Are you ready for the resource revolution?

Meeting increasing global demand requires dramatically improving resource productivity. Yet technological advances mean companies have an extraordinary opportunity not only to meet that challenge but to spark the next industrial revolution as well.

Most cars spend more than 95 percent of their time sitting in garages or parking lots. When in use, the average occupancy per vehicle is well below two people, even though most cars have five seats. Roads are likewise extremely inefficient. Freeways can operate at peak throughput (around 2,000 cars a lane per hour) only when they are less than 10 percent covered by cars. Add more, and congestion lowers speeds and reduces throughput. Most roads reach anything like peak usage only once a day and typically in only one direction.

The story is similar for utilities. Just 20 to 40 percent of the transmission and distribution capacity in the United States is in use at a given time, and only about 40 percent of the capacity of power plants. The heat-rate efficiency of the average coal-fired power plant has not significantly improved in more than 50 years—an extreme version of conditions in many industries over the past century. Automotive fuel-efficiency improvement, for example, has consistently lagged behind economy-wide productivity growth.

Underutilization and chronic inefficiency cannot be solved by financial engineering or offshoring labor. Something more fundamental is required. We see such challenges as emblematic of an unprecedented opportunity to produce and use resources far more imaginatively and efficiently, revolutionizing business and management in the process. Indeed, rather than facing a crisis of resource scarcity, the world economy will be revitalized by an array of business opportunities that will create trillions of dollars in profits.

To put this new era in context, think back to Adam Smith’s The Wealth of Nations (1776), which identified three primary business inputs: labor, capital, and land (defined broadly as any resource that can be produced or mined from land or disposed of as waste on it). The two industrial revolutions the world has thus far seen focused primarily on labor and capital. The first gave us factories and limited-liability corporations to drive growth at scale. The second, from the late 1800s to the early 1900s, added petroleum, the electric grid, the assembly line, cars, and skyscrapers with elevators and air-conditioning, and it created scientific management, thus enabling corporate globalization. But neither revolution focused on Smith’s third input: land and natural resources.

Further reading: https://www.mckinsey.com/business-functions/sustainability/our-insights/are-you-ready-for-the-resource-revolution