A new book by McKinsey and Company outlines four major forces that will transform the world of the mid 21st century.
A disruptive force is one that causes a major change in the fabric of an industry or society. Consulting firm McKinsey and Company believes that globalization, technological change, aging population, and trade connectivity will profoundly affect business and the economy. As they gain strength, they feed on, influence, and amplify one another. In the book No Ordinary Disruption: The Four Global Forces Breaking All the Trends, here’s what McKinsey had to say about each of these forces:
The balance of power of the world economy is shifting east and south at a speed never before witnessed. As recently as 2000, 95 percent of the Fortune Global 500 companies were headquartered in developed economies. By 2025, nearly half of the companies with revenues of $1 billion or more will come from emerging markets. Perhaps equally important, the locus of economic activity is shifting within these markets.
The global urban population has been rising by an average of 65 million people over the last three decades. Nearly half of global GDP growth between 2010 and 2025 will come from 440 cities in emerging markets – 95 percent of them small- and medium-sized cities that many Western executives may not even have heard of. Hsinchu, in northern Taiwan, is already the fourth-largest advanced electronics and high-tech hub in the China region, and Brazil’s Santa Catarina state is now a regional hub for electronics and vehicle manufacturing.
As fast as technological innovation has multiplied and spread in recent years, it is poised to change and grow at an exponential speed beyond the power of human intuition to anticipate. Processing power and connectivity are only part of the story. The data revolution places unprecedented amounts of information in the hands of consumers and businesses alike, and technology- enabled business models – from online retail platforms like Alibaba to car- hailing apps like Uber – are proliferating.
Two-thirds of the world’s population now has access to a mobile phone. Technology allows businesses to start and gain scale with stunning speed while using little capital, as WhatsApp did. Entrepreneurs and startups now frequently enjoy advantages over large, established businesses. The furious pace of technological adoption and innovation is shortening the lifecycle of companies and forcing executives to make decisions and commit resources much more quickly. Another reason why low-code platforms and business-led IT initiatives for digital transformation are accelerating.
Fertility is falling, and the world’s population is graying dramatically. Aging has been evident in developed economies for some time, but the demographic deficit is now spreading to China and will then sweep across Latin America. The European Commission expects that by 2060, Germany’s population will shrink by one-fifth, and the number of people of working age will fall from 54 million in 2010 to 36 million in 2060 – a level that is forecast to be less than France’s. A smaller workforce will place a greater onus on productivity for driving growth, and caring for large numbers of elderly people will put severe pressure on government finances.
Instead of a series of lines connecting major trading hubs in Europe and North America, the global trading system has expanded into a complex, intricate, sprawling web. Asia is becoming the world’s largest trading region, with the flow between China and Africa rising from $9 billion in 2000 to $211 billion in 2012. Global capital flows expanded 25 times between 1980 and 2007. More than one billion people crossed borders in 2009, over five times the number in 1980. These types of connections all paused during the global recession of 2008 and have recovered only slowly since. But the links forged by technology have marched on uninterrupted and with increasing speed, creating unmatched opportunities and volatility.
Which one of these disruptions will have the biggest impact on your business and function? Why?