NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute
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  • 1. The Disruptive Dozen Highlights from MGI report on Disruptive Technologies McKinsey Global Institute July, 2013 CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of McKinsey & Company is strictly prohibited
  • 2. Some very long-run context – Ours is a time of unprecedented growth and innovation Estimated GDP per capita, world GDP per capita, real USD 10,000 8,000 6,000 4,000 2,000 0 0 50 100 150 200 Technology advancements 1550 1600 1650 1700 1750 1800 1850 1900 1950 2000 Printing press 1450 First steam Efficient engine steam engine 1698 1769 Mass Internal Internet & steel combustion world wide web engine 1970sToday 80s 1855 1860 First Industrial Second Industrial Revolution Revolution 1760s to 1840s 1860s to 1920s SOURCE: Angus Maddison's "World Population, GDP and Per Capita GDP, 1-2003 AD”; Projection based on Global Insight economic data; WIPO IP Statistics 1
  • 3. Technology trend “lists” everywhere Top 25 Technology Predictions 10 Disruptive Technologies for Business Information By 2029, 11 petabytes ofemerging Management The five most disruptive The top 10 storage will be available for $100 In the next 10technologies for 2013 years, we will see a 20-time increase in home networking speeds. technologies of 2012 ▪ Big data revolution and energy-efficient computing ▪ Media The By 2013, wireless network traffic will reach 400 petabytes a month.Five Most Disruptive tablets and beyond The top twenty business trends in 2020 Technologies at CES 2013 By the end of 2010, there willBold Predictions for reasons 2020 will be an technologies that will of a cent. 12 the Innovations 9 bewill that a billion transistors per human—each costing▪one ten-millionthapplications and 10 ▪ Satelliteswill OnLine to performWorld of of space and commercial applications 2020 communication, regardless of distance. interfaces: Controlling interfaces Mobile-centric ▪ Gesture based The Internet ▪ change tomorrowVehicles (OLEV) evolve Electric instantaneous awesome year Digital change the world in the next computers without touching them 10 be available The first commercial quantum computer willbreakthroughby mid-2020. 10 years Fighting the ▪ continues ▪ ▪ Robots computer jobs 3D printing and remote have the raw ▪ 2020, a $1,000autonomous systems manufacturing2013 ▪ ▪ Thepower of a Power brain. to social user experience Robotics and personal taking our willtechnologies processing DIY economy Contextual and By human ▪ ofVirtual Avatars to match a $1,000rise ▪ Robotic moon computer.The Internet of Things base ▪ ▪ Augmented reality: Fusing the real and By 2030, it will ▪ Electric clothes human brains ▪ take a village and synthetic biology Self-healing ▪ The Intelligent Home ▪ a global materials ▪ Life (assumingThe Internet of machines Internet equal the the▪ power By 2050sciences, genomics population of 9 billion), $1,000 worth of computing virtual willof Things processing power of all ▪ Intelligence in Anything speed rail new connectingrevolution Europe ▪ High link education China and but a zettaflood ▪ A ▪ Not just Big Data, Adaptive cruise control human brains on earth. ▪ ▪ ▪ medicineorganisations ▪ Deep learning purification Flatter The Interface ▪ You storesbatteries: The ▪ RegenerativeEnergy-efficient waterwillto Become the Norm▪other words,Compressed95 percent of whatworld’s know will have ▪ in of App Today, we know 5 percent of what we In we ▪ The Cloud know inAutonomous and flying cars 50 years, air and marketplaceswill ▪ 50 years. ▪ Reskilling the workforce cloud ▪ Wisdom of the most cost-effective energy storage Better bikes been discoveredCarbonpast 50 years. conversion and use ▪ ▪ ▪ in the dioxide (CO2) ▪ Temporary social ▪media the Doctor You’re ▪ world’s data 3D printing Connecting the Cloud With the Crowd with fossil Next-generation fiftyfold. ▪ TheAgri-science will increase sixfold in each of the next two years, while corporate‘Net’ will growanalytics ▪ Biofuels competitive ▪ The ▪ fuels next data ▪ Older ▪ ▪ ▪will index nutrition to drive Prenatal pages of content. ▪ Autonomous electric vehicles: The end of Enhanced approximately▪775 in cars DNA screening workers re-entering the health at the By 2015, Google Predictive medical analysis billion Nano-technology Technology that Knows You in ▪ Virtual of 92.5 ▪ Devices Bio-▪ workforce cars as implantedBetter ▪ Advanced materialsthe equivalentHospitals Thanks to controlled by▪microchipswe know them than You ▪ year. data By 2015, we will molecular level create and nano-technologymillion Libraries of Congress in oneBiggets smaller The world Know Yourself Connectivity ▪ ▪ Planes made redefining maintain manufacturing fiber By 2020 worldwide,Mobile appsof carbon ▪ servicehumansterabytes of personal data (today it is ~128 gigabytes). the average person will Additive 130 ▪ Remote sensing a ▪ In-memory computing ▪ Energy and downloads and peer-to-peer file sharing ▪ Thesociety equivalent By 2015, movie its storage ▪ Ultra-Intelligent Electronicwill▪ Dealing ▪100 Ultra-cheap web devices: million Libraries of explode to with exabytes, at industries Agents screens age power of power to 5 Five billion retirement people with internet access ▪ Ultra-thin Congress. ▪ Baxter: The OLED ▪ ▪ ▪ Subway entertainmentof the mobile Blue Collared Robot ▪Earl Grey. Hot (3D printing) Precise drug delivery through nanoscale ▪ Tea. Extreme low-energy Libraries The fight pervasive, and Video Analysis By 2015, video calling will befor control generating 400 exabytes of data—the equivalent of 20 million servers of Congress. ▪ New Image engineering ▪ Commercial space travel to up the value data. the ▪ payments system ▪ Better looking movies ▪and Tools explode to generate 50 moon and asteroids By 2015, the phone, web, email, photos, andMemory Implants China moving exabytes of Algorithms music will ▪ Another family tree (Advanced robotics and ▪ Cloud computing Within two years, information on the and photovoltaics computerhours. processing power of the will double every chain ▪ Organic electronics Internet Sound Quality 11 with the ▪ $1,000 virtual ‘avatars’) ▪ entertainment Reinventingbe connected to the Internet ▪ ▪ Teeth with sensors By 2010, 35 billion devices willImproved CallSmart Watches (nearly six devices per person on the planet). ▪ human brain ▪ in South Asia By 2020, there will be more devicesreactors and nuclear-waste Rising incomes there's a cure for that (Medical ▪ Fourth-generation than people online. ▪ Digital Jewelry, e.g. Augmented Reality ▪ Yes, The disinfectants and Africa ▪ recycling anddevices ▪ for every star in the known universe translation With IPv6, there ▪ Smartenough rise of socialUltra-Efficient Solar Power technologies) trillion addresses. will be fall addresses media ▪ Ubiquitous, mobile universal to have 4.8 By 2020, universal language translation will be commonplace in every device. ▪ Gourmet frozen will to ▪ Big display. ▪ reality Newspapers cease exist In the next five▪years, any surface foodbecome ▪ Data from Cheap Phonesdeleveraging a Augmented The great Humans or Borg? (Augmented homo sapiens) ▪ By 2025, teleportation atrights become an will begin to occur. the particle level issue ▪ Data ▪ Synthetic brain ▪ Taming the Big Data tsunami By 2030, artificial implants for the brain will take place. ▪ Supergrids Eight great technologies ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ 2
  • 4. The correlation between hype about a technology and its potential economic impact is not clear Media attention Number of relevant articles in major general interest and business publications over 1 year (log scale) 100,000 10,000 1,000 Renewable energy Advanced oil and gas exploration and recovery NextEnergy generation storage genomics 3D printing Advanced materials 100 100 Mobile Internet Autonomous and near-autonomous vehicles Advanced robotics 1,000 Cloud technology The Internet of Things Automation of knowledge work 10,000 Potential economic impact across sized applications $ billion (log scale) NOTE: Estimates of potential economic impact are for only some applications and is not a comprehensive estimate of total potential impact. Estimates include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted. SOURCE: Factiva; McKinsey Global Institute analysis 3
  • 5. Disruptive Technologies – Not a prediction, but a careful selection Potential for economic disruption ▪ Technology ▪ ▪ ▪ breakthrough or rapid advancement (cost/perf/capability) Scope of impact (people, companies, sectors, etc.) Scale of economics at stake (cost, spend, GDP, etc.) Disruptive potential (e.g. to value chains, industry structures, profit pools) Potential to solve global economic challenges ▪ Nature and size of ▪ potential economic impact Implications for stakeholders – Companies – Employees – Entrepreneurs – Consumers – Governments – Society ▪ Energy efficiency ▪ Sustainable food ▪ ▪ ▪ ▪ resources Access to clean water Environmental management Economic development Millennium Development Goals 4
  • 6. The Disruptive Dozen: Speed, Scope, and Economics at stake IT and how we use it Mobile Internet Increasingly inexpensive and capable mobile computing devices and Internet connectivity Cloud technology Use of computer hardware and software resources delivered over a network or the Internet, often as a service Internet of Things Networks of low-cost sensors and actuators for data collection, monitoring, decision making, and process optimization Automation of knowledge work Intelligent software systems that can perform knowledge work tasks involving unstructured commands and subtle judgments 5
  • 7. What else can Watson be used for? How about Watson in your pocket? 6
  • 8. What is this stuff? 7
  • 9. Disruption in numbers: IT and how we use it Technology improvement/ difference example Disrupted pools Mobile internet ▪ 6x growth in sales of smart ▪ 4.3 billion more people Cloud ▪ 3x - monthly cost of owning a ▪ 80% of NA institutions Internet of Things ▪ 80-90% price decline in MEMS ▪ 100 million M2M B2B Automation of work ▪ 100x increase in computing ▪ 230+ million knowledge wireless devices since 2007 server vs. renting in the cloud (micro electro-mechanical systems) sensors in last 5 years power from IBM’s Deep Blue to Watson left to be connected to the web hosting or planning to host critical apps on the cloud industrial devices workers 8
  • 10. The Disruptive Dozen: Speed, Scope, and Economics at stake Machines working for us Advanced robotics Increasingly capable robots with enhanced senses, dexterity, and intelligence used to automate tasks or augment humans Autonomous and near-autonomous vehicles Vehicles that can navigate and operate with reduced or no human intervention 3D printing Additive manufacturing techniques to create objects by printing layers of material based on digital models 9
  • 11. What is special about this robot? 10
  • 12. How long before your car can drive itself? 11
  • 13. What is special about this NASA rocket engine? 12
  • 14. Disruption in numbers: Machines working for us Technology improvement/ difference example Disrupted pools Advanced robotics ▪ 85% lower price for a ▪ 320 million Near autonomous driving machines ▪ 300,000 miles driven by ▪ 1 billion cars and 3D printing ▪ 90% price decline in 4 ▪ $11 trillion global Baxter robot versus average industrial robot Google autonomous car without system-caused accident years for home 3D printers manufacturing workers ▪ 250 million annual major surgeries trucks globally manufacturing industry GDP 13
  • 15. The Disruptive Dozen: Speed, Scope, and Economics at stake Rethinking energy comes of age Energy storage Devices or systems that store energy for later use, including batteries Advanced oil and gas exploration and recovery Exploration and recovery techniques that make extraction of unconventional oil and gas economical Renewable energy Generation of electricity from renewable sources with reduced harmful climate impact 14
  • 16. What is this stuff? 15
  • 17. Disruption in numbers: Rethinking energy Technology improvement/ difference example Disrupted pools Energy storage ▪ 40% price decline for a vehicle ▪ 1.2 billion people without Advanced oil & gas ▪ 3x increase in efficiency of US ▪ 22 billion barrels of oil lithium-ion battery pack since 2009 gas wells, 2007–11 Renewable ▪ 19x growth in solar PV and wind energy generation capacity since 2000 electricity equivalent in natural gas produced globally ▪ 30 billion barrels of crude oil produced globally ▪ 13 billion tons of CO2 emissions annually from electricity generation 16
  • 18. The Disruptive Dozen: Speed, Scope, and Economics at stake Changing the building blocks of everything Next-generation genomics Fast, low-cost gene sequencing, advanced big data analytics, and synthetic biology (“writing” DNA) Advanced materials Materials designed to have superior characteristics (e.g., strength, weight, conductivity) or functionality 17
  • 19. Who are these guys, and why are they so happy? 18
  • 20. What is this device? 19
  • 21. What do all of these products have in common? 20
  • 22. Disruption in numbers: The building blocks of everything Technology improvement/ difference example Disrupted pools Nextgeneration genomics ▪ 10 months – time to double ▪ 26 million annual deaths Advanced materials ▪ 115x - strength to weight ratio of ▪ $1.2 trillion revenue sequencing performance carbon nanotubes versus steel from cancer, cardiovascular disease, or Type 2 diabetes from global semiconductor sales 21
  • 23. Economic potential for sized applications $ trillion, annual by 2025 Range of sized potential economic impacts in each category Low High Mobile Internet IT and how we use it 3.7–10.8 Cloud technology 1.7–6.2 Internet of Things 2.7–6.2 Automation of knowledge work 5.2–6.7 Advanced robotics Machines working for us 1.7–4.5 Autonomous and nearautonomous vehicles 0.2–1.9 3D printing 0.2–0.6 Energy storage Rethinking energy comes of age 0.1–0.6 Advanced oil and gas exploration and recovery Renewable energy Changing the building blocks of everything Impact from other potential applications Next-generation genomics Advanced materials SOURCE: McKinsey Global Institute analysis 0.1–0.5 0.2–0.3 0.7–1.6 0.2–0.5 22
  • 24. The surplus is up for grabs Enterprise vs. Enterprise Producer vs. Consumer Knowledge and capital vs. Labour Country vs. Country 23
  • 25. Potential economic impact in developed versus developing economies Impact on Developed economies Developing economies % of potential economic impact for sized applications Mobile Internet 50 Automation of knowledge work Cloud technology 50 80 Internet of Things Next-gen genomics 20 70 30 30 80 Energy storage 60 40 3D printing 60 40 Advanced materials 70 Advanced robotics 80 20 Autonomous vehicles 80 20 Renewable energy 90 Advanced oil & gas SOURCE: McKinsey Global Institute analysis 20 10 80 20 20 80 24
  • 26. What does it all mean? IT, big data, and advanced analytics everywhere 1 Combinations of technologies will multiply the impact 2 Benefits will not be evenly distributed 3 Consumers will be big winners 4 Entrepreneurs have a bright future 5 The nature of work will change 6 “Business models and the pursuit of surplus” 7 Incumbents must evolve on multiple fronts, fast 8 9 Policies and rules will have a hard time keeping up (but must) 25
  • 27. What’s cool about this? 26
  • 28. Thank you Download our reports www.mckinsey.com/mgi @ McKinsey_MGI www.facebook.com/ McKinseyGlobalInstitute McKinsey Global Institute 27
  • 29. Appendix 28
  • 30. Sized applications of mobile Internet could have direct economic impact of $3.7 trillion to $10.8 trillion per year in 2025 (1/2) Sized applications Health care Education Service delivery Public sector Potential economic impact of sized applications in 2025 $ trillion, annually Estimated potential reach in 2025 Potential productivity or value gains in 2025 ▪ $15.5 trillion cost of 0.9– 2.1 Estimated scope in 2025 ▪ 70–80% mobile penetration ▪ 10–20% cost reduction in chronic treating chronic diseases 0.3– 1.0 ▪ $11 trillion global spending ▪ K–12 adoption of online/hybrid 0.2– 0.5 Retail on education 0.1– 0.4 Payments 0.2– 0.3 Interaction workers ▪ Other potential applications (not sized) Sum of sized potential economic impacts ▪ 5–15% rise in secondary graduation rates ▪ 10–30% productivity gain in postsecondary, corporate, and government education ▪ Adoption by 90–100% of ▪ 60–75% cost savings on ▪ $7.2 trillion cost of retail 0.1– 0.4 Additional consumer surplus learning – Developed world: 80–90%1 – Developing: 65–80% 90–100% adoption in postsecondary, corporate, and government education disease treatment through remote health monitoring ▪ $0.9–1.2 trillion 0.9– 1.3 Transaction workers among patients accounting for 95% of health-care spending ▪ 30–50% of retail consumption ▪ Mobile devices used in 50% of ▪ 6–15% productivity gain of online ▪ Implementation of advanced ▪ 50% productivity gain in managing government spending on customer-facing services administrative tasks driven by labor efficiency hybrid retail versus traditional purchases 1.0– 4.8 ▪ $3 trillion in global transaction revenue 3.7– 10.8 governments for online or mobile services electronic payment systems in – 80–100% of advanced economies – 65–80% of developing economies1 transactions across all stakeholders 1 Estimates of adoption are based on Internet penetration rates in advanced and developing economies. NOTE: Estimates of potential economic impact are for some applications only and are not comprehensive estimates of total potential impact. Estimates include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted. Numbers may not sum due to rounding. SOURCE: McKinsey Global Institute analysis 29
  • 31. Sized applications of mobile Internet could have direct economic impact of $3.7 trillion to $10.8 trillion per year in 2025 (2/2) Sized applications Health care Education Public sector Potential economic impact of sized applications in 2025 $ trillion, annually Estimated potential reach in 2025 Potential productivity or value gains in 2025 ▪ $19 trillion in interaction ▪ 80–90% of workers in ▪ 4–5% increase in efficiency 0.9– 2.1 0.3– 1.0 0.2– 0.5 Retail worker salaries ▪ 0.1– 0.4 Payments Other worker productivity1 Estimated scope in 2025 0.2– 0.3 Interaction workers worker salaries 0.1– 0.4 Additional consumer surplus Other potential applications (not sized) Sum of sized potential economic impacts ▪ 80–90% of workers in ▪ 0.9– 1.3 Transaction workers ▪ $15 trillion in transaction ▪ 1.0– 4.8 ▪ 3.6–4.9 billion mobile users advanced economies 65–80% of workers in developing economies advanced economies 65–80% of workers in developing economies Mobile devices needed for 10% of work tasks ▪ 100% of users through social technology via mobile ▪ 10–30% productivity gain from time saved accessing information ▪ $500–1,500 per user in developed world ▪ $300–1,000 per user in developing world 3.7– 10.8 1 Estimates of potential economic impact for worker productivity applications exclude labor productivity impact sized as part of service delivery applications. NOTE: Estimates of potential economic impact are for some applications only and are not comprehensive estimates of total potential impact. Estimates include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted. Numbers may not sum due to rounding. SOURCE: McKinsey Global Institute analysis 30
  • 32. Sized applications of automation of knowledge work could have direct economic impact of $5.2 trillion to $6.7 trillion per year in 2025 Sized knowledge worker occupations Common business functions Social sector services Technical professions Clerical Customer service and sales Education Health care Potential economic impact of sized applications in 2025 $ trillion, annually Estimated potential reach in 2025 Potential productivity or value gains in 2025 ▪ $4.4 trillion in knowledge 1.1– 1.3 ▪ 50–65 million full-time ▪ $35,000 value per FTE of ▪ 20–30 million FTEs of ▪ $50,000 value per FTE of ▪ 15 million FTEs of work ▪ $60,000 value per FTE of ▪ 15–20 million FTEs of ▪ $60,000 value per FTE of ▪ 10 million FTEs of work ▪ $65,000 value per FTE of ▪ 0.6– 0.9 0.8– 1.0 Science and engineering IT Finance Legal ▪ 0.6– 0.7 worker costs 55 million knowledge workers ▪ $2.2 trillion in knowledge 0.4– 0.5 ▪ 0.8– 1.1 0.4– 0.5 0.2– 0.3 worker costs 35 million knowledge workers ▪ $2.9 trillion in knowledge ▪ worker costs 50 million knowledge workers ▪ $1.5 trillion in knowledge ▪ Other potential applications (not sized ) Sum of sized potential economic impacts worker costs 125 million knowledge workers ▪ $2.8 trillion in knowledge 0.3– 0.4 Managers Professional services Estimated scope in 2025 worker costs 25 million knowledge workers equivalents (FTEs) of work potentially automatable work potentially automatable potentially automatable work potentially automatable potentially automatable additional productivity additional productivity additional productivity additional productivity additional productivity 5.2– 6.7 NOTE: Estimates of potential economic impact are for some applications only and are not comprehensive estimates of total potential impact. Estimates include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted. Numbers may not sum due to rounding. SOURCE: McKinsey Global Institute analysis 31
  • 33. Sized applications of the Internet of Things could have direct economic impact of $2.7 trillion to $6.2 trillion per year in 2025 (1/2) Sized applications Health care Manufacturing Electricity Potential economic impact of sized applications in 2025 $ trillion, annually 0.9– 2.3 0.2– 0.5 0.1– 0.2 ▪ ▪ 0.1– 0.2 Resource extraction ▪ 70–80% mobile penetration in ▪ 10–20% cost reduction in 0.1– 0.3 Security Estimated potential reach in 2025 ▪ $15.5 trillion cost of 1.1– 2.5 Urban infrastructure Agriculture Retail 0.02– 0.10 Sum of sized potential economic impacts ▪ ▪ ▪ chronic disease treatment through remote health monitoring 80–100% reduction in drug counterfeiting 0.5–1.0 hour time saved per day by nurses ▪ 27,000–31,000 TWh ▪ 25–50% of consumers could ▪ 2–4% reduction in demand ▪ ▪ Reduction of total load on grid ▪ Operating/maintenance savings; manufacturing operating costs ▪ 2.7– 6.2 ▪ patients who account for bulk of health-care spending Counterfeit drug tracking – Developed world: 50–80% – Developing world: 20–50% Inpatient monitoring – Developed world: 75–100% – Developing: 0–50% ▪ 80–100% of all manufacturing ▪ 2.5–5.0% saving in operating ~0.05 Other potential applications (not sized) treating chronic diseases $400 billion cost of counterfeit drugs, 40% addressable with sensors 50 million nurses for inpatient monitoring – Developed world: $30 per hour – Developing: $15 per hour ▪ $47 trillion in global ~0.1 Vehicles Potential productivity or value gains in 2025 Estimated scope in 2025 ▪ global electricity consumption $200 billion spending on transmission lines 300 billion consumer minutes outage costs, including maintenance and input efficiencies ▪ adopt energy management 25–50% of grid monitored through sensors 50–100% of consumer meters automated peaks in the grid shorter outage time through automated meters NOTE: Estimates of potential economic impact are for some applications only and are not comprehensive estimates of total potential impact. Estimates include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted. Numbers may not sum due to rounding. SOURCE: McKinsey Global Institute analysis 32
  • 34. Sized applications of the Internet of Things could have direct economic impact of $2.7 trillion to $6.2 trillion per year in 2025 (2/2) Sized applications Health care Manufacturing Electricity Potential economic impact of sized applications in 2025 $ trillion, annually 0.9– 2.3 0.2– 0.5 Urban infrastructure 0.1– 0.3 Security 0.1– 0.2 Resource extraction 0.1– 0.2 Estimated potential reach in 2025 Potential productivity or value gains in 2025 ▪ 200–300 hours commuting 1.1– 2.5 Estimated scope in 2025 ▪ 40–70% of working urban ▪ 10–20% reduction in average travel ▪ ▪ ▪ ▪ time per urban worker per year $200 billion spent on urban water $375 billion cost of waste handling ▪ time through traffic and congestion control 10–20% reduction in water consumption and leaks with smart meters and demand control 10–20% reduction in cost of waste handling ~0.1 Retail 0.02– 0.10 Vehicles ~0.05 ▪ $6 trillion cost of crime ▪ Adoption of advanced ▪ 4–5% crime reduction through ▪ $3.7 trillion in global mining ▪ 80–100% of all resource ▪ 5–10% saving in operating costs ▪ $630 billion in automotive ▪ 10–30% of all insured cars ▪ 25% reduction in cost of vehicle ▪ $200 billion lost due to ▪ 30–80% of retail adopting smart ▪ 1.5–2.0% increased sales ▪ $1.2–1.3 trillion in Agriculture ▪ 20–40% adoption of advanced ▪ 10–20% increase in yields from operating costs insurance premiums1 stockouts Other potential applications (not sized) Sum of sized potential economic impacts population living in cities with smart infrastructure 50–70% of large urban regions adopting smart water infrastructure and waste handling 2.7– 6.2 agricultural production (wheat, maize, rice, soybeans, barley) surveillance by countries accounting for 50–70% of global GDP extraction equipped with sensors logistics irrigation systems and precision farming improved surveillance from productivity gains damage from collision avoidance and increased security1 precision application of fertilizer and irrigation 1 Automotive premiums used as proxy for cost of collisions. NOTE: Estimates of potential economic impact are for some applications only and are not comprehensive estimates of total potential impact. Estimates include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted. Numbers may not sum due to rounding. SOURCE: McKinsey Global Institute analysis 33
  • 35. Sized applications of cloud technology could have economic impact of $1.7 trillion to $6.2 trillion per year in 2025 Sized applications Surplus from cloud-based Internet Infrastructure and operating expenses Enterprise productivity1 Potential economic impact of sized applications in 2025 $ trillion, annually Estimated scope in 2025 1.2– 5.5 2–3 billion more Internet users, most in developing economies 0.3– 0.4 Application development and packaged software 0.2– 0.3 Other potential applications (not sized) Sum of sized potential economic impacts $1.26 trillion or 40% of global IT spending in base scenario2 $1.68 trillion or 60% of global IT spending in base scenario2 Estimated potential reach in 2025 Potential productivity or value gains in 2025 Nearly all Internet applications use cloud as a core enabler $25–85 surplus per user per month Varying levels of cloud adoption across enterprises ▪ All enterprises could have potential to use cloud ▪ Most enterprises may use a hybrid cloud ▪ The share of public cloud usage may increase as cybersecurity improves 20–30% productivity gains ▪ Reduced infrastructure and facilities footprint ▪ Higher task standardization and automation 10–15% productivity gains ▪ Standardization of application environment and packages ▪ Faster experimentation and testing 1.7– 6.2 1 We have not sized the impact of increased flexibility and convenience to enterprises. 2 Estimates for enterprise cloud based on a global IT budget that does not include telecommunications. NOTE: Estimates of potential economic impact are for some applications only and are not comprehensive estimates of total potential impact. Estimates include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted. Numbers may not sum due to rounding. SOURCE: McKinsey Global Institute analysis 34
  • 36. Sized applications of advanced robotics could have direct economic impact of $1.7 trillion to $4.5 trillion per year in 2025 Sized applications Robotic human augmentation Industrial robots Surgical robots Potential economic impact of sized applications in 2025 $ trillion, annually Estimated potential reach in 2025 Potential productivity or value gains in 2025 ▪ 50 million amputees and ▪ 5–10% of amputees and ▪ $240,000–390,000 per person for ▪ 355 million applicable 0.6– 2.0 Estimated scope in 2025 ▪ 30–60 million FTEs of work ▪ 75% potential improvement in ▪ 200 million major surgeries in ▪ 5–15% of major surgeries in ▪ 60,000–180,000 lives saved people with impaired mobility in advanced economies 0.6– 1.2 industrial workers 0.2– 0.6 countries with developed health care people with impaired mobility in advanced economies potentially automatable across key job types countries with developed health-care systems extended/ improved quality of life1 productivity per unit of work automated per year ▪ 50% reduction in sick and inpatient days Personal and home robots 0.2– 0.5 0.1– 0.2 ▪ 20–50 billion hours saved per year ▪ $10 value per hour of time saved ▪ 10–15 million FTEs of work ▪ 35–55% potential improvement in tasks such as cleaning and lawn care per year in advanced economies workers Other potential applications (not sized) Sum of sized potential economic impacts ▪ 25–50% of households in ▪ 130 million applicable service Commercial service robots ▪ 90–115 billion hours spent on advanced economies potentially automatable across key job types productivity per unit of work automated 1.7– 4.5 1 Using QALY (quality-adjusted life years) estimates. NOTE: Estimates of potential economic impact are for some applications only and are not comprehensive estimates of total potential impact. Estimates include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted. Numbers may not sum due to rounding. SOURCE: McKinsey Global Institute analysis 35
  • 37. Sized applications of autonomous and near-autonomous vehicles could have direct economic impact of $200 billion to $1.9 trillion per year in 2025 Potential economic impact of sized applications in 2025 $ trillion, annually Autonomous cars Autonomous trucks 0.1– 1.4 Estimated scope in 2025 Estimated potential reach in 2025 Potential productivity or value gains in 2025 ▪ 900 million new cars Sized applications ▪ 5–20% of all driving ▪ $2–8 per hour in value of time ▪ 0.1– 0.5 produced in or after 2018 500 hours per year spent in car by average owner ▪ 24 million trucks produced in 2018 or later autonomous – 20–30% of cars sold from 2017–20 with potential to be autonomous – 50–100% driving time spent under full computer control ▪ 10–30% of new trucks with ▪ Other potential applications (not sized) Sum of sized potential economic impacts autonomous driving capabilities 50% driven by human drivers saved ▪ 70–90% fewer accidents ▪ 15–20% gain in fuel efficiency ▪ 70–90% fewer accidents ▪ 10–40% greater fuel efficiency ▪ 1–2 drivers per 10 trucks (for monitoring) ▪ Potential applications not sized include commercial drones, military drones, and/or autonomous and nearautonomous submersible vehicles for applications such as fossil fuels exploration 0.2– 1.9 NOTE: Estimates of potential economic impact are for some applications only and are not comprehensive estimates of total potential impact. Estimates include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted. Numbers may not sum due to rounding. SOURCE: McKinsey Global Institute analysis 36
  • 38. Sized applications of next-generation genomics could have direct economic impact of $700 billion to $1.6 trillion per year in 2025 Sized applications Disease treatment Substance production Agriculture Potential economic impact of sized applications in 2025 $ trillion, annually 0.5– 1.2 0.1– 0.2 0.1– 0.2 Estimated scope in 2025 Estimated potential reach in 2025 Potential productivity or value gains in 2025 ▪ Estimated deaths from ▪ Patients with access to ▪ ▪ ▪ Extended life expectancy – Cancer: 0.5–2 years2 – Cardiovascular: 1 year – Type 2 diabetes: 1 year3 ▪ Value of prenatal screening4 – Developed world: $1,000 – Less-developed: $200 relevant diseases – Cancer: 12 million – Cardiovascular: 23 million – Type 2 diabetes: 4 million 160 million newborns relevant treatment – Cancer: 20–40% – Cardiovascular: 15–40% – Type 2 diabetes: 20–40% Access to prenatal genetic screening: – Developed world: 100% – Less-developed: 30–50%1 ▪ 60 billion gallons per year of ▪ Ethanol: 20–40% of world ▪ 15–20% cost saving in ethanol ▪ ▪ ▪ 150–200% price premium for diesel ▪ 30–70% CO2 reduction from fuels ethanol 350–500 billion gallons per year of diesel production Diesel: 2–3% of world production production over life cycle Other potential applications (not sized) ▪ $1.2–1.3 trillion worth of major crops (wheat, maize, rice, soybeans, barley, tomatoes) ▪ 60–80% of agricultural ▪ Sum of sized potential economic impacts 0.7– 1.6 production improved using genomics data 20–80% of current genetically engineered crops to be further enhanced ▪ 5–10% increase in yields due to process optimization ▪ 5–10% increase in yields from use of advanced genetically engineered crops 1 Developing economies excluding the least developed. 2 Will vary across cancer types. 3 We take into account the overlap of diabetes- and cardiovascular-related deaths. 4 Measured by parents’ willingness to pay. NOTE: Estimates of potential economic impact are for some applications only and are not comprehensive estimates of total potential impact. Estimates include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted. Numbers may not sum due to rounding. SOURCE: McKinsey Global Institute analysis 37
  • 39. Sized applications of energy storage could have economic impact of $90 billion to $635 billion per year in 2025, including consumer surplus (1/2) Sized applications Electric and hybrid vehicles Distributed energy Stabilizing electricity access Electrifying new areas Potential economic impact of sized applications in 2025 $ billion, annually Estimated potential reach in 2025 Potential productivity or value gains in 2025 ▪ 115 million passenger 20– 415 Estimated scope in 2025 ▪ 40–100% of vehicles sold in ▪ Fuel price: $2.80–7.60 per gallon ▪ 0.22 KWh per mile fuel efficiency ▪ 25– 100 ▪ 13,000 TWh electricity 0– 50 Frequency regulation Peak load shifting 10– 25 Infrastructure deferral ~10 ▪ 25– 35 Other potential applications (not sized) Sum of sized potential economic impacts vehicles sold Over 1 billion vehicles in the market consumption in emerging markets 2–70 hours per month without electricity ▪ 60–65% rural electrification ▪ ▪ rate 1.2 billion people without electricity access 60 KWh monthly electricity requirement of average household 2025 could be electric or hybrid ▪ 35–55% adoption with solar ▪ and battery combination 35–55% of companies in Africa, Middle East, and South Asia own diesel generators ▪ 50–55% adoption based on number of people projected to earn above $2 per day for EVs ▪ $0.75–2.10 per KWh value of ▪ uninterrupted power supply to an enterprise $0.20–0.60 per KWh value per household ▪ $0.20–0.60 per KWh value per household for direct lighting, TV, and radio benefits 90– 635 NOTE: Estimates of potential economic impact are for some applications only and are not comprehensive estimates of total potential impact. Estimates include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted. Numbers may not sum due to rounding. SOURCE: McKinsey Global Institute analysis 38
  • 40. Sized applications of energy storage could have economic impact of $90 billion to $635 billion per year in 2025, including consumer surplus (2/2) Sized applications Electric and hybrid vehicles Stabilizing electricity access Electrifying new areas Frequency regulation Potential economic impact of sized applications in 2025 $ billion, annually Estimated potential reach in 2025 Potential productivity or value gains in 2025 ▪ 27,000–31,000 TWh global 20– 415 Estimated scope in 2025 ▪ 100% technology adoption, ▪ $30 per MWh weighted average ▪ 10–20% adoption of energy ▪ $65–80 per MWh between non- 25– 100 ▪ 0– 50 ▪ 25– 35 ▪ 12% of total electricity ▪ Utility grid Peak load shifting 10– 25 Infrastructure deferral ~10 Other potential applications (not sized) Sum of sized potential economic impacts electricity consumption 1.5% electricity production reserved for frequency regulation 2.5% additional reserved for renewable integration production possible to shift 850 million tons additional CO2 release more efficient, and cost competitive with incumbent solutions storage, given costs compared with cycle gas turbines frequency-regulation price renewable peak and base load ▪ $45–65 per MWh between peak ▪ ▪ $295 billion per year ▪ investment in T and D infrastructure deferral 10% spent to reduce congestion ▪ 15% adoption based on share of transmission lines economical for energy storage and average wind price $30–45 per MWh between peak and average solar price ▪ Possible deferral of infrastructure investment by 2.5 years 90– 635 NOTE: Estimates of potential economic impact are for some applications only and are not comprehensive estimates of total potential impact. Estimates include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted. Numbers may not sum due to rounding. SOURCE: McKinsey Global Institute analysis 39
  • 41. Sized applications of 3D printing could have direct economic impact of $230 billion to $550 billion per year in 2025 Potential economic impact of sized applications in 2025 $ billion, annually Consumer use of 3D printing Direct product manufacturing1 Estimated scope in 2025 Estimated potential reach in 2025 Potential productivity or value gains in 2025 ▪ $4 trillion in sales of Sized applications ▪ 5–10% of relevant products ▪ 60–80% value increase per 3D- ▪ $300 billion spending on ▪ 30–50% of products in ▪ 40–55% cost savings to buyers of ▪ 30–50% of injection- molded ▪ 30% production cost reduction consumer products that might be 3D printed 100– 300 100– 200 ▪ Tool and mold manufacturing 30– 50 complex, low-volume items such as implants and tools $470 billion spending on complex, low-volume parts in transportation ▪ $360 billion global market for injection-molded plastics Other potential applications (not sized) Sum of sized potential economic impacts (e.g., toys) could be 3D printable, assuming easy consumer access relevant categories replaceable with 3D printing plastics produced with 3Dprinted molds printed product – 35–60% cost savings to consumers – 10% added value from customization 3D-printed products using superior 3D-printed molds 230– 550 1 Focuses on use of 3D printing to directly manufacture low-volume, high-value parts in the medical and transport manufacturing industries. Other potentially impactful applications might include manufacturing of low-volume, high-value replacement parts for other industries. NOTE: Estimates of potential economic impact are for some applications only and are not comprehensive estimates of total potential impact. Estimates include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted. Numbers may not sum due to rounding. SOURCE: McKinsey Global Institute analysis 40
  • 42. Sized applications of advanced materials could have direct economic impact of $150 billion to $500 billion per year in 2025 Sized applications Potential economic impact of sized applications in 2025 $ billion, annually Estimated scope in 2025 20 million new cancer cases worldwide in 2025 Drug delivery 150– 500 Other potential applications (not sized) Sum of sized potential economic impacts Estimated potential reach in 2025 Potential productivity or value gains in 2025 5–10% of cancer patients could benefit from nano-based drug delivery treatments $130,000–230,000 QALY value created per patient1 ▪ $100,000–200,000 for 1–2 years increased life expectancy ▪ $30,000 from reduced chemotherapy side effects Example applications not sized include nanomaterials for electronics and composites and applications of other advanced and smart materials, such as self-healing concrete or memory metals 150– 500 1 QALY is quality-adjusted life year. NOTE: Estimates of potential economic impact are for some applications only and are not comprehensive estimates of total potential impact. Estimates include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted. SOURCE: McKinsey Global Institute analysis 41
  • 43. Sized applications of advanced oil and gas exploration and recovery could have direct economic impact of $95 billion to $460 billion per year in 2025 Sized regions and applications North America – shale gas1 North America – light tight oil Potential economic impact of sized applications in 2025 $ billion, annually Estimated incremental annual production in 2025 Assumed price in 2025 ▪ 71 trillion cubic meters (Tcm) ▪ 145 billion cubic meters ▪ $70–280 per million British thermal ▪ 64 billion barrels of reserves – 57 billion barrels in 10– 35 Currently estimated reserves ▪ 5.4–9.0 million barrels per ▪ $50–150 per barrel ▪ More than 150 Tcm of ▪ 70–220 Bcm ▪ Regional pricing (per MMBtu) – China, Australia: $8–10 – Argentina: $7–8 – Europe: $6–11 ▪ More than 130 billion barrels ▪ 0.5–1.7 million barrels per ▪ $50–150 per barrel of reserves – 60 Tcm in United States – 11 Tcm in Canada 60– 300 (Bcm) day unit (MMBtu); nearly $2–8 million per Bcm United States – 7 billion barrels in Canada Rest of the world – shale gas Rest of the world – light tight oil 15– 65 10– 60 of reserves – 24 billion barrels in Russia – 13 billion barrels in Argentina Other potential applications (not sized) Sum of sized potential economic impacts2 reserves – 36 Tcm in China – 22 Tcm in Argentina 95– 460 day ▪ Potential unsized applications include coalbed methane and methane clathrate 1 Potential economic impact estimated by calculating incremental gross output from 2025 production and prices, and converting into value added through GDP multiplier tables; currently estimated reserves are for information only. 2 Only direct value added—indirect and induced impact, as well as downstream benefits, could nearly double the impact. NOTE: Potential economic impact not comprehensive; includes potential impact of sized applications only. Numbers may not sum due to rounding. SOURCE: McKinsey Energy Insights; US Energy Information Administration; McKinsey Global Institute analysis 42
  • 44. Sized applications of renewable energy could have economic impact of $165 billion to $275 billion per year in 2025 Sized renewable energy sources1 Solar photovoltaics Cost impact Wind Potential economic impact of sized applications in 2025 $ billion, annually 105– 110 ▪ 27,000–31,000 TWh 40– 45 ▪ ▪ Total cost impact 145– 155 ▪ Social impact (CO2 avoided) Solar photovoltaics Wind 15– 90 5– 30 Other potential applications (not sized) Sum of sized potential economic impacts2 ▪ global electricity consumption 8,500–9,500 TWh renewables generation (wind, solar, hydro) $4.5–5.5 trillion annual generation cost of global electricity 2–degree Celsius maximum temperature rise target by 2050 450 ppm global greenhouse gas concentration limit by 2050 Estimated reach in 2025 Potential productivity or value gains in 2025 ▪ 1,330–1,570 TWh, or 5% of Estimated scope in 2025 ▪ 60–65% drop in the levelized cost ▪ total electricity generation 1,100–1,300 TWh incremental generation vs. base scenario ▪ 2,700–3,500 TWh, 10–11% ▪ of total 500–550 TWh incremental generation vs. base scenario of electricity (LCOE) over base scenario ▪ 25–30% drop in LCOE over base scenario – Onshore: 13–15% – Offshore: 50% ▪ 700–880 million tons ▪ $20–100 per ton of CO2 avoided ▪ 280–300 million tons ▪ $20–100 per ton of CO2 avoided ▪ Potential applications not sized include hydro, biomass, ocean thermal and wave energy, geothermal, next-generation nuclear, and concentrated solar power. 165– 275 1 Value calculated for a set of regions representing approximately 90% of the total market. 2 Only direct value added—indirect and induced impact not sized. NOTE: Potential economic impact not comprehensive; includes potential impact of sized applications only. Numbers may not sum due to rounding. SOURCE: McKinsey Global Energy Perspective; US Environmental Protection Agency; McKinsey Global Institute analysis 43