Global megatrends and implications for leaders Dominic Barton | Global Managing Director, McKinsey & Company
We are living in historic times Rise of Fall of the Crusades, “Discovery” Chinese Roman Resurgence of new world, Industrial Dynasties Empire of Europe Renaissance revolution The Great Transition ~200BC ~600 ~1100 ~1500 ~1750-1850 2010 - 40
Four forces are changing the world at an unprecedented pace and scale 2 3 1 4 The power The aging of of disruptive the global The The rise of technologies population integrating emerging world markets
1. THE RISE OF EMERGING MARKETS The world’s economic centre of gravity is shifting back to Asia Locations weighted in 3D space by GDP 2000 2010 1950 1940 2025 1500 0
1. THE RISE OF EMERGING MARKETS There will be 2.2 billion new middle class consumers by 2030 Global middle class 1 Billions of people 5.0 4.2 2.2 billion 2.8 Sub Saharan Africa Middle East & North Africa US & Canada 2.8 Latin America 2.1 Europe 1.1 Asia-Pacific 2013 2025 2030 1 Annual personal income $3,600 and over SOURCE: United Nations World Population Prospects; McKinsey Global Institute CityScope
1. THE RISE OF EMERGING MARKETS Urbanisation is driving rapid increases in individual wealth, especially in emerging markets Per capita GDP by urban density 1990 Purchasing Power Parity (log scale), Percent United States 2010 Japan Germany 30,000 2010 2010 United Kingdom 2010 Italy South Korea China 2010 2010 2010 10,000 Brazil 2010 India 2010 1950 3,000 1950 1860 1820 1,000 1891 1930 1950 1920 1950 300 0 10 20 30 40 50 60 70 80 90 Urban population (%) SOURCE: McKinsey Global Institute
Shenzhen – 1980 Text SOURCE: Source
Shenzhen – 2014
1. THE RISE OF EMERGING MARKETS Africa is also continent to be reckoned with $2.4 trillion in GDP ~1.1 billion people United States India of America ~$1 trillion Household consumption Argentina 64 cities with more than 1M people Western Europe Significant global resources 69% of platinum group reserves 82% of phosphates China 8% of oil reserves 60% of unused arable land SOURCE: BP statistics; Metals economics Group; CIA world fact book; Global insights: World Market Monitor
1. THE RISE OF EMERGING MARKETS By 2025, almost half of the world’s billion -dollar-plus companies will be headquartered in emerging markets Number of companies with $1B+ revenue Emerging regions %, number of large companies Developed regions 41% of total (~2,900 ~7,000 ~15,000 companies) from Asia alone 68% 46% 32% ~8,000 27% 54% 73% 2010 New large companies 2025 SOURCE: McKinsey Global Institute CompanyScope
2. THE POWER OF DISRUPTIVE TECHNOLOGIES 12 disruptive technologies will have enormous Low High Range of sized potential economic impact by 2025 X – Y economic impact $ Trillions, annual 1 3.7 – 10.8 Mobile Internet 2 5.2 – 6.7 Automation of knowledge work 3 2.7 – 6.2 Internet of Things 4 1.7 – 6.2 Cloud technology 5 1.7 – 4.5 Advanced robotics 6 0.2 – 1.9 Autonomous and near-autonomous vehicles 7 0.7 – 1.6 Next-generation genomics 8 0.1 – 0.6 Energy storage 9 0.2 – 0.6 3D printing 10 0.2 – 0.5 Advanced materials 11 0.1 – 0.5 Advanced oil and gas exploration 12 0.2 – 0.3 Renewable energy SOURCE: McKinsey Global Institute
2. THE POWER OF DISRUPTIVE TECHNOLOGIES 3 major drivers of digitization Every 2 days, we create as A modern 1 Comput- 2 Data much data washing ing power as we did machine has (Moore’s 0 1 0 1 from the more 1 0 1 1 dawn of Law) computing 0 1 1 0 time to 2003 power than Apollo II 3 Connectedness 40% of the world (3.2B people) are online SOURCE: Gartner; International Federation of Robotics
2. THE POWER OF DISRUPTIVE TECHNOLOGIES The pace of digital disruption is accelerating Computer type Calculations per second per $1,000 Exponentially… 10 40 Faster 10 30 Smaller … all human brains Cheaper Where 10 20 we are Better … 1 human brain now 10 10 … 1 mouse brain … 1 insect brain 1 Apple 10 -10 MAC II Univac I Hollerith tabulator 10 -20 ‘01 ‘10 ‘23 1900 1925 1950 1975 2025 2050 2075 SOURCE: Singularity University
2. THE POWER OF DISRUPTIVE TECHNOLOGIES Digitisation is driving massive improvements in efficiency Locomotive velocity Avg miles per hour per day Data analytics – optimized 23 22 scheduling 1 and predictive maintenance reduce downtime, increasing velocity 1 mile per hour increase worth $250M in annual profit Typical Digital- enabled
There is NO BLINDSPOT on this car
2. THE POWER OF DISRUPTIVE TECHNOLOGIES Digitisation also makes design more important than ever before – because we have more user experiences than ever before People check their phones every 5.6 minutes That means 170 interactions with the lock screen each day – it had better work well! SOURCE: KPCB
2. THE POWER OF DISRUPTIVE TECHNOLOGIES Digital is disrupting the beef and dairy industry – livestock sensor example 1.4 B beef and dairy cattle worldwide – ~10% lost each year to injury and disease Sensors remotely monitor cow movements and health – improving animal welfare and reducing labor costs
2. THE POWER OF DISRUPTIVE TECHNOLOGIES Not all challengers will survive, but incumbents will still have to respond BBVA acquired Simple in 2014 to "disrupt itself"
Message or topic title École ▪ Free 3-year computer programming course, launched in 2013 ▪ Open 24/7, with online classes supported by in-person instructors – allowing students to study and work ▪ Emphasis on continuous education, with “plug and play” modules available after course completion ▪ 1,000 students selected each year ▪ Selection based on a psychological test intended to assess ability to learn programming
3. THE AGING OF THE GLOBAL POPULATION The global population is aging: by 2050 … The proportion of world’s population over age 65 will double The number of people worldwide aged 80+ will quadruple to 400 M 80% of people 65+ will live in low or middle-income countries For the first time in history, there will be more people 65+ than under the age of 14 In Italy, Japan, and Spain, 1/3 of people will be 65+
3. THE AGING OF THE GLOBAL POPULATION Aging will place massive strains on governments Age-related spending Global government could raise median net debt will exceed government debt to Net government debt world GDP by 2030 Percent of GDP 216% of GDP in 2050 260% 216% 200% 71% 100% 59% 2010 2025 2050 SOURCE: Standard and Poor’s
4. THE INTEGRATING WORLD Networks of global trade are larger and denser – heightening risks and opportunities USD 50 – 100 billion USD 100 – 500 billion USD 500 billion or more Lines show total trade flows between regions; figures in bubbles show participation in world trade 1990 2013 100% = $1.8 trillion 100% = $17.2 trillion 4% 2% 2% 5% 41% 32% 12% 8% 8% 4% 3% 6% 2% 32% 22% 4% 5% 7% SOURCE: The Conference Board Total Economy Database; UN Population Division; McKinsey Global Institute analysis
4. THE INTEGRATING WORLD Interconnected trade flows help generate global GDP growth $250-$450B Annual increase in world GDP from flows – about 15% - 25% of world’s total GDP growth +40% Difference in impact of flows on GDP growth for countries at the centre of the network compared with ones at the periphery SOURCE: McKinsey Global Institute analysis; DHL Globalization Index
4. THE INTEGRATING WORLD Our social problems are also interconnected – the number of global refugees is at its highest level since World War II Refugees, internally displaced people, and asylum seekers worldwide Millions of people 60 51 43 36 36 35 34 34 32 32 20 20 20 19 19 16 2000 01 02 03 04 05 06 07 08 09 10 11 12 13 14 2015 ISIS emerges Number of Intensification of as an migrants sectarian violence in autonomous surpasses Iraq (Iraqi ‘Civil War’) entity WWII level
4. THE INTEGRATING WORLD Without action, this path will be unsustainable for the planet In 2007, it took 1.5 2007 years to fully 1.5 replenish our planets annual resource use 2030 2.0 planets With current consumption, it will take 3 years to replenish our annual use in 2050 2050 2.9 – we would need planets 3 earths to live sustainably
4. THE INTEGRATING WORLD Executives say geopolitical instability is the #1 threat to global growth 75% 1 of executives say geopolitical instability is a top 5 threat to global growth over the next 12 months… … this is more than cited defaults on sovereign debt (39%), slowing consumer demand (22%), and new asset bubbles (20%) 1 N = 1,202; surveyed July 2015 SOURCE: McKinsey Global Institute survey, Economic conditions snapshot
The average lifetime of companies is declining Average tenure on the S&P 500 Years 90 61 -80% 25 18 1935 1958 1980 2011
Character, behaviours, and tactics of 21st century leaders ‘Chief People Sense of Setting a bold Officer ’ Urgency ambition Influencing Managing Telescope & Radar & without energy microscope lightning authority rod Purpose & Persistence Selflessness Judgment & Absorbing CHARACTER resilience & drive & broad- decisiveness & compart- mindedness mentalizing
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