Penny Burtt Slide - megatrends


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Tomorrow belongs to those who prepare for it today - mega trends that will shape the next 20 years

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Penny Burtt Slide - megatrends

  1. 1. “Tomorrow Belongs to thosewho prepare for it today –mega trends that will shapethe next 20 years”Presentation at Australian Institute of Company DirectorsDirecting in the Asian CenturySingapore, May 8, 2013CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of McKinsey & Company is strictly prohibited
  2. 2. McKinsey & Company | 1China World Wide WebG7Twenty years ago . . .1
  3. 3. McKinsey & Company | 2. . . who would have imagined?G20 Mobile WebChina2
  4. 4. McKinsey & Company | 3More than 50% of chiefexecutives believethat, in the next 10years, their businessmodel will undergofundamentaltransformation3
  5. 5. McKinsey & Company | 4The Great Rebalancing4
  6. 6. McKinsey & Company | 5+50% of GDP growth over the next10 years will come fromnon-OECD countries5
  7. 7. McKinsey & Company | 61.3 million a week6
  8. 8. McKinsey & Company | 77New ShenzhenOld Shenzhen
  9. 9. McKinsey & Company | 8Globally, the number of megacities willdouble over the next 10 to 20 yearsSOURCE: United Nations; World Urbanization Prospects 2007; McKinsey Global Institute China All City Model; McKinsey Global Institute analysis1 Cities with 10 million or more inhabitantsMumbaiDelhiNew YorkLos AngelesMexico CityOsaka-KobeTokyoParisRio de JaneiroSão PauloManilaCairoIstanbulMoscowBuenos AiresBeijingLondonSeoulKinshasaLagosDhakaKarachiBogotaTehranLimaJakartaHyperabadBangaloreAhmadabadChennaiHangzhouShenzhenShanghaiGuangzhouTianjinWuhanLahore ChongqingChengduXi’anKolkataMegacities1 2007Additional megacities by 20258
  10. 10. McKinsey & Company | 9The urbanisation will result in the emergenceof 3 billion middle class consumers5251,7403,228105324,88423410731368032220203,249165 5725170333320091,8451816643382030Middle East andNorth AfricaSub-Saharan AfricaAsia-PacificCentral andSouth AmericaEuropeNorth AmericaGlobal middle classMillions of people9
  11. 11. McKinsey & Company | 1010048TotalDevelopingeconomies52DevelopedeconomiesSOURCE: Global Insight; EIU; MGIA tidal wave of consumptionPrivate consumption growth, 2008-2025Percent, 100% = 16.6 trillion dollarsWith an averageper capita spendof just 15% of thatof developednations, we canexpect to seeradicalinnovations inbusiness models10
  12. 12. McKinsey & Company | 11SOURCE: BoA Merrill Lynch Wireless Matrix 3Q 2009Airtel went from a regional Indiantelco to one of the world leadingmobile operators▪ 5x lower per-minute prices, butsame margins as western telcos▪ Relentless acquisitions▪ 200M subscribers globally,5th largest global wireless carrierLow cost does not necessarily meanlow margins11
  13. 13. McKinsey & Company | 12Top 5 construction equipmentmanufacturers by revenue, 2009$ billionsTop 5 volume producer of high sellingconstruction equipment SKUWheel Loaders, units, 000sSOURCE: Bloomberg; Company WebsiteMajor value-volume disconnects emergingChinese manu-facturers supplymore than one-third of emergingmarket demand45101532TerexVolvoLieb-herrKom-atsuCater-pillar1820242930Lin-gongCater-pillarXGMCLiu-gongLon-king12
  14. 14. McKinsey & Company | 1320608040Profit100Growth100GDP growth, 2009-2023PercentGDP share, 2023Percent65%OECDSOURCE: IHS Global Insight, disguised client exampleMNCs must wrestle with the disparity betweenlong-term growth and near term profits …Disguised company example:Revenue growth vs. profitsOECDNon-OECD100%= $26 T100%=$76 T4654653513
  15. 15. McKinsey & Company | 1414Pricing the Planet
  16. 16. McKinsey & Company | 15An expected +30%increase in resourceconsumption by 2020+50% of oil reserves in just 4 countries –Iran, Iraq, Venezuela, and Saudi ArabiaNot just oil, but acrosscommodities—metals,water, food, and otherresources15
  17. 17. McKinsey & Company | 162006 2020“Clean”energyFossilfuels100% =QBTU464~22%~21%62416
  18. 18. McKinsey & Company | 17Entire industries shiftingSOURCE: McKinsey steel model1 Profit pool calculated based on EBITDA x demand/production, calculated for 12 major regions, with EBITD based on historical highs and lows by region and product1122318 15 1741787812861Profit pool1 split, HRCEBITDA in USD billions, PercentIron oreCoking coalSteel-Making1995 2000 2005 200917
  19. 19. McKinsey & Company | 18Resource conservation going mainstreamManufacturingAgricultureLogisticsNo left turns…28.5 million fewerdelivery route miles3 million gallonsof saved gas31,000 metric tonsreduced CO2 emissions2% reduced fuel cost+ 60% of global watergoes toagriculture, most iswasted▪ Low-cost irrigationtechnologies candouble yields whilereducing water usage50-75%SOURCE: NY Times; McKinsey Water Initiative; UNESCO; WBCSD; IWMI-Summary of Comprehensive Assessment in Agriculture;executive summary of the WWDR. World Bank, 2001, Washington DC; UNESCO; FAPRI (2008); London Science MuseumDirect Panel on LoomCAD technologyweaves exactly-shaped fabric panels– no cutting, noscraps▪ 15-20% less fabric▪ 70-80% less water▪ 50% shorter lead time18
  20. 20. McKinsey & Company | 19Surprising ―green‖ technologiesGenetically Modified FoodsFewer pesticidesLess H2O usageLess land useLower carbon footprintAlready +20% ofdeveloped world crops0501001502002503001980 1990 2000 2010 2020 2030Yield increase from GMOsBushels per acreILLUSTRATIVEPotential of 2x yieldgrowth from GMOs vs.conventional breedingTrend yield growth fromconventional breeding19
  21. 21. McKinsey & Company | 2020The Global Grid and next waveof technology to driveproductivity20
  22. 22. McKinsey & Company | 21Two decades of growth . . .Compound Annual Growth Rate*, 1990-2005PercentGDPTradeflowsCapitalflows5%7.4%10.7%21
  23. 23. McKinsey & Company | 22SOURCE: IMF 22Late 2000s
  24. 24. McKinsey & Company | 23NorthAmericalRest ofworldEuropeAsia1 andAustraliaJapanMiddle East1672414294527 4130 13-2184215A world in which non-US capital flows areout-growing US flowsGlobal cross-border capital stock flow 2001- 07, select flowsCAGR %1 14 countries – Japan, China, Hong Kong, Singapore, Australia, South Korea, Malaysia, Thailand, India, Indonesia, Taiwan, Macao, Philippines, and VietnamSOURCE: McKinsey Global Institute Cross-Border Investments Database; team analysis 23
  25. 25. McKinsey & Company | 24Fully global supply chain – where did youriPhone come from?Foxconn City (Longhua, PRC)Home of 300,000 workersFoxconn▪ $62b revenue▪ 920,000 employeesNew York CityApple▪ $65b revenue▪ 49,000 employeesSOURCE: Bloomberg; Apple; Foxconn; Wikipedia; press search 24
  26. 26. McKinsey & Company | 25SomaliaTanzaniaEthiopiaKenyaUganda25
  27. 27. McKinsey & Company | 26Companies increasingly born global▪ Launched by a Swede and a Dane inLuxembourg in 2003▪ Is the largest (12%) provider ofcross border communications in theworld – without a networkinfrastructure▪ Partnered with international telecomoperators to expand reach▪ 40 M international users online atpeak times26SOURCE: Company Web sites; press search
  28. 28. McKinsey & Company | 27Worldwide installed network devices, 2014―The Internet of Things‖ will change the wayscompanies do businessNetworked devices(RFID tags/Sensors)20-50 BIndustrial(e.g., Auto, utilitymetering, buildings,retail, banking)412MMobile devicesaccessing internet1.7 BExplosion in thenetwork of users,objects, andinformationDevices accessingInternet10 B27SOURCE: Analysis Mason, Press search, Network World August 16, 2010; Juniper Research 1/19/ 2010 pressrelease, , Business Week 6/29/2009: “Online Gizmos Could Top 50 Billion in2020”,,
  29. 29. McKinsey & Company | 28Cutting-edge technology has enabled signifi-cant productivity gains in leading companiesin the worldTechnologyTelemetric sensorsallows measurements to bemade at a distance, via radiowave or IP network transmissionReducesupply costs by12%, 10 - 15%fleet sizereductionGlobal Positioning System GE Transportationuses GPS formonitoringtransportationequipment andcargo, and transactionsupport (e.g., pre-clearing fuel taxes)Company Application Sample ImpactA sensor-enabledtelemetric solution wasattached to BP’srailcars to optimizefleet managementIncreaseefficiency ofliquid petroleumtanks by 25%space-based satellitenavigation system thatprovides location andtime information in allweather28
  30. 30. McKinsey & Company | 29What happens next?―If the burden of leadership in the modern agecan seem overwhelming, the good news isthat the potential benefits are overwhelmingtoo. The flip side of all the chaos, complexityand pressure is that large organizations – ifled well – can do more for more people than atany other moment in human history. Leaderswho understand their role and how toleverage it in this rapidly changingcontext, have the opportunity to change theworld in ways their predecessors neverimagined.‖-- Dan Vasella, Chairman Novartis29