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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,
Dominic 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
~1500 “Discovery”
Renaissance Industrial revolution ~1750-1850 2010 - 40
Four forces are changing the world at an unprecedented pace and scale
2 The power
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 Asia
Locations weighted in 3D space by GDP
2000 1950 2010 2025 1940 1500
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
Urbanisation is driving rapid increases in individual wealth, especially in emerging markets
Urban population (%) 30,000 10,000 3,000 1,000 300 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
SOURCE: Source
Text
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
Argentina United States
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
41% of total (~2,900 companies) from Asia alone
12 disruptive technologies will have enormous economic impact by 2025
Range 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
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
1 Data 2 Comput- ing power (Moore’s Law) 3 Connectedness
0 1 0 1 1 0 1 1 0 1 1 0
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 2075 2050 2025 1975 1950 1925 1900
Computer type SOURCE: Singularity University
Calculations per second per $1,000 … 1 mouse brain … 1 insect brain
Where we are now
Digitisation is driving massive improvements in efficiency
23 22 Typical Digital- enabled 1 Locomotive velocity Avg miles per hour per day
– optimized scheduling and predictive maintenance reduce downtime, increasing velocity
hour increase worth $250M in annual profit
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
That means 170
the lock screen each day – it had better work well!
Digital is disrupting the beef and dairy industry – livestock sensor example
cattle worldwide –
year to injury and disease Sensors remotely
animal welfare and reducing labor costs
Not all challengers will survive, but incumbents will still have to respond
BBVA acquired Simple in 2014 to "disrupt itself"
Message or topic title
▪ 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
260% 100% 200% 2050 216% 2025 71% 2010 59% Net government debt Percent of GDP
Aging will place massive strains on governments
SOURCE: Standard and Poor’s
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
USD 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
Annual 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
Difference in impact of flows on GDP growth for countries at the centre of the network compared with ones at the periphery
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 35 34 36 34 32 32 20 19 16 20 19 20 04 03 02 2015 14 13 12 11 01 2000 07 06 05 10 09 08 ISIS emerges as an autonomous entity Intensification of sectarian violence in Iraq (Iraqi ‘Civil War’) Number of migrants surpasses WWII level
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
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%)
The average lifetime of companies is declining
Average tenure on the S&P 500 Years 18 25 61 90 1980 1958 1935
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
“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
Courage to take on industries in which he has no experience, focusing on those with high margins and inefficiencies to exploit
Has tackled payments, space transport, automotive, and energy production and storage
After 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
“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
State of Israel
When selecting 4-star Generals, they look for 2 things: selflessness and judgment
“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
“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
Is undertaking the “biggest transformation in GE’s history” as the company shifts from industrials to analytics and information
“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
“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
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
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.”
“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.
“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
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
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
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
“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
vide them opportunities to grow”
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
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?”
Ground-breaking ceremony for steel plant, 1970
“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”
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
Dominic Barton | Global Managing Director, McKinsey & Company