global megatrends and implications for leaders

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


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


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


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


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


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


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


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!


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


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

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


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


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

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


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”


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

global megatrends and implications for leaders

Documents