global megatrends and implications for leaders
TRANSCRIPT
Global
megatrends and
implications for
leadersDominic Barton | Global Managing
Director, McKinsey & Company
We are living in historic times
The Great
Transition
~200BC
Rise of
Chinese
Dynasties
~600
Fall of the
Roman
Empire
~1100
Crusades,
Resurgence
of Europe
~1500
“Discovery”
of new world,
Renaissance
Industrial
revolution
~1750-18502010 - 40
Four forces are changing the world at an unprecedented pace and scale
2
The power
of disruptive
technologies
3
The aging of
the global
population
4
The
integrating
world
1
The rise of
emerging
markets
The world’s economic centre of gravity is shifting back to AsiaLocations weighted in 3D space by GDP
2000
1950
2010
2025
1940
1500
0
1. THE RISE OF EMERGING MARKETS
There will be 2.2 billion new middle class consumers by 2030
Global middle class1
Billions of people
1.1
2.8
2025
4.2
2.1
2013
2.8
5.0
2030
SOURCE: United Nations World Population Prospects; McKinsey Global Institute CityScope
1 Annual personal income $3,600 and over
2.2 billion
Latin America
Asia-Pacific
Europe
US & Canada
Middle East & North Africa
Sub Saharan Africa
1. THE RISE OF EMERGING MARKETS
Urbanisation is driving rapid increases in individual wealth, especially in
emerging markets
Urban population (%)
30,000
10,000
3,000
1,000
300
0 10 20 30 40 50 60 70 80 90
1860
United Kingdom
2010
United States
2010
1820
Italy
2010
1950
1950
Germany
2010
1891
Japan
2010
1950
South Korea
2010
1930
Brazil
2010
1920
China
2010
1950
India
2010
Per capita GDP by urban density
1990 Purchasing Power Parity (log scale), Percent
SOURCE: McKinsey Global Institute
1. THE RISE OF EMERGING MARKETS
SOURCE: Source
Text
Shenzhen – 1980
Shenzhen – 2014
Africa is also continent to be reckoned with
Significant global resources
69% of platinum group reserves
82% of phosphates
8% of oil reserves
60% of unused arable land
$2.4 trillion in GDP
~1.1 billion people
SOURCE: BP statistics; Metals economics Group; CIA world fact book; Global insights: World Market Monitor
1. THE RISE OF EMERGING MARKETS
Argentina
United States of America India
Western Europe
China
~$1 trillion Household consumption
64 cities with more than 1M people
By 2025, almost half of the world’s billion-dollar-plus companies will be
headquartered in emerging markets
Number of companies with $1B+ revenue
%, number of large companies
~7,000
46%
32%
New large companies
54%
2025
~15,000
73%
2010
68%
~8,000
27%
SOURCE: McKinsey Global Institute CompanyScope
Emerging regions
Developed regions
1. THE RISE OF EMERGING MARKETS
41% of total
(~2,900
companies) from
Asia alone
12 disruptive technologies will have enormous
economic impact by 2025Range of sized potential
economic impact
Low High
X–Y
0.2–0.3
0.1–0.5
0.2–0.5
0.2–0.6
Renewable energy
Advanced oil and gas exploration
Advanced materials
3D printing
Energy storage
Internet of Things
Cloud technology
Autonomous and near-autonomous vehicles
0.7–1.6
Automation of knowledge work 5.2–6.7
3.7–10.8
0.1–0.6
Advanced robotics
Mobile Internet
Next-generation genomics
1.7–6.2
1.7–4.5
0.2–1.9
2.7–6.2
$ Trillions, annual
1
2
3
4
5
6
7
8
9
10
11
12
SOURCE: McKinsey Global Institute
2. THE POWER OF DISRUPTIVE TECHNOLOGIES
3 major drivers of digitization
SOURCE: Gartner; International Federation of Robotics
A modern
washing
machine has
more
computing
power than
Apollo II
40% of the
world (3.2B
people) are
online
1 Data2Comput-
ing power
(Moore’s
Law)
3 Connectedness
0 1 0 1
1 0 1 1
0 1 1 0
2. THE POWER OF DISRUPTIVE TECHNOLOGIES
Every 2
days, we
create as
much data
as we did
from the
dawn of
time to 2003
Exponentially…
Faster
Smaller
Cheaper
Better
… all human brains
… 1 human brain
‘01 ‘23‘10
Apple
MAC II
Univac I
Hollerith tabulator
The pace of digital disruption is accelerating
1030
1040
1020
1010
1
10-10
10-20
2075205020251975195019251900
Computer type
SOURCE: Singularity University
Calculations per second per $1,000
… 1 mouse brain
… 1 insect brain
2. THE POWER OF DISRUPTIVE TECHNOLOGIES
Where
we are
now
Digitisation is driving massive improvements in efficiency
2322
Typical Digital-
enabled
1
Locomotive velocity
Avg miles per hour per day Data analytics
– optimized
scheduling
and predictive
maintenance
reduce
downtime,
increasing
velocity
1 mile per
hour increase
worth $250M
in annual profit
2. THE POWER OF DISRUPTIVE TECHNOLOGIES
There is NO BLINDSPOT on this car
Digitisation also makes design more important than ever before – because
we have more user experiences than ever before
SOURCE: KPCB
People check their
phones every 5.6
minutes
That means 170
interactions with
the lock screen each day
– it had better work well!
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"
2. THE POWER OF DISRUPTIVE TECHNOLOGIES
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
The global population is aging: by 2050 …
In Italy, Japan, and Spain, 1/3 of
people will be 65+
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
The number of people worldwide
aged 80+ will quadruple to 400 M
The proportion of world’s population
over age 65 will double
3. THE AGING OF THE GLOBAL POPULATION
260%
100%
200%
2050
216%
2025
71%
2010
59%
Net government debtPercent of GDP
Aging will place massive strains on governments
SOURCE: Standard and Poor’s
3. THE AGING OF THE GLOBAL POPULATION
Global government
debt will exceed
world GDP by 2030
Age-related spending
could raise median net
government debt to
216% of GDP in 2050
Lines show total trade flows between regions; figures in bubbles
show participation in world trade
Networks of global trade are larger and denser – heightening risks and
opportunitiesUSD 50–100 billion
USD 100–500 billion
USD 500 billion or more
1990
100% = $1.8 trillion
2013
100% = $17.2 trillion
41%12%
4%
5%
2%
3%
8%
22%
2%
32%8%
7%
6%
4%
5%
2%
32%4%
SOURCE: The Conference Board Total Economy Database; UN Population Division; McKinsey Global Institute analysis
4. THE INTEGRATING WORLD
$250-$450BAnnual increase in world GDP from flows –
about 15% - 25% of world’s total GDP growth
Interconnected trade flows help generate global GDP growth
SOURCE: McKinsey Global Institute analysis; DHL Globalization Index
+40%Difference in impact of flows on GDP growth for countries at
the centre of the network compared with ones at the periphery
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
36353436343232
201916
201920
040302 201514131211012000 070605 100908
ISIS emerges
as an
autonomous
entity
Intensification of
sectarian violence in
Iraq (Iraqi ‘Civil War’)
Number of
migrants
surpasses
WWII level
4. THE INTEGRATING WORLD
Without action, this path will be unsustainable for the planet
1.5
planets
2.0
planets
2.9
planets
2007
2030
2050
In 2007, it took 1.5
years to fully
replenish our
annual resource
use
With current
consumption, it will
take 3 years to
replenish our
annual use in 2050
– we would need
3 earths to live
sustainably
4. THE INTEGRATING WORLD
Executives say geopolitical instability is the #1 threat to global growth
1 N = 1,202; surveyed July 2015
SOURCE: McKinsey Global Institute survey, Economic conditions snapshot
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%)
4. THE INTEGRATING WORLD
The average lifetime of companies is declining
Average tenure on the S&P 500
Years
18
25
61
90
198019581935
-80%
2011
Character, behaviours, and tactics of 21st century leaders
Telescope &
microscope
Managing
energy
Radar &
lightning
rod
Influencing
without
authority
Persistence
& drive
Purpose &
resilience
Selflessness
& broad-
mindedness
Judgment &
decisiveness
Absorbing
& compart-
mentalizing
CHARACTER
Setting a bold
ambition
‘Chief People
Officer’
Sense of
Urgency
Paul Polman
Purpose and Resilience
“I know we all have our jobs, but that has to
come from a deeper sense of purpose.
You have to be driven by
something.
Leadership is not just about giving
energy, but it’s unleashing other
people’s energy, which comes from
buying into that sense of purpose.”
Took over as CEO and pledged to double
revenue while halving carbon footprint in
10 years
Persistence and Drive
Courage to take on
industries in which he has
no experience, focusing on
those with high margins and
inefficiencies to exploit
Elon Musk
Has tackled payments, space
transport, automotive, and
energy production and
storage
Persistence and DriveAfter Dashrath Manjhi’s wife died because the nearest doctor was 70 km
from their home, he spent the next 22 years building a road through the
mountains – reducing the distance to the nearest doctor to 15 km
Selflessness and broad-mindedness
“Leaders have lost their way
… Leadership is about being
a servant, not a ruler”
Working to bring together businesses
with the public sector to solve issues
3 time Prime Minster and recent
President of Israel, Nobel Peace
prize recipient
Shimon Peres State of Israel
Selflessness and broad-mindedness
Ted Kelly
When selecting 4-star
Generals, they look for 2
things: selflessness and
judgment
Mary Barra
Absorbing and compartmentalizing
“If you have a problem, you've got to
solve it. Because that problem is
going to get bigger…it's not going to
get smaller with time”
Clear and ambitious strategy for the future,
and making tough decisions to execute
against it – e.g., reallocations from Europe
to emerging markets
Maintained steady hand during rocky first
year – including 30 M car recall
Jeff Immelt
Judgement and Decisiveness
“Industrial companies are in the
information business whether they
want to be or not … we want to
treat analytics like it’s as core to
the company for the next 20 years
as material science has been for us
over the last 50 years”
Is undertaking the “biggest
transformation in GE’s history” as the
company shifts from industrials to
analytics and information
Marillyn Hewson
Judgment and Decisiveness
“Innovation with purpose is still
what makes Lockheed Martin
unique.”
Saw declining U.S. defense spending and
moved decisively into growing industries
like cybersecurity and alternative energy
Spent ~$1B on acquisitions last year with
plans for $9B in further purchases
Tenure has seen record profits and a
more than 2x increase in stock price
Klaus Kleinfield
Judgment and Decisiveness
“Don’t be paranoid … you need to be
destructive in order to create”
Recently announced the split of the higher-margin
parts and services business from the legacy
aluminum business in light of commodity swings
Saw that the aircraft industry was moving away
from aluminum to other materials
Made 3 acquisitions between June 2014 to June
2015 - suppliers of titanium casting, engine rings
and forgings, and titanium and airframe
Aluminum sheets and plating – Alcoa’s signature
product – is now only 20% of aerospace revenue
Managing Energy
Now companies are more global, and so you have jet lag, you are tired, the food is different. You have to be disciplined about your schedule and organizing everything.
I live like a Knight Templar. I wake at a certain hour and sleep at a certain hour. There are certain things I won’t do past a certain time.”
Carlos Ghosn
“Leading takes stamina. I became CEO at 45, and I was working…15 or 16 hours a day…but you can’t do that when you are 60 or 65.
Randall Stephenson
Telescope & Microscope
“We need to be ahead of the curve…
if we see ourselves falling behind
global trends, we know we are in
trouble”
Plans to reskill 90k employees
through higher education
partnerships
Anticipated trend of mobile media
consumption and completed merger
with DirecTV
Jim Flaherty
Telescope & Microscope
Known for pragmatism and deep
knowledge on policy matters – was
a leader and staunch supporter of
bank reform in the G7 and G20
during the crisis
Canada’s Finance Minister for 8
years, leading Canada through
the Global Financial Crisis
Peter Ma
Radar & Lightning Rod
Passed up deal to buy Didi –
China’s Uber competitor – and
greatly regrets it
Resolved to study technology
and innovation news every day
since
Makes a point to hire the best
person in the world for any
given role
Pope Francis
Influencing without authority
Trying to rally politicians and
people around the globe
around climate change
Helped bring about the
restoration of diplomatic
negotiations between Cuba
and the United States after
50 years of stalemate
Chief People Officer
“There’s no need to make it complex.
You shouldn’t have to make special time
for mentoring. It should happen in the
course of your normal interactions.”
“I have to watch for talent and
once I spot it, it is my job to pro-
vide them opportunities to grow”
KV Kamath
Spends ~30% of his time on
mentoring
BRICs Bank
A Colonel in the American
Revolution, wrote the Federalist
Papers, invented the U.S. national
financial system, founded the U.S.
Coast Guard and New York Post,
and helped establish the nation’s
first industrial center…
…by age 50
Sense of urgency
Alexander Hamilton
Broke the world pole vault
record that had stood for over
20 years in February 2014…
…then immediately attempted
to break it again
“Who will be ambitious on our
behalf, if we are not ambitious
for ourselves?”
Renauld Lavillenie
Setting a bold ambition
Setting a bold ambition
Ground-breaking ceremony for steel plant, 1970
Larry Page
“Over time companies tend to get
comfortable doing the same thing,
just making incremental changes.
But in the technology industry,
where revolutionary ideas drive the
next big growth areas, you need to
be a bit uncomfortable to stay
relevant”
Setting a bold ambition
Character, behaviours, and tactics of 21st century leaders
Telescope &
microscope
Managing
energy
Radar &
lightning
rod
Influencing
without
authority
Persistence
& drive
Purpose &
resilience
Selflessness
& broad-
mindedness
Judgment &
decisiveness
Absorbing
& compart-
mentalizing
CHARACTER
Setting a bold
ambition
‘Chief People
Officer’
Sense of
Urgency
Global
megatrends and
implications for
leadersDominic Barton | Global Managing
Director, McKinsey & Company