost infinite quantities from ever-shrinking amounts of material, thanks to rapidly evolving human ingenuity. At times, it almost seemed that the value of the stock markets had become independent of economic activity. The dotcoms, spawning in huge numbers, were at the sizzling edge of change. Nevada’s Burning Man festival symbolized the wild energy and ambitions of many driving the revolution.

But, in retrospect, the sea-change in market sentiment during 2000 heralded the dawn of the Chrysalis Economy.

This new era marks not just the end of the excesses of the first stage of the new economy, but also the beginning of the end for the less sustainable aspects of 20th century capitalism. Some of the crucial economic, social and political characteristics are described in the book.

Although we have been tinkering with our technologies, business models and value webs for decades, hoping to achieve anything between 5 percent and Factor 2 (50 percent) improvements in their eco-efficiency, the 21st century’s demographic and lifestyle trends will demand Factor 4 (75 percent), Factor 10 (90 percent) and even higher levels of improvement. We will need to innovate both at the level of the function (i.e. not just a better car, but better mobility or access solutions) and at the level of the total system (i.e. how we design cities and, for example, control urban sprawl).

Nor will the innovations simply be technical or managerial. They will also involve economic, social and moral transitions. Among the key characteristics of the Chrysalis Economy:

Dramatically greater transparency, as the internet sends the ‘CNN World’ into overdrive.
Revolutionary new forms of corporate and political accountability, right across the triple bottom line (TBL) agenda.
Surprisingly ambitious definitions of social equity and corporate social responsibility.
Growing tensions between values and traditional forms of value creation.
Status quo-shaking strategic partnerships between pioneering companies and innovative public interest groups.
Radical dematerialization, with most of the market transforming successes being achieved by companies we have hardly (or never) heard of.
The conscious, strategic incubation by both business and governments of more sustainable technologies, business models and value webs.
Rapidly evolving financial market interest in relative corporate performance against the triple bottom line – and in the evolving links to long-term value creation.

The Citizen CEO

Formal evaluations of CEOs are now commonplace. But how should we assess a business leader’s progress in terms of sustainability and its TBL agenda? That’s a question we begin to tackle in Chapters 6 and 10. No single CEO or business leader so far models all the desirable characteristics of the Citizen CEO, but growing numbers have been displaying at least some characteristics of the breed.

Based on the cases described in the following pages, and on work done by my friends and colleagues Jane Nelson and Peter Zollinger on what they dub the L.E.A.D.E.R. agenda, these would include:

A strong vision.
An acute sense of commercial and political timing.
The survival skills and stamina to pursue the agenda – whether it is labeled corporate citizenship (CC), corporate social responsibility (CSR) or sustainable development (SD) – through the inevitable market squalls and storms.
Well-developed peripheral vision – coupled with a real concern for (and capacity to manage) multiple forms of capital.
An appreciation of diversity in all its forms.
Unusual sensitivity to the full range of past, present and potential future impacts caused by the company and its value web.
The wisdom to create a culture of openness, honesty and constructive criticism.
A readiness to walk the talk, adapting the business not just in compliance with the relevant laws and regulations, but also in response to emerging voluntary standards and societal values.
An honest assessment of – and willingness to admit to – gaps in his or her understanding and performance, and a determination to remedy them.
A genuine, inclusive desire to learn from others, inside and outside the company.
More specifically, the capacity to learn from the inevitable failures – and to help others do likewise.
Effective networking across his or her sector, and across the wider business community, with a particular focus on enlightening the darker corners of the financial world.
A capacity to integrate TBL thinking, targets and performance from the boardroom to the workplace.
A willingness to believe that zero (e.g. accidents, health risks, waste, environmental impacts) is both desirable and achievable – and a determination to drive the business in this direction.
A passion to identify, invest in and incubate more sustainable products, technologies, services and business models.
A recognition that sustainability is a journey, not a destination.
An interest in legacy.
A healthy sense of humor: he or she is going to need it!
And luck, perhaps the most important factor of all.

Butterfly effects

It’s a global cliché. A butterfly flaps its wings in Brazil, the resulting turbulence gradually building to trigger a cascade of effects, including fierce storms in Texas, or along the USA’s eastern seaboard. But the cliché gained new life when a laboratory study of the impact of genetically modified corn on America’s favorite butterfly, the monarch, suggested that the results could be fatal for this "Bambi of the insect world".

Although the risk was later shown to have been exaggerated by the study’s design, and respected scientists now argue that "this is not a very big issue", the monarch helped bring chemical and life sciences giant Monsanto to its corporate knees. In Chapter 6 of the book, we hear from Monsanto’s ex-CEO about some of the lessons he learned in the process.

Meanwhile, the butterfly effect has become a powerful metaphor for our increasingly interdependent world. Consider the story of asbestos worker Clarence Borel. Or remember what happened to American electoral ballot designer Theresa LePore. All she was trying to do was help old people vote. But she ended up throwing American politics into chaos. Angry Democrats even accused her of single-handedly stripping the presidency from Vice-President Al Gore.

LePore had decided that the ballot sheet should be spread across two pages, in what was called the ‘butterfly ballot’, to allow for larger print. Unfortunately, the new form confused some folk, so they claimed they had mistakenly voted for the wrong candidate. ‘Madame Butterfly’ got her new name because her form looked like a butterfly, but she also provided another example of the butterfly effect in which small actions lead to mega-impacts.

Meanwhile, whether the economic trend line is up or down, the potential for turbulence is building. Business and markets are mutating, as both old and new economy business models evolve, as they say, at warp speed. Despite the reverses suffered by the dotcoms and other vanguard businesses of the new economy, one thing is clear: new forms of competition are generating new business models, new patterns of value creation. Some will be more sustainable than others, but how do we work out which is likely to be which?

Part of the answer lies in the extent to which business models align with (or change) societal values, present and future. To illuminate the interplay between values and value creation, often powered by unexpected butterfly effects, a series of panels appears through the book. From the snow-capped Alps to the sun-scorched deserts of Nevada, from the worldview of an anti-logging campaigner who spent 738 days up a tree named Luna to that of an astronaut who briefly stood on the Moon and looked back at distant Earth, the panels spotlight ideas, people and trends now driving economic and cultural metamorphosis.

The five sections of the book

The Chrysalis Economy is divided into 14 chapters, in five main sections. They cover: the drivers of change (Section I: Chrysalis); the processes of change (Section II: Metamorphosis); the stages of corporate transformation (Section III: Stages); five directions economic evolution may take in the coming decades (Section IV: Migrations); and selected sources of further information (Section V: Sources).

The five sections are as follows:

I CHRYSALI$

Section I introduces Catch-23 and explains how companies that want to overcome it must embark on a cycle of transformation, summarized in the Learning Flywheel. We then look at two factors that will increasingly drive economic and corporate transformation in the coming decades. The first, discussed in Chapter 2, is the 3P agenda, made up of Planet (environmental change), People (human rights, broadly defined) and Politics (global and corporate governance). Then, in Chapter 3, we review the implications of the ‘New Economy’ era and its aftermath.

II METAMORPHOSI$

Section II opens by introducing the MetaMatrix, distinguishing between companies or value-webs with either low or high impacts in relation to the degeneration or regeneration of natural and other critical forms of capital. Chapter 4 explores the two barriers embodied in the Catch-23 challenge: the Values Barrier and the Value Barrier.

Chapter 5 then dives in deeper, comparing companies and value-webs with four insect types: Locusts, Caterpillars, Butterflies and Honeybees. Corporate Locusts and Caterpillars are both on the wrong side of the Values Barrier, while Corporate Caterpillars and Butterflies are on the wrong side of the Value Barrier. Corporate Locusts may have pushed through the Value Barrier, creating value for a narrow range of people, but they destroy various forms of capital in the process. Only Corporate Honeybees emerge on the right side of both the Values and Value Barriers.

Chapter 6 then investigates the new breed of ‘Citizen CEOs’, running companies of all four types. They include some business leaders who are seen as runaway successes, and several who are not – but all have something to teach us.

III STAGE$

Section III then works through the five stages of the Learning Flywheel. The five chapters here run as follows:

Chapter 7 focuses on invasion, the natural process by which an innovation – be it a new technology or a new business model – invades an opportunity space, creating economic, social or environmental impacts in the process.
Chapter 8 looks at the process of internalization, by which a company or value-web absorbs some of the costs previously externalized to society or the environment.
Chapter 9 focuses on inclusion, the process by which a range of internal and external stakeholders are progressively engaged, their priorities established and their legitimate needs met.
Chapter 10 explores the emerging challenge of integration, recalling how companies have handled previous agendas, among them environment, health and safety (EHS), total quality management (TQM), information technology (IT), shareholder value added (SVA) and corporate social responsibility (CSR).
Finally, Chapter 11 looks at the prospects for incubation, considering how more sustainable technologies, industries and even entire economies might be incubated in today’s highly unsustainable world.

IV MIGRATION$

Like the monarch butterflies of the Americas, the global economy is going to have to make an extraordinary migration. The Chrysalis Economy is simply the first step in the process.

Section IV, particularly Chapter 12, spotlights ways in which Citizen CEOs and other business leaders currently use scenarios to help them think through the sustainability agenda and its implications. Chapter 13 looks at the perspectives and priorities of some of those who guide companies through the CSR and SD mazes. And Chapter 14, the Afterword, then raises a difficult question: What happens if the world doesn’t wake up, and the markets for more sustainable technologies, products and services don’t evolve in time?

V SOURCE$

The Chrysalis Economy trawls through a huge amount of information and experience, but literally only skims the surface. So Section V lists references for the rest of the book, and suggests a small number of useful web-sites.

Order the book on Sustainability.com

Top of page.

Home About Resources Investors Businesses Members Admin