The book The Performance Economy (2nd edition) looks at the role of entrepreneurs and other innovators and how the dominating business models of the current ‘industrial economy’ are changing to those of a ‘performance economy’ by:

• using science and knowledge as drivers to increase revenues and wealth creation while at the same time reducing resource consumption (doing more with less) by focusing on smart materials, smart goods and smart solutions,
• creating more jobs locally via a shift from the resource-intensiveness of an industrial or ‘river economy’ to the asset management of a ‘lake economy’ (e.g.: in-sourcing jobs instead of out-sourcing work), and,
• applying the business models of a ‘functional service economy’ by extending the ‘performance responsibility’ of economic actors over the full life-cycle of products so as to increase wealth and welfare.

In addition, The Performance Economy also reveals:

• how wealth creation can be decoupled from a dependence on resource consumption - a promising new business model that has a long and successful track record and which is illustrated in the text with numerous inspirational examples,
• a profitable way of doing business in which the goods of today become the resources of tomorrow at yesterday’s prices (rather than ending up as undesired waste), and,
• new metrics designed to measure sustainable competitiveness in the form of absolute decoupling indicators that enable the documentation of changes in three key sustainability dimensions – economics, ecology and social welfare.

The second edition of The Performance Economy (which will be published in March 2010) has been revised and reviewed in an easy-to-read format that focuses on producing performance, selling and buying performance, and maintaining performance over time.

Unchanged from the first edition (which was published in 2006 and translated into simplified Mandarin three years later) is the philosophy of learning from reality – what Hannah Arendt calls the vita activa, or reality as it develops. The field of buying and selling performance, however, is growing and improving and this is reflected in the new edition. For example, in the past, the factors that constitute a performance economy were driven by economic actors like Xerox, which sells customer satisfaction, and fleet managers such as airlines and leasing companies selling more services. Yet within the last five years, the concept of buying performance has substantially increased and spread into other areas. For example, the US government now openly states that its preferred procurement option is buying services instead of hardware. Even NASA openly admits that the space shuttle is the last piece of hardware that the organisation will own and operate – a trend embraced by government buyers in other high tech areas as well. This tendency of buying services instead of hardware may be the biggest driver of the transition from an industrial to a performance economy (a.k.a.: a functional service economy) and it is now being seen in an increasing number of industrialized countries. Among the latest examples are turbine manufacturers, such as Rolls-Royce selling power-by-the-hour instead of jet engines, and Michelin, the French tyre manufacturer, selling ‘Michelin Fleet Solutions’ (also known as ‘pay by the mile’) instead of truck tyres.

Other aspects of the performance economy that have hit the mainstream include reuse and remanufacturing business models, which are currently receiving a substantial push from government regulators. The 2008 waste directive (2008/98/EC) of the European Union, for example, defines waste prevention as measures taken before a … product has become waste, which reduce the quantity of waste through the re-use of products or the extension of the life-span of products. Additionally, the World Trade Organisation (WTO) published a note in 2009 to facilitate trade in remanufactured goods.

Further concepts promoted by The Performance Economy are becoming more popular and will be seen more often in the coming years. For example, the debate on sustainability is presently focused on climate change and a reduction in the emissions of greenhouse gases (GHG) - particularly CO2. Unfortunately, most people still do not know that reusing and remanufacturing products prevents GHG emissions by preserving the embodied energy within them, thus eliminating the need to use more energy to create new products from virgin raw materials. This opens the door to myriad opportunities. For example, carbon credits are currently not given for carbon prevention, however, when this change happens (and it is bound to happen sooner or later), maintaining performance over time will receive an additional economic and political boost as opposed to manufacturing.

All in all, author Walter Stahel hopes that the present global debate on climate change will open the eyes of the world (including those of politicians, policymakers and journalists) to the opportunities that abound in a Performance Economy – specifically, a more sustainable economy with a substantially higher value per weight ratio that creates more employment (particularly local employment), facilitates greater wealth and welfare, and reduces resource use.