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The World in 2025 - Future Agenda (2016)

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What are the big issues for next decade? The World in 2025 is the full synthesis of insights from the second Future Agenda programme undertaken in 2016. From 120 discussions with thousands of informed people in 45 cities across 35 countries, we gained over 800 insights on the next decade. From these we identified and detailed over 60 key areas of change - those are all shared feely on the future agenda website (www.futureagenda.org).

This document brings all of these insights together in a single pdf for you to use. It is a free book shared under the Creative Commons Attribution Non Commercial 3.0 licence. We hope that you find it a useful view of how people around the world see change occurring over the next decade.

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The World in 2025 - Future Agenda (2016)

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  2. 2. Future Agenda
  3. 3. © Future Agenda 2016 ISBN 978-0-9932554-2-7 All images © istockimages.com First published in 2016 by Future Agenda Limited 84 Brook Street London W1K 5EH
  4. 4. Future Agenda The World in 2025
  5. 5. 6 Context 7 Certainties 13 Everything connected 11 Imbalanced population growth 17 Resource constraints 21 Shifting power and influence 25 Interconnected systems 29 Affordable healthcare 31 Air quality 35 Autonomous transport 39 Deeper collaboration 43 Energy storage 47 Food waste 51 Intra city collaboration 55 Open supply webs 59 Urban obesity 63 Data revolution 67 Changing nature of privacy 69 Data ownership 73 Enhanced performance 77 Ethical machines 81 Privacy regulation 85 The increasing value of data 89 Truth and illusion 93 Contents
  6. 6. Unequal access 97 Access to transport 99 Capitalism challenged 103 Caring for those left behind 107 Education revolution 111 Mass engagement 115 Off grid 119 Rising youth unemployment 123 Shrinking middle 127 Our habitat 131 Accelerated displacement 133 Basic sanitation 137 Built-in flexibility 141 Citizen-centric cities 145 Flooded cities 149 Infrastructure deficit 153 Nature’s capital 157 Plastic oceans 161 Sometimes nomads 165 Beliefs and belongings 169 Agelessness 171 Care in the community 175 Female choice dilemma 179 Human touch 183 Keeping the faith 187 Working longer 191 Power and influence 195 Africa growth 197 Companies with purpose 201 Declining government influence 205 Eco civilisation 209 Rise of nimby 213 Standards driving trade 217 Still being stupid 221 The Rise of the cult of China 225 Changing business 229 Creative economy 231 Currencies of meaning 235 Digital money 239 Dynamic pricing 243 Full cost 247 Optimised last mile 251 Organisation 3.0 256 Skills concentration 259 Speed to scale 263 The real sharing economy 267 Conclusion 271 The Future Agenda team 279 Hosts/Partners 285 Future Agenda 2020 287 Further reading 289 Copyright and creative commons 321
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  8. 8. 9 Context Taking the long view has never been easy. Rapid technological advances, shifting political movements, changing economic dynamics and accelerating societal change are seldom far from the news headlines and many of us struggle to understand their implications on day-to-day life. Taking the long view has never been easy. Rapid technological advances, shifting political movements, changing economic dynamics and accelerating societal change are seldom far from the news headlines and many of us struggle to understand their implications on day-to-day life. Indeed, such are the challenges that it seems clear that the major issues facing our planet are of such a magnitude that no single institution or organisation can truly understand their impact alone. As change accelerates in an increasingly connected world, more companies are looking further ahead to better understand emerging opportunities and challenges. We believe that sharing knowledge across disciplines and across continents can add real value to this process, particularly as much-needed innovation often occurs at the intersection of different disciplines, industries or challenges. This is what the Future Agenda programme strives to achieve. Our aim is to make it easier for all organisations, large or small, to shape a strategy that will help them to address the major challenges we face and identify ways in which systems could function, consumers behave and governments regulate over the next decade. The first Future Agenda programme ran in 2010. Building on expert perspectives that addressed everything from the future of health to the future of money, over 1500 organizations debated the big issues and emerging challenges for the next decade. Sponsored globally by Vodafone Group, the programme looked out ten years to the world in 2020 and connected CEOs and mayors with academics and students across 25 countries. Additional online interaction connected over 50,000 people from more than 145 countries who added their views to the mix. The results, which were published both online and in print, have been widely shared and have been used around the world by individuals and organizations. TV programmes, talks, workshops and additional discussions have followed as people have explored the potential implications and opportunities in their sector or market. World Now World Future Current Focus Future Focus
  9. 9. 10 Future Agenda’s success stimulated several organisations to ask that it should be repeated. Therefore the second programme, Future Agenda 2.0, ran throughout 2015 looking at key changes in the world by 2025. Following a broadly similar approach, it added extra features, such as providing more workshops in more countries to gain an even wider input and enable regional differences to be debated. All in all 25 topics were explored in 120 workshops hosted by 50 different organisations across 45 locations on five continents. There was a specific additional focus on the next generation, so we including collaboration with schools, universities and other educational organizations. A more refined use of social networks to share insights and earlier link-ups with global media organizations ensured wider engagement on the pivotal topics. In addition, rather than having a single global sponsor, this time multiple hosts supported workshops on specific topics either globally or in their regions of interest. This book outlines the insights we gained rom all the conversations. We have already witnessed a number of opportunities for positive change. These include suggestions about how to tackle some of the challenges around climate change, sustainable health and food supply for example; ideas about how to use policy to best influence our right to a private life. Our material has also acted as a stimulus for the development of new products, services and business models. We are delighted and humbled that so many people have given freely of their time and intellect to help ensure that Future Agenda has become a reality. Run as a not for profit project with the core team all donating their time, it continues to be a major collaboration involving many leading, forward- thinking organisations around the world. We hope you find the insights useful and thank you for your interest.
  10. 10. 11 To do this we invited recognised experts in each topic from across the academic, commercial and government arenas to answer a number of common questions on the future. These were then edited into initial perspectives and put into a standard format to ease navigation and to ensure a common structure. Each was each grouped into four sections – namely the global challenges, options and possibilities, the way forward, and impacts and implications. We then initiated a nine-month programme of face- to-face workshops across the world in order to build on the initial perspectives. Some of these were within single organisations but many brought together different expertise from multiple different avenues. Some took place in corporate conference facilities, some in hotels and restaurants – whatever worked best. In locations around the world, including London, New York, Singapore, Sydney, Shanghai, Frankfurt, Beirut, Dubai, Mumbai, Lima and Mendoza informed people from many cultures, of varied ages and with many different perspectives shared their views. After the workshops, the Future Agenda core team took the output from all the workshops and identified the major insights that we believe will drive change. These are issues that were raised in several discussions – either across different countries or across different topics. As part of the overall synthesis, they have now been have been broadened into 1000 word summaries and published both online and in-print form. As with the insights gained from the first Future Agenda programme, organisations around the world are already using the new views to variously challenge assumptions, refine strategic directions and identify emerging innovation and growth opportunities. All of the output from the Future Agenda project including all raw insights are made freely available for organsiations around the world to use to help challenge and build more informed views of the next decade. Foresight (5 to 10 yrs) Uncertainty Predictability Time Trends (3 to 5 yrs) Insight (1 to 2 yrs) Our Approach From the very beginning the intention was not only to get views for each topic on what the future would be, but also to get perspectives on which way we should go, why and with what consequences.
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  12. 12. 13 Certainties As we look forward most shifts are seen as being possible, probable and even plausible. Depending whom you talk to and where different changes on the horizon are seen as maybes with varied chances of occurring. Some maybe 50/50 others could be higher. There is however a small select group of future shifts on which pretty well everyone agrees are happening. Across multiple regions, topics and groups, these are seen as being certain. Out of the 800 insights generated by the future agenda programme, only four fit into this group. We call these the certainites. The topics covered in the following pages are: Everything connected Resource constraints Imbalanced population growth Shifting power and influence
  13. 13. 14 50 billion – SIM cards in use by 2025 80% – new mobile connections occurring in Africa and Asia Everything connected
  14. 14. 15 Everything connected Over 1 trillion sensors are connected to multiple networks: everything that can benefit from a connection has one. We deliver 10,000x more data 100x more effectively but are concerned about the security of the information that flows. By 2025, there will be over 50bn SIM cards in use, we will have digitized all of our archives, and new information will be being created at such a rate that some see us doubling the volume of our total data set every month. Much of this data will come from machines, talking to each other as well as to us - by the end of the decade, pretty much everything that can have a connection, will have one. IBM sees that the Internet of Things (IoT) is bringing over 1 trillion sensors into the world, all connected to each other and multiple networks. This digitization of the world has the potential to provide us with previously unknown levels of information and insight; equally it could open the doors to unpredicted risk. Today there are over 3.3bn of us connected to the Internet globally and we are currently adding another billion every three years. In 2014 China already had over 640m Internet users, the US had 280m and India 240m. With over 40% of the population connected, the general view is that within the decade pretty much all of us will have the capacity to be online, wherever we may be. Smartphones and other devices will be a primary driver of change; with 2.6bn smartphones already in use, Ericsson sees that there will be 6bn by 2020. Indeed, Ericsson and other big mobile technology network firms such as Nokia and Huawei are investing heavily in broadening the reach and performance of their networks. They are planning for a doubling of data traffic per user every 18 months to a point where each of us can access 1GB of information every day. Facebook and Google are looking at vast fleets of balloons and drones to bridge the digital divide and provide connectivity to those currently without coverage. With Africa and Asia accounting for over 80% of new connections, total mobile subscriptions by 2020 are now expected to number over 9 billion. As of 2015, some countries were already very connected. In terms of the number of devices per capita, Germany, Sweden, the Netherlands, Switzerland and the US had already passed the 20 threshold, Denmark was over 30 and South Korea was touching 40. Fast accelerating up the tables was China with 6 devices per capita but India had less than 1. Given the investments taking place looking ahead, a global average of just over 10 devices per capita by 2020 certainly seems credible. While 10 per capita is a handy number, increasingly these devices will not be owned or used by us. The vast majority, maybe 30 to 40 billion of them, will be embedded in machines. Cars, fridges, traffic lights, containers, robots and even surgical equipment will all be connected, creating, accessing and using data. Most of the digital information will be stored in the cloud with users expecting instant access anywhere anytime and thus testing the physical limits of networks. Networks will have to become programmable to create capacity on demand, heralding the advent of self-optimizing and cognitive networks able to handle complex end-to-end optimization tasks autonomously and in real time. All of us will have the capacity to be online, wherever we may be.
  15. 15. 16 The concept of interconnected networks of physical objects, machines, buildings, infrastructure and devices is a focus for many such as Cisco and IBM as part of the vision for a Smarter Planet. Although progress has not been as rapid as some thought, the direction of travel is still clear. Everything that can benefit from an Internet connection will, by 2025, probably have one, be that fridges, toasters, driverless trucks or pallets. The large amounts of data generated from diverse locations will be aggregated very quickly, thereby increasing the need to better index, store and process such data. One critical factor is how all these newly connected things connect to one another. Too many standalone IoT gadgets not taking into account the wider context, and digital ecosystems they exist within, is a concern. Without interoperability of technologies, products and ecosystems, these products will remain separate islands. There is however arguably even more data to be generated from passive tags and sensors. Miniature sensors that can be put anywhere – on food, in clothing, within packaging, inside components, in animals and pretty much anywhere we like – and which can be activated by a multitude of different energy waves from a reading device, can provide location, temperature, orientation, movement or biological information to be remotely read, hundreds at a time. IBM sees that within the decade we could have 1 trillion passive tags and sensors connected to multiple networks. Nokia’s view is that by 2025 we will have 10,000x more data being provided to us and between machines 100x more effectively. The knock on challenge will be the need to make sense of the information that flows. Whether or not we choose to access and hopefully make use of these vast amounts of data and information will, though, be our choice and not a consequence of location, income or education. Certainties A global average of just over 10 devices per capita by 2020 certainly seems credible.
  16. 16. 17 While the benefits are lauded in terms of the opportunities to improve efficiency, reduce waste and find out new things that were previously unknown, there are concerns about the risks of everything being connected. Some argue that we are jumping into connecting everything without thinking through all of the consequences, especially as some of the data protection on some devices is very low. People point out that a connected kettle, for example, could become the back door to your Wi-Fi network that bypasses all passwords and so an open door to your personal data. When everything is connected, not just kettles and laptops but power stations, traffic systems and medical devices, then the concerns shifts from privacy to security. Cyber attacks are already happening on a regular basis targeting not just databases but also machines and systems. Security services and consultancies are already busy monitoring, repelling and recovering systems from being hacked and hijacked. As we move forward with everything being linked online, the potential for harmful hacks rises significantly. This is especially true of the billions of passive tags and sensors that don’t have the power to support high levels of encryption. So while everything being connected has lots of upside, there is clearly also some risk. Everything connected We could have 1 trillion passive tags and sensors connected to multiple networks. A connected kettle, for example, could become the back door to your Wi-Fi network. Autonomous transport The shift to fully autonomous transport is an evolution via truck platoons on highways and small urban delivery pods. Connected cars create the network and test the technologies for the eventual revolutionary driverless experience. Built-in flexibility The path to a connected, accessible and distributed infrastructure is fraught with complex, costly and risky issues: Upgrading and repurposing systems to make them more open plus on-going maintenance need significant resources. Ethical machines Automation spreads beyond trading and managing systemic risk. As we approach technology singularity, autonomous robots and smarter algorithms make ethical judgments that impact life or death. The increasing value of data As organisations try to retain as much information about their customers as possible, data becomes a currency with a value and a price. It therefore requires a marketplace where anything that is information is represented. Related insights
  17. 17. 18 11 billion – global population by 2100 1.4 billion – people aged over 60 by 2030 Imbalanced population growth
  18. 18. 19 Imbalanced population growth A growing population adds another billion people but it is also rapidly ageing: a child born next year will live 6 months longer than one born today. While migration helps to rebalance, increasing dependency ratios challenge many. While there are a number of different views on total population growth over the next 50 years, no one disagrees that this growth is going to be imbalanced. Be it ageing, fertility or geography, we are increasingly going to have more people in the places and demographic zones where we are least comfortable. Dependency ratios in some countries are fast moving into unsustainable areas; thanks to climate change we are going to see significantly increased migration as the system across many societies seeks to rebalance itself. This in turn will lead to economic, political and social stresses around the world, bringing a greater pressure on the overall system in the next decade. The latest medium UN projections see the current global population of 7.4bn rising to 8.5bn by 2030, 9.7bn by 2050 and over 11bn by 2100. Overall, with better use of food and land, this is thought possible. However, regionally the numbers and speed of increase vary considerably. In Europe, the natural population is actually set to decline. Other countries with a naturally declining population include Japan, South Korea, Taiwan and Singapore. In all, the populations of 48 countries or areas in the world are expected to decrease between 2015 and 2050. By contrast, Africa is growing steadily. Africa’s share of global population is projected to rise 25 per cent by 2050 and 39 per cent by 2100, a staggering 4.9bn. Elsewhere, the trend is somewhere in between: In North America the population is expected to reach 500m by the end of the century; In South America 721m. Across Asia as whole, we will see 4.9bn by the end of the century. Overall we will be adding an average of 60m people a year to the planet between now and 2050. While most of the growth is evidently coming from Africa, other expanding nations such as India are experiencing what they see as more manageable growth. Those countries that are seeing population decline however face significant structural issues for the future. If they are to maintain sustained economic growth, one of the biggest challenges is how to achieve this with an increasingly imbalanced domestic population. There are three core drivers of population growth: ageing, fertility and migration. It is the first of these that is most visible in most societies today. One of the great successes of the last 50 years has come from improved healthcare; we are all living longer. 900m people, around 12% of the world’s population, are aged over 60 (projected to rise to 1.4 billion by 2030). While most of the overall increase will come from health improvements achieved in bringing the average in Africa up from 50, it will be in Asia, America and Europe where the elderly will be most visible. We will be adding an average of 60m people a year to the planet between now and 2050.
  19. 19. 20 In pretty much every country the number of babies being born per family is on the decrease. This is widely seen to be a good thing as it both reflects better healthcare and puts a brake on runaway long-term population growth. Infant mortality is decreasing and so families no longer see the need to have so many children to stand a chance of them making it through to adulthood. The single biggest factor in reducing fertility is widely seen to be female education, a major focus for many governments worldwide for the past 50 years and a priority Millennium Development Goal; women who are empowered through education tend to have fewer children and have them later. China’s One Child Policy was introduced in 1978 to manage population growth. Although it has many detractors, many see that it has worked but maybe too well. During this time the population growth has been brought under control but there have been consequences. As a result, the policy is now for two children. China has too many men, too many old people, and too few young people, “a huge crushing demographic crisis. If people don’t start having more children, they’re going to have a vastly diminished workforce to support a huge aging population.” Bringing all this together, within and across countries, demographers look at the balance of society by calculating dependency ratios. These are a measure showing the number of dependents (aged 0-14 and over the age of 65) to the total population (aged 15- 64), the number of people being supported by the system in proportion to the population available to work and so pay taxes into the system. Concern is raised when the total ratio increases beyond 60% and the elderly ratio is more than half of that, showing not only a high level of social burden, but one skewed by an ageing population. As the elderly dependency ratio globally is set to double by 2050, a good number of countries will be worried. Similarly, the potential support ratio (PSR) calculates the number of working age people per single elderly person. By 2050, many countries are expected to have PSRs below 2, underscoring the fiscal and political pressures that the health care systems, as well as the old-age and social protection systems, of many countries are likely to face in the not-too- distant future. Certainties The number of babies being born per family is on the decrease.
  20. 20. 21 Shorter-term options for rebalancing and imbalanced population are few and perhaps the most visible is migration. Around one in seven people today are migrants: net migration is projected to account for 82 per cent of population growth in the high-income countries. Migration is an increasingly political concern globally; although the current conflict-driven movement of people out of Syria is ever present on our TV screens, globally the great majority of displaced people have been uprooted by weather- related disasters. As the rate of growth globally drops, thanks to longer life spans, and we continue to move towards a steady state of around 2bn babies on the planet, what remains uncertain is how societies will seek to cope with high dependency ratios and low potential support ratios, and the role we will want to give increased migration as the 21st Century’s primary population balancing mechanism. Imbalanced population growth Net migration is projected to account for 82 per cent of population growth in the high-income countries. Accelerating displacement Climate change, conflict, resource shortages, inequality and political elites unable or unwilling to bring about necessary change all trigger unprecedented migration to the North Over the next 50 years, as many as 1 billion people could be on the move. Africa growth With a land mass bigger than India, China, the US and Europe combined, few doubt the scale of the African continent and its resources. However, until recently only some have seen it as the growth market that it is fast becoming. Agelessness A person’s physical age becomes less important as society adapts to the new demographic landscape. New opportunities arise for creators and consumers of all ages, though benefits are often only for the wealthy. Rising youth unemployment With unemployment rates already over 50% in some nations, access to work is a rising barrier. Especially across North Africa, the Middle East and southern Europe, a lost generation of 100m young people fails to connect with or gain from global growth. Related insights
  21. 21. 22 1.6 – equivalent planets of resources consumed each year 70% – of all fresh water is used for agricultural purposes Key resource constraints
  22. 22. 23 Key resource constraints Economic,physicalandpoliticalshortagesofkeyresourcesincrease and drive increasing tension between and within countries. As we exceed the Earth’s natural thresholds, food and water receive as much focus as oil and gas. People are concerned about the environmental impact of our continuing to consume more resources than the earth can naturally replenish. We currently consume the equivalent of 1.6 planets a year, meaning ‘overshoot day’ – the day each year when demand outstrips natural supply - is coming earlier and earlier. Many worry about us physically running out of important materials but others however are more sanguine, seeing the recent drop in oil prices as a reflection of declining demand. The true picture is itself complex but consistent. While we are not necessarily running out of things, access to many important resources is increasingly constrained - be that physically, economically, politically and environmentally. Over the next decade, many resources are going to become more difficult to get hold of and may become more expensive. When we talk about resource constraints, the usual ones come to mind: food, oil and water. However we should also consider metals, phosphorous, gas and land. All are under pressure – some more extreme than others. At current rates of consumption, there are real physical constraints on several important materials. We have around 8 years production left of antimony, a key ingredient in batteries, 12 years of iridium, important for solar panels, and only 17 years of silver and zinc. We have around 30 years worth of copper, 45 years of titanium. Without a downturn in consumption or a switch to alternatives, these are very big concerns. As we deplete these resources, countries with supplies will seek to keep them and their prices will increase. Other resources are in more plentiful supply but are under pressure politically, environmentally or economically. We have between 40 and 80 years supply left of coal; given its impact on carbon emissions, it is little surprise that its use is being restricted on environmental grounds. Gas and oil, the other two major fossil fuels, are also under pressure but with different emphasis. Gas is cleaner than both coal and oil but, with the main global supplies lying in Russia and the Middle East, is evidently prone to political pressures. The same is true of oil, although unlike in the past when low demand dropped OPEC production, recently Saudi Arabia has kept pumping into an over-supplied market and so instigated the low current prices. With producers such as Nigeria, Angola and even Saudi Arabia itself suffering economically, how long oversupply - and low prices - can continue is a source of hot debate. However what is less contested is that over the next decade or so, overproduction will stop, prices will rebound and, within the context of a greener energy mix, oil will become increasingly more constrained by environmental issues. At current rates of consumption, there are real physical constraints on several important materials.
  23. 23. 24 Certainties Questions are also raised about peak supply for copper, zinc, other rare metals, and phosphorous. Essential for fertilizer, phosphate rock is only found in a few countries (the US, China and Morocco). Demand is directly linked to us wanting more efficient food production; we may become more efficient with food waste, but not reduce the need for modern industrial farming and its dependency on phosphorus. At current rates of consumption, we have around 75 years of supply left, but phosphorous cannot be replaced by something else, nor can it be artificially manufactured. It can only be recycled through organic methods. With peak-phosphorous estimated around 2030, it will increasingly feature on news bulletins over the next decade as another key resource of concern. Beyond phosphorus, anxiety on food supply and demand continues to grow. Globally we face more of a problem in net food distribution than food supply, at both local and regional levels. With more people increasingly in places where food is not plentiful, getting good quality food to people at affordable levels is already a challenge for many. Add in future population growth, more uncertain weather patterns (hence less predictable harvests), and food as a resource will become subject to more political as well as economic interest. Although there is clearly volatility in prices from year to year as weather impacts supply, the recent general trends for wheat, rice and soy are all upward, and expected to continue in that way. Over the next decade, maintaining global food security will become much more difficult as the population increases. Solutions include changing our diets - eating less meat, wasting less, improving yields and the wider adoption of GMO. Some of these may work in some cultures, but not all. The challenge therefore is how to manage an increasingly constrained food supply at the same time as we add another billion mouths to feed into the system. Food as a resource will become subject to more political as well as economic interest.
  24. 24. 25 Linked to food production for more people, but also driven by mass urbanization, is the quantity of arable land available. The amount of arable land per capita on the planet has already dropped from 0.45ha in 1960 to 0.25ha today – and is set to decline further. More efficient farming has helped manage this transition over the past 50 years, but there are concerns about the next 50. If 2010 was the year of peak farmland, we are going to need to produce more food from less land. As such we must double food production over the next decade - in a sustainable manner. Lastly, water – a resource that is neither running out, nor becoming more plentiful, but increasingly under pressure. We have the same amount of water today as we did 10,000 years ago, the challenge is how we use it. Globally, around 70% of all fresh water is used for agricultural purposes – while, depending where you live, the other 30% is split between domestic purposes, manufacturing and waste in the system. Given increasing demands on food supply, how we provide more water, or manage with less, is a significant test. More people stress the system, while, as many become wealthier, and so consume more energy, food and hence water, managing 10bn with the same amount of water as worked for 1bn is no easy task. Today few regions value fresh water and have little idea of its true cost. Going forward we can expect the challenge of water supply to be more widely recognized. It is clear that we face major supply / demand challenges. Some of these will result in higher prices, some in national hoarding, some in greater competition and some in more transparency. Whatever the resource the manifestations of change will vary. However what will be consistent as we look forward is that more resources will be seen to be increasingly constrained. Managing this is one of our major challenges for the next decade. Key resource constraints Managing 10bn with the same amount of water as worked for 1bn is no easy task. Energy storage Storage, and particularly electricity storage, is the missing piece in the renewables jigsaw. If solved, it can enable truly distributed solar energy as well as accelerate the electrification of the transport industry. Food waste 30-50% of our food is wasted either in the supply chain or in consumption and could feed another 3 billion. Optimising distribution and storage in developing countries and enabling better consumer information in others could solve this Full cost Increasing transparency of society’s reliance on nature, intensify requirements for business to pay the true cost of the resources provided by ‘natural capital’ and so compensate for their negative impact on society. Imbalanced population growth A growing population adds another billion people but it is also rapidly ageing: a child born next year will live 6 months longer than one born today. While migration helps to rebalance, increasing dependency ratios challenge many. Related insights
  25. 25. 26 25% – share of GDP growth accounted for by China 140 km/h – speed at which world’s centre of economic gravity is moving east Shifting power and influence
  26. 26. 27 Shifting power and influence The centre of gravity of economic power continues shifting eastwards, back to where it was 200 years ago. Recent superpowers seek to moderate the pace of change but the realities of population and resource locations are immoveable. Are we are witnessing the end of an era in globalization and international trade? The structures set up in the wake of the WW2 may no longer be fit for purpose. Western markets are weakening, the US appetite to act as overall arbiter and keeper of the peace diminishes and Europe faces its own constitutional challenges. Asian countries, which have in the main benefitted from a youthful workforce and rising middle class, are beginning not only to influence world trade but also to play a greater role on the diplomatic stage. Africa and South America have yet to make a significant impact, but with a wealth of natural resources at their disposal, the next ten years should begin to change this. Whether or not this is the Asian century as some foresee, the next decade will see the post-war routes gradually being eclipsed by the power of the Indian Ocean region. South-south trade doubled in the decade from 2000 to 2010, and is likely to account for over a third of global trade by 2025. After centuries of growth, Europe’s days in the economic sunshine are, many think, in relative decline. The Euro experiment has had its day and the Europeans will have to spend the next decade dealing with the repercussions of this failure. Some believe that the region will muddle through while others see three possible options: that the Euro will be split in two, probably on a North and South divide; second, a couple of major former currencies such as the Deutschmark and the Lira will be reintroduced, or third, there will be a complete re-fragmentation of the euro zone into individual national currencies and hence economic interests. Germany will remain the primary power within the EU over the next ten years, but overall Europe’s influence will be eroded by its internal problems, such as the UK’s threat of ‘Brexit’. Bridging Europe and Asia, but a long way from being an economic superpower, lies Turkey. Since the establishment of a Customs Union with the EU in 1996, Turkey’s EU exports have grown and in 2014 accounted for nearly $70 billion, or 43.5% of its total. Whether the former description of Turkey as ‘the world’s most progressive Muslim state’ will still hold in 2025, its influence on the regional and global economy seems set to grow as does, given its geopolitical location, its sway on global trade. Things, though, are not looking good in Russia. A declining population, access to secure water and food supplies previously supplied by former Soviet Union neighbours lost, its economy corrupt and dominated by quasi-state firms whose revenues depend on political contacts rather than economic efficiency. GDP growth averaged a paltry 2.4% from 2011 to 2014 despite high oil prices and renewed access to credit markets. Most economists see that Russia will have a less rosy future – with less focus on increasing its global financial interaction. This won’t deter Putin, keen to bolster his status at home, from maintaining a presence on the world stage. Its current military postulating around the Middle East in order to regain influence in key locations is perhaps understandable. The Euro experiment has had its day.
  27. 27. 28 Wherever you go in the Middle East there are some elements of commonality but also many areas of difference – especially concerning competition and conflict between Sunni and Shia, the financing of ISIS, the changes afoot in Saudi and the future ambitions of Iran to create a new Persian Empire. The US’s influence is declining, for economic and political reasons. Many OPEC economies need to increase diversification; not only is there the climate change challenge, but the potential to act as a growing, pivotal gateway for China and India, not just to the Middle East but significantly (in the long-term) to Africa. Few doubt the scale of the African continent (a land mass greater than India, China, the US and Europe combined, its workforce the world’s largest by 2040) and its resources. With a collective GDP of $2.6 trillion by 2020 and $1.4 trillion of consumer spending, many anticipate the impact of around 500m new middle class consumers. The question here is one of timescale; will there be significant change in the next decade or, like India, a longer period of transition? India’s perfect population pyramid, a massive domestic market, a growing middle class, more successful home-based multinational private companies, little interest in military expansion to secure resources, and world class expertise in IT and process innovation, all add up to the potential for India to be a top 3 economy. With a highly connected Indian diaspora and a number of very progressive business leaders, many see India as a certain long- term bet; but, for others, India is still a tricky place to do business, with a sagging infrastructure and endemic corruption presenting huge obstacles. The government aims to double India’s exports of goods to $900 billion a year by 2020 and improve India’s share of global trade from 2% to 3.5% by 2020. The World Bank, EIU, IMF and UN all expect between 6 and 7% GDP growth for the next decade. But progress on reform has been slow. Also in the region, Singapore will continue to be a major global trade hub, and be the Asian leader in GDP per capita; Indonesia will grow steadily via more progressive government polices and a strong base of raw material exports. But it is China that dominates. IMF figures show over the past decade it has averaged over 25% of the world’s GDP growth. Some are questioning the long-term sustainability of the Chinese economy, especially with the burden of unbalanced demographics stemming from the impact of the One Child policy. If China uses more of its economic might and soft diplomacy to reshape the world order, and if the Remnimbi maybe one day usurps the dollar as the world’s reserve currency, then China could dominate world trade. Certainties Many see India as a certain long-term bet.
  28. 28. 29 The fortunes of the other BRIC nation, Brazil, reflect China’s curtailment of the commodity boom; future growth for the next decade is projected to be under 3%. Other Latin America countries, Chile, Peru and Mexico, will benefit from being in the TPP. By contrast the more ‘inward looking’ Argentina is generally seen to be stumbling from one crisis to another. North lies the United States. Whereas China has 20% of the world’s population and generates around one seventh of global GDP, the US has 6% of the world’s population but still produces up to 25% of its GDP. Increasingly self-supporting both in trade and energy, will the US remain as the world’s naval policeman and ‘guarantee’ to keep global trade routes open? It may be several decades before there is a significant decline in US foreign policy and economic influence. The world’s centre of economic gravity has changed over past centuries. Since the mid-1980s, the pace of that shift, from the West toward Asia, has been increasing dramatically, at a speed of 140 kilometres a year - faster than ever before in human history. Having spent the first 1,000 years in Iraq and then gradually reached its westernmost point just off the Newfoundland coast in the 1950s, a McKinsey model sees that by 2025, with the growing impact of India and Africa, it will be near to the Russian border with China and Mongolia. Changes are on the cards. Shifting power and influence Will the US remain as the world’s naval policeman. Africa growth With a land mass bigger than India, China, the US and Europe combined, few doubt the scale of the African continent and its resources. However, until recently only some have seen it as the growth market that it is fast becoming. Currencies of meaning New trusted currencies of exchange and meaning emerge to better facilitate transactions, trade, authentication and validation. Money is complemented by new systems to which we attach greater significance. Declining government influence National governments’ ability to lead change comes under greater pressure from both above and below - multinational organisations increasingly set the rules while citizens trust and support local and network based actions. Standards driving trade International regulation is progressively aimed at freeing up trade and making it simpler and less bureaucratic – but there are a number of agreements, standards| and protocols that some are seeing as increasingly constraining. Related insights
  29. 29. 30
  30. 30. 31 Interconnected systems A few changes taking place in the world are occurring completely independently of others. Far more have a mutual dependency and are increasingly interlinked. Especially when concerned with complex issues that are impacted by several underlying driving forces, these are seen as being increasingly interconnected systems. While an individual trend may be simple to grasp, the causal relationships can be deep and complex. Whether driven by an overlap of resource demands and competing behaviours, these issues are proving difficult to fully address. The topics covered in the following pages are: Affordable healthcare Air quality Intra city collaboration Open supply webs Deeper collaboration Energy storage Autonomous transport Urban obesity Food waste
  31. 31. 32 70% – of global population without access to decent healthcare 80% – of healthcare costs spent on last 2 years of life Affordable healthcare
  32. 32. 33 Affordable healthcare The escalating cost of healthcare is further stressed by the need to support the old and the chronically ill. Spending 20% of GDP on healthcare is seen as unsustainable so hard decisions are taken around budgets and priorities. As nations develop and their economies grow, so does spending on healthcare. Improved health is a priority issue and the challenge for governments is how to provide an efficient, cost effective system. This is no easy task and many are buckling under the pressure of rising costs, ageing populations and increased public expectations; across the world the whole healthcare system seems to be imploding. Fear of failure is not quite at a point that will instigate change, many agree that something has to be done, but fewer know quite what this should be. 30% of the global population has access to decent healthcare; most developed countries use upwards of 9% of their GDP on health care – in the US, it’s over 17%. In India, spending is now over 4%, in China it’s approaching 6% and in Indonesia over 3%. Costs are escalating not only because of the general desire to reach more people but also because of the growth in preventative healthcare, health monitoring solutions and the increasing variety of medicines to treat the sick. Unlike other areas of high consumption, such as energy, where eventually demand plateaus, spending on healthcare is showing no sign of levelling off and there seems little hope in the current circumstances that it will do so. With healthcare the numbers just keep going up. What is paid for drugs in the US generally sets the standard in other markets. In most developed countries funding for this is picked up either by the state or the insurance system so the patient rarely has to come to terms with the real cost of care. But the money has to come from somewhere. The beginning of life can be expensive. Many countries are lowering the threshold at which they are able to support premature births from 26 weeks down to 22, but this costs: around £250,000 for a birth at 23 weeks, thirty times the cost for a full term baby. Meanwhile, global life expectancy increases on average by six months every year, largely due to better healthcare provision. Although each of us needs more overall medical attention because of this, our main requirements are associated with the last 2 years of life where more frequent admittance to hospital will account for around 80% of our healthcare costs. Better end of life provision is therefore a big issue – and one where the balance between hospital and palliative care is key. We cannot, though, blame the elderly for all the escalating cost of care. Our sedentary lifestyles and appetite for alcohol and cigarettes also lead to a huge rise in chronic conditions such as diabetes, heart conditions, emphysema and cirrhosis, all expensive to treat. Most seem to agree that we need an alternative solution, one that focuses on preventative healthcare measures rather than treatment. We also need technology that delivers improvements at scale and at low cost. India has become a standard bearer for redesigning processes delivering high quality healthcare at a fraction of the usual cost. $50 per patent cataract surgery from Aravind, or $2000 cardiac surgery from Naranaya Healthcare, innovation that drives the delivery of world class surgery at 1/50th of the cost of the same care in the Better end of life provision is therefore a big issue – and one where the balance between hospital and palliative care is key.
  33. 33. 34 US. High-tech, personalised treatments tailored to an individual’s genetic make-up rather than generic profiles is another fast-developing area. Significant investments have already been made by the biotech industry and will impact soon, particularly in the provision of bespoke drugs that can dramatically increase efficacy. The cost of such treatment is however currently prohibitively high because it requires the development of specific drugs for small populations and in all probability the additional provision of customised support systems. While some are sceptical of large-scale impact by 2025, because of the expense, all agree that personalised healthcare is a great opportunity for those who can afford to pay. Perhaps it all comes down to the business model. For the pharmaceutical industry, the system is based on the expectation of a $1bn revenue windfall from an occasional blockbuster, but as R&D budgets can only to be justified on the promise of a major drug discovery, this takes time and is extremely expensive to deliver – which explains the high average costs of patented drugs. There is a general acceptance of high failure rates in product development, and the reality is that very few of the drugs currently coming out of the system deliver reasonable returns either from a financial perspective or a health care perspective. Some see sequencing technologies helping to improve the efficiency of drug development, while others hope that Big Data will reduce or even eliminate costly clinical trails. While share prices are based on high drug prices, few believe that any of the big pharmaceutical players will seriously consider a different approach. And, while the current system in many countries is tilted towards rewarding sick-care rather than prevention, high development costs and high healthcare costs naturally follow. The principle of preventative healthcare is lauded, especially when tied into improving overall public health, but the system is not set up to align with this and there are few economies that are prepared to fund it at the scale required. Improved public education is an integral part of the process. Little things matter; in India between 4 -16% of pregnant women are anaemic, and better education around diet could have a dramatic impact on child survival rates at birth. However such is the scale of change required that few see a dramatic shift in public awareness any time soon particularly as the financial cost saving benefit does not come for 20 to 50 years down the line.The current system in many countries is tilted towards rewarding sick care rather than prevention, high development costs and high healthcare costs naturally follow. Interconnected systems
  34. 34. 35 Paying for healthcare is a balance between state intervention and personal responsibility; shifting from a national system towards private healthcare insurance is supported and rejected in equal measure. Some support the notion of each citizen having a personal healthcare budget, where there is a limit of spending beyond which the state either stops providing support or reclaims it via tax or benefits. Generally speaking, there are increasing expectations of ‘co- pay’ where sick patients will directly or indirectly pay for an element of their treatment, whether drug or hospital costs. In emerging economies, where private healthcare is already in place, the big challenge is to develop appropriate systems for everyone else. While most support the concept of the UK’s National Health System, many believe that it is simply not sustainable in the long term. Potential alternatives being explored in India and South America are focused around micro health insurance, where people pay a small amount a month extra on their mobile phone bill, used to fund a workable healthcare insurance system for the majority. Outstanding questions remain: what level of support can be provided, and how much additional government financing is also required? India is never going to spend as much on health care as the US, but will a combination of more innovation, effective use of data, new pricing systems for drugs, micro- insurance initiatives, more public-private partnerships and a slight rise in government funding provide an equivalent service? Certainly scalable, sustainable solutions are needed if we are to see affordable healthcare for all. Most likely we will see few global answers but more probably there will be a host of regional and local shifts, all aimed at a more cost efficient, more effective and more equitable healthcare system for a growing, aging but still, on average, healthier population. As one US health economist put it, ideally ‘we want to die quickly as late as possible’. Achieving that for all in the next decade really would be a success. As one US health economist put it, ideally ‘we want to die quickly as late as possible’. Affordable healthcare Care in the community The desire to ‘age-in-place’ meets a healthcare reform agenda that promotes decentralization. A new care model is customer-centric, caregiver-focused and enhances coordination across care settings. Caring for those left behind Although significant progress has been made positive change has limited reach. Millions of people continue to be left behind from main-stream progress -especially the young, the poor and those who are disadvantaged. Imbalanced population growth A growing population adds another billion people but it is also rapidly ageing: a child born next year will live 6 months longer than one born today. While migration helps to rebalance, increasing dependency ratios challenge many. Urban obesity Mass urbanisation, reduced activity and poor diets are accelerating the rise of obesity. Levels of obesity in most cities are growing fast and the associated healthcare burden will soon account for 5% of global GDP. Related insights
  35. 35. 36 15x – Delhi’s air more polluted than the WHO safe maximum 4000 – people killed every day in China due to air pollution Air quality
  36. 36. 37 Air quality Rising air pollution in many cities is killing people and becomes a visible catalyst for changing mind-sets and policies across health, energy, transportation and urban design. Delhi, Patna, Gwailor and Raipur: the four most polluted cities in the world, and all of them in India - 13 of the top 20 most polluted cities are in India. Although Beijing has a worse reputation, with its visible smog formed mostly from 10 micron particulates, Delhi has more of these as well, as many more of the more dangerous smaller sub-2.5 micron ones that kill as they go deeper into the lungs. Delhi’s air is 15 times more polluted than the WHO safe maximum. Whether from vehicle emissions, industrial smokestacks or paraffin stoves in the slums, this pollution is manifested across many Indian cities in escalating asthma rates, higher cancer incidence and more heart attacks and strokes. About 620,000 people dying every year from pollution-related diseases, but they are not alone. Lives in many Chinese cities are over 5 years shorter than the national average because of air pollution - 80 percent of the population are exposed to pollution above safe levels and the air in Beijing is so polluted that breathing it does as much damage to the lungs as smoking 40 cigarettes a day. The omnipresent paper masks of recent years are being replaced by heavy- duty facemasks; parents are even delaying having children because of the poor quality air. Air pollution in China kills about 4,000 people every day - about 17 percent of all deaths. But, according to the World Bank, when measured across whole nations, the most toxic air today is found not in India or China but in the UAE. Globally, in 2012, 7m people died because of the impacts of poor air quality and, as increased industrialization, wider car ownership and climate change all add to the problem, things are going to get a lot, lot worse. The OECD believes that pollution will soon become biggest cause of premature death. A pivotal issue about poor air quality is that it has multiple causal factors and impacts multiple areas. From industrial strategy and energy policy, to vehicle emissions to city design and transportation choices, the forces driving increased pollution intertwine. Equally the health consequences of rising asthma, heart attacks, chronic obstructive pulmonary disease and cancer combine with poor visibility and grey skies to make many of the world’s cities increasingly unattractive places to live. The lists of the world’s unhealthy cities are increasingly much longer than the healthy ones. In some Western cities some progress in improving air quality has been made over recent years. The Mayor of London has launched public awareness campaigns aimed at helping Londoners make small changes to reduce their exposure to pollution and help improve air quality. Alongside tightening standards with the city’s Low Emission Zone, retiring old taxis, cleaning up the bus fleet and retrofitting 400,000 buildings with clean air facilities, a primary activity to meet 2020 targets is rethinking traffic management. Meanwhile the EU is taking legal action against 17 States with a consistent record of poor air quality. Bulgaria, Latvia and Slovenia are being asked to urgently address an on-going issue that kills more of their citizens than road traffic accidents every year. It has multiple causal factors and impacts multiple areas.
  37. 37. 38 In the US, outdoor air quality has improved since the 1990s, but, according to the CDC, many challenges remain in protecting Americans from air quality problems. Ground-level ozone, the main part of smog, and particle pollution are just two of the many threats to air quality and public health in the United States and, based on current projections, pollution in the US is set to increase not decrease by 2025. With public attention rising and concerns over poor health influencing political agendas, now India and China are ramping up their activities. The Chinese government has set up a nationwide network of sensors, and regularly publishes data online. A comparative index has recently been launched in India to monitor air quality, while three industrialised states—Gujarat, Maharashtra and Tamil Nadu—are about to launch the world’s first market for trading permits in emissions of particulate matter. In the town of Surat, in Gujarat, 300 textile plants, which typically burn coal to produce steam, are likely to be the first to trade such permits. Monitoring equipment has already gathered emissions data from these and other plants. Beyond monitoring and permits, others are trying more radical measures. In the western Chinese city of Lanzhou, officially deemed by the WHO to have the worst air in China, officials have proposed digging great gullies into the surrounding mountains in the hope of trapping polluted air in a gigantic landscape gutter. But Lanzhou’s poor air quality is caused less by burning coal and car fumes than by the local penchant for blowing up mountains. More than 700 peaks are being leveled to provide swathes of flat land for development and blowing out a huge gulley would only add to the problem. New approaches to city design are being called for that will gain by encouraging healthier urban dwellers - reduced healthcare costs, increased productivity, more community resilience, improved life expectancy and fewer demands on health services. Given that most people in India, even in cities, still commute by foot, bus or bicycle—and that only 5% of households own cars—India still has time to set up systems for mass public transport before the car becomes king. Already 14 cities have or are building metros. Interconnected systems Pollution in the US is set to increase not decrease by 2025.
  38. 38. 39 Most of the world’s population will be subject to degraded air quality in 2050 if human-made emissions continue as current trends. The OECD believes that air pollution will become a bigger global killer than dirty water and, as such, is encouraging faster change. The challenge in many countries however is in balancing the public health impact with the desire for sustained economic growth – primarily still powered by fossil fuels. In regions where energy access is a higher priority than clean energy, many are increasingly seeing that it may well be air pollution, and not carbon emission targets, that captures the public sentiment and act as a catalyst for change. More children with asthma, permanently grey skies and increased breathing difficulties for all are seen by some as the triggers for widespread change – both bottom up and top down – and consequently, air quality is fast becoming a core part of the climate change vocabulary. Air pollution will become a bigger global killer than dirty water. Air quality Deeper collaboration Partnerships shift to become more dynamic, long-term, democratised, multi-party collaborations. Competitor alliances and wider public participation drive regulators to create new legal frameworks for open, empathetic collaboration. Energy storage Storage, and particularly electricity storage, is the missing piece in the renewables jigsaw. If solved, it can enable truly distributed solar energy as well as accelerate the electrification of the transport industry. Intra city collaboration Increasing competition between cities overrides national boundaries and drives change. They compete to attract the best but also collaborate to avoid the downside of success – over-crowding, under-resourcing and pollution. Mass engagement As the public voice becomes easier to access and harder to suppress, leaders seek to engage to create, develop, secure and maintain legitimacy for their initiatives and policies – so further reducing their hierarchical power. Related insights
  39. 39. 40 2020 – launch date for Google’s car 2020 1.24 million – number of road deaths globally p.a. Autonomous transport
  40. 40. 41 Autonomous transport The shift to fully autonomous transport is an evolution via truck platoons on highways and small urban delivery pods. Connected cars create the network and test the technologies for the eventual revolutionary driverless experience. The concept of self-driving, autonomous vehicles has been talked about for years. Whether from the automotive sector, science fiction or big data enthusiasts, the advent of cars, trucks and buses that navigate and drive themselves has been a common aspiration. The reality is however getting increasingly closer and, over the next decade, many expect to see some pivotal advances introduced at scale in some parts of the world, though at different speeds in different sectors and in different regions. Over the past thirty years there have been numerous proof of concept tests, such as the European Prometheus project and the DARPA funded Autonomous Land Vehicle project in the US. The 1997 National Automated Highway System Consortium project brought the idea to wider public attention, when twenty or so self-driving vehicles were demonstrated on Interstate Highway 15 in San Diego. These early projects set the direction, proved the principles and also raising many questions, including data access, ownership and sharing as well as network reliability. Some car manufacturers became confident enough to put major stakes in the ground – Volvo, in particular, declared that by 2020, no one would be killed in a Volvo and saw the ability of a car to take over, when an accident was likely, as a key safety improvement. Recent developments by the likes of Google, Apple and Amazon have shown how innovation from outside the automotive sector can speed up development. The key question is whether the next decade will be an evolution or revolution. By 2025, will we see fully autonomous vehicles at scale or will it be a patchwork approach, where this only happens in certain locations; and, elsewhere, will we see more assisted driving but not the complete autonomous experience? The connected car is certainly a priority for many and a forerunner to a world of autonomous vehicles. In 2013, Nissan announced its plans to launch several driverless cars by 2020 and has a dedicated proving ground in Japan. BMW and Mercedes have connected vehicles now driving along German Autobahns where autonomous driving is working as an evolution of adaptive cruise control and assisted driving - which is already in production cars showing automated lane keeping, parking, acceleration, braking, accident avoidance and driver fatigue detection. In 2014 Tesla introduced its AutoPilot systems in its Model S electric cars and in 2015 a car designed by Delphi Automotive completed a coast-to-coast trip across the US, 99% of which was automated driving. The key question is whether the next decade will be an evolution or revolution.
  41. 41. 42 The recent acknowledgement by Apple that its autonomous car project, ‘Titan’, is a ‘committed’ project has brought much speculation about what is also underway in Cupertino, after tripling its dedicated team to 1800 including many recruits from across the automotive sector. Google are probably furthest ahead, building over 100 vehicles and already clocking up over 1m miles; they started working on driverless cars as far back as 2005 when they won the DARPA grand challenge and in the past few years have successfully lobbied for regulatory approval for autonomous cars and started road testing in 2012. By June 2015, Google’s fleet had encountered 200,000 stop signs, 600,000 traffic lights, and 180 million other vehicles and had only had between 12 and 14 (depending on who you ask) minor accidents. Launch date for Google’s car is set at 2020. The fundamental issue here is whether or not they can pull off driverless vehicles that work in cities, can deal with roundabouts, avoid unpredictable actions by pedestrians and certainly don’t crash. Much attention is also focused on moving goods. Already in off-road applications such as mining and farming, many of the ingredients of autonomous and driverless vehicles will get large-scale traction in this area. The advent of truck platoons or trains, lines of long distance trucks electronically coupled to each other running along the highway, is upon us – Daimler’s Freightliner highway pilot has been given approval to operate in Nevada and rivals such as Volvo and Scania are undertaking similar trials in Sweden. However the revolution in this space is for small urban delivery vehicles – slow-moving, driverless electric pods delivering packages to homes, offices, drop-off points and even traditional car boots. No surprise that many are looking at Amazon to take the lead here; the opportunity to simplify the last mile of delivery in terms of both reducing human cost and optimizing drop-off schedule is a hugely attractive business proposition. What remains to be determined are the all-important issues that sit around the core platforms. Mobile operators are already sharing data, but who owns the shared data required to make the whole system work and how it is accessed? This is matter of trust, value and liability and, depending where you are in the world, the balance between government, tech companies and vehicle manufacturers shifts significantly. This needs to be addressed, as most business models require visibility of 100% of the vehicles on the road – 99% is not good enough. Interconnected systems However the revolution in this space is for small urban delivery vehicles – slow-moving, driverless electric pods delivering packages to homes, offices, drop-off points and even traditional car boots.
  42. 42. 43 And then there is the tricky issue of risk and ethics. From an insurance perspective the advent of autonomous vehicles should mean that cars don’t crash and we don’t need motor insurance. But insurance companies see the risk simply shifting from the owner to others - the vehicle manufacturer, the road network or the whole system. With the costs of system failure significant, this is a big issue that few seem to have yet resolved. Meanwhile, on the ethical side, some are questioning who is going to code the decision to sacrifice the ‘driver’ rather than the child who runs into the road. While the likes of Google DeepMind, helping with the Google car, are leaders in artificial intelligence, ethics professors are not sure how quickly this will be resolved. Varied perspectives from different cultures have to be considered here. Autonomy is not far away. The technology is being proven, the money is being invested and the potential for safer, less congested roads is a big social benefit. Governments are starting to discuss regulatory issues in both the US and EU and some of the ingredients such as automated connections like eCall are becoming mandatory in major markets in the next few years. By 2025 we will certainly see more assisted driving and autonomy on highways for both cars and trucks, where everyone is going in the same direction with controlled entry and exit, and maybe full autonomy in cities for goods delivery pods. However, at the moment, it looks like full autonomy in cities for passenger vehicles is a few years away. Autonomous transport Insurance companies see the risk simply shifting from the owner to others - the vehicle manufacturer, the road network or the whole system. Ethical machines Automation spreads beyond trading and managing systemic risk. As we approach technology singularity, autonomous robots and smarter algorithms make ethical judgments that impact life or death Everything connected Over 1 trillion sensors are connected to multiple networks: everything that can benefit from a connection has one. We deliver 10,000x more data 100x more effectively but are concerned about the security of the information that flows. Theincreasing value of data As organisations try to retain as much information about their customers as possible, data becomes a currency with a value and a price. It therefore requires a marketplace where anything that is information is represented. Access to transport The widespread need for individuals to travel short distances becomes a key feature of urban design and regeneration. Planners use transport infrastructure to influence social change and lower carbon living. Related insights
  43. 43. 44 2.6 million – number of patent applications p.a. 7 million – number of trademark applications p.a. Deeper collaboration
  44. 44. 45 Deeper collaboration Partnerships shift to become more dynamic, long-term, democratised, multi-party collaborations. Competitor alliances and wider public participation drive regulators to create new legal frameworks for open, empathetic collaboration. Giventhechallengeswearefacing,manyseetheneed for a different way of working across and between organisations. The time when one company alone could develop scalable solutions is fast disappearing, and even traditional cross-industry partnerships are unlikely to have the resources and reach required. Addressing some of the big meaty future challenges will rely on deeper and wider collaboration that will no longer be driven solely by intellectual property and value considerations; instead more dynamic, agile, long-term, democratised and multi-party cooperation is on the horizon. Take rising air pollution. Tackling this will demand partnerships across transportation operators, energy providers, city planners, public health organisations, governments, regulators, financiers and citizen groups. Or, addressing the obesity challenge isn’t just about food and drink companies changing direction but also involving healthcare professionals, behavioural psychologists, regulators, transport and city planners as well as educational institutions and the media. The type of cooperation needed to innovate and address these and similar challenges will require the collaborating organisations to rethink the fundamental nature of how such partnerships are designed, operated and rewarded. Bilateral agreements, while easier to establish and execute than global ones, are implicitly limiting. The residual approach to intellectual property creation, ownership and trading is more of a barrier to collaboration that an enabler. While concepts such as patent pools have worked within industries, be that sewing machines and cars a century ago or Bluetooth, MPEG and DVD standards in the past 20 years, some see that they too are not the right model for the deeper and wider levels of collaboration envisaged for the future. The answer could be emerging in the way we increasingly collaborate around content production online via layered authorship - copyright is shared as more of us collaborate and swap ideas as thoughts are built upon again and again. As a result, multiple authors are recognised and shared information is not owned by any individual. Clearly, remuneration models for collaborative programmes need to evolve. If we are indeed going to undertake more pragmatic The residual approach to intellectual property creation, ownership and trading is more of a barrier to collaboration that an enabler. onciling the need for companies to work together globally and locally will involve making compromises, and we may even see a fundamental shift in how we measure success – away from GDP and income towards a more holistic perspective of progress. Some large, well-established incumbent organisations may argue for short-term incremental shifts, but it’s hoped that, in time, the big banks, energy companies and other controllers of the status quo will shift their positions. Pivotal in this shift is the expectation that many will either seek or be compelled to take a longer-term view around systemic change and that will imply wider collaboration. The residual approach to intellectual property creation, ownership and trading is more of a barrier to collaboration that an enabler.
  45. 45. 46 Within this, the role of public-private partnerships seems to be in ascendance. Although often criticised in some areas in the West, across Asia and South America the need and benefit for closer collaboration between governments and companies is evident. In Ecuador and elsewhere the successful transformation of Medellin in Colombia was highlighted as an outcome of closer public- private partnerships in city management and facility operation. In India, discussions on improving healthcare, education, transport and food supply all highlighted the potential available when more efficient execution of government ambitions can be achieved through collaboration with faster moving and more flexible private companies. Citizens, part of a shift towards more participatory government in some regions, will increasingly be more involved in both decision-making and execution. The state may take a step back and instead of leading will become the facilitator of building new relationships with people and industry that can co-create and co-provide solutions to problems. Theneedforgreatercollaborationinthefuturewilldrive many companies to re-organise themselves based more on social networks than traditional functional or business unit silos, so changing the structure of collaboration as well as the platforms upon which it operates. This could bring about a divide between meaningful networks based on shared values and emotions and those more superficial connections built purely on data. Within collaboration, time may well become a social currency, and time spent on working on collaborative projects addressing real societal issues could become the metric that drives reputation and social status. Rather than putting in cash, either from a philanthropic standpoint or as a more active investor, we may soon see a shift to individuals proactively seeking to give up their free time to help solve emerging problems, ensuring that the scale of action and impact can be far greater than that achieved when a couple of organisations decide to partner on a traditional joint venture. Already, collaboration in innovation is increasingly becoming more public and shifting from bilateral partnerships to grand challenges such as X-prizes that focus on problems currently seen to be unsolvable, or that have no clear path toward a solution. The future of interconnected systems The role of public-private partnerships seems to be in ascendance.
  46. 46. 47 One timely example of this is the award-winning SunShot initiative run by the US Department of Energy. It focuses on accelerating the point at which solar energy becomes cost-competitive with other forms of electricity by the end of the decade – essentially bring the cost per Watt of solar energy down from $3.80 to $1. Rather than funding research within energy companies, the approach has been to first engage the wider public population to generate new concepts that could help achieve the ambition. By then funding the best ideas through cooperative research, development and deployment projects undertaken by a combination of private companies, universities, state and local governments, non-profit organizations and national laboratories, the SunShot approach is to choreograph the ideal collaboration network for each concept. Halfway into the decade long initiative, it has been able to use its resources more intelligently and fund 250 projects that have collectively already achieved 70% of the target cost reduction. Going forward, big problems are seen to require completely different ways of thinking and cooperating and deeper, wider, more meaningful collaboration is for many an important part of the puzzle. Collaboration in innovation is increasingly becoming more public. Deeper collaboration Air quality Rising air pollution in many cities is killing people and becomes a visible catalyst for changing mind-sets and policies across health, energy, transportation and urban design. Flooded cities The vast majority of our cities are not prepared for flooding. Many districts and households can no longer get flood insurance and are in jeopardy. It’s going to get worse before it gets better. Infrastructure deficit Infrastructure again becomes a source of competitive advantage. Emerging economies invest in new railroads and highways for more effective movement of people and goods, while developed nations suffer from poor legacy. Privacy regulation The push towards global standards, protocols and greater transparency is a focus for many nations driving proactive regulation, but others choose to opt-out of international agreements and go their own way. Related insights
  47. 47. 48 50% – increase in energy stored in Lithium-ion batteries $5 billion – cost of the Tesla ‘Giga Factory’ Energy storage
  48. 48. 49 Energy storage Storage, and particularly electricity storage, is the missing piece in the renewables jigsaw. If solved, it can enable truly distributed solar energy as well as accelerate the electrification of the transport industry. After years of rising prices and increasing demand, there is change in the air for energy supply, with many seeking to accelerate the shift to renewables. Although there are short-term factors in matching current supply and demand in varied regions, most agree that long-term we will move to a renewables- based energy system. At the moment solar energy is playing a small role, contributing around 0.6% of the world’s energy mix, but is expected to increase to between 5% and 20% by 2020 (depending on whose view you believe). The key variable is around cost. Today in some regions solar is already comparable with the cost of electricity from natural gas, in others government subsidies are used to make it competitive. Successful transformation of the energy system is increasingly being linked to the development and scaling of storage solutions and there is much optimism that substantial improvements will be achieved over the next decade. However, it would be rash to expect better storage solutions alone to solve our current energy crisis based as it is on a system focused around fossil fuels which simply hold their energy until it is ignited. It will take many years or even decades to shift to renewables. Controlling how and when energy is provided is implicitly linked to our ability to store it, especially so in locations where energy demand is not in sync with supply – whether that be from solar, wind or wave renewables or a wider energy mix. People have been looking forward to the advent of smart energy grids for some time and having two-way transmission of electricity between supplier and consumer is a core element of this. Today the main options for large- scale energy storage are pumped hydro-storage and batteries. California’s Inland Empire Utilities Agency uses spare energy capacity at periods of low demand to pump water up mountains so that it can be released at peak demand and turned back into electricity using conventional hydroelectric turbines. Meanwhile, though, the role that batteries can play in displacing other energy solutions, even with incremental change, can be significant. Battery costs are falling steadily – they have halved in the last five years. In the past, batteries have been made from materials such as lead-acid and nickel-cadmium. Highly toxic, some of these ingredients are also bulky and heavy. The rechargeable lithium-ion battery helped slim them down and these batteries now power not just smartphones and laptops but also power tools, electric cars and drones. Lithium-ion batteries have been steadily getting better and, with improved chemistry and production techniques, the energy stored in them has increased by 50%. Today the main options for large-scale energy storage are pumped hydro-storage and batteries.
  49. 49. 50 For some applications, such as electric cars, a better battery would be transformative. Until recently the battery for an electric car could cost $400-$500 per kilowatt-hour, perhaps 30% or so of the overall cost of the vehicle. General Motors (itself involved in about a dozen battery storage projects) expects the battery in its latest Chevy Bolt electric car to cost around $145 per kilowatt-hour; once costs come down to around $100 per kilowatt-hour, electric vehicles will become mainstream because they will be able to compete with petrol cars of all sizes without subsidy. Other organisations are looking at a more radical change in the technology. Sakti3 focuses on a lithium- ion battery with a solid electrolyte that offers about double the energy density; Dyson, the British inventor of the bag-less vacuum cleaner, recently bought the company. As Dyson expands into domestic robotics, expect to see solid-state batteries in the mix. And, with further engineering, maybe in electric cars and grid storage too; in large volumes, such solid-state batteries should cost around the target $100 per kilowatt-hour. Many research groups around the world are hoping for battery breakthroughs. 24M, a Massachusetts start-up, is using nanotechnology to develop a cost- effective “semi-solid” lithium-ion battery, while over in Cambridge, UK, there is much expectation from a new lithium-air cell that has overtaken current lithium- ion batteries in the amount of energy stored per kg. A spin-off of Carnegie Mellon University, Aquion Energy’s nontoxic, saltwater-based batteries are designed to deliver high-performance storage while avoiding the expensive maintenance of competing chemistries such as lead-acid. South Korea’s LG Chem is building on its experience supplying lithium- ion batteries for electric cars to provide residential, commercial and industrial stationary batteries. Alongside LG Chem, numerous other big lithium-ion battery producers, such as BYD, Johnson Controls, Panasonic, Samsung and Sony, are partnering solar installers, inverter manufacturers and innovative product integrators. Interconnected systems Once costs come down to around $100 per kilowatt-hour, electric vehicles will become mainstream.
  50. 50. 51 Perhaps most significantly however, SolarCity, the largest residential PV installer in the U.S., is rolling out storage systems relying on lithium-ion batteries supplied by electric carmaker Tesla — whose CEO and founder, Elon Musk, is also SolarCity’s chairman. The duo’s entry into stationary energy storage is significant. SolarCity hopes to offer its solution to enable residential customers to take advantage of time-of-use rates, ancillary services and PV system interaction. It is spearheading a 200-kilowatt project to store energy from rooftop solar arrays at Tesla’s factory in Fremont, with the aim of helping Tesla offset millions of dollars in demand charges. Tesla (with its Japanese battery supplier, Panasonic) is building a $5 billion lithium-ion battery factory in Nevada - the ‘Giga Factory’. A new Tesla battery, Powerwall, can be used to store solar electricity generated at home, as well as lower electric car costs. Some see Tesla as much as an energy storage company as a manufacturer of electric cars. Some solar industry leaders see that within the next couple of years consumers will no longer be buying solar systems on their own, but rather a complete energy system, consisting of generation, storage, load-management and an app - all leveraged through big data analytics in the cloud. Each consumer will take more responsibility for storage, generation and usage, but do it in such a way that is less expensive than pure utility energy while the utility has access to what it needs to, to make sure that it plays well on the grid. Tesla’s Elon Musk highlights the possible network benefits of “system-wide implementation” of energy storage, including flattening peaks of electricity demand which could lead to far less conventional generation power plants being required – “you can basically, in principle, shut down half of the world’s power plants if you had stationary storage, independent of renewable energy.” Some see Tesla as much as an energy storage company as a manufacturer of electric cars. Energy storage Air quality Rising air pollution in many cities is killing people and becomes a visible catalyst for changing mind-sets and policies across health, energy, transportation and urban design. Full cost Increasing transparency of society’s reliance on nature, intensify requirements for business to pay the true cost of the resources provided by ‘natural capital’ and so compensate for their negative impact on society. Key resource constraints Economic, physical and political shortages of key resources increase and drive increasing tension between and within countries. As we exceed the Earth’s natural thresholds, food and water receive as much focus as oil and gas. Speed to scale Greater global connectivity, growing consumer wealth and broader reach all combine to accelerate the time to 1bn customers and a $10bn valuation for start-ups and new corporate ventures alike. Related insights
  51. 51. 52 2 billion tonnes – amount of food wasted each year 50% – target reduction in US food waste by 2030 Food waste
  52. 52. 53 Food waste 30-50% of our food is wasted either in the supply chain or in consumptionandcouldfeedanother3billion.Optimisingdistribution and storage in developing countries and enabling better consumer information in others could solve this. We live in a world where 1 in 4 of the calories we create are never eaten. Every day, consumers in the West throw away as much food as is produced in the whole of Sub Saharan Africa, while, globally, the 2bn tonnes of food wasted each year are equivalent to around $1 trillion of financial loss each year. Going forward, if we are to support another billion or so people on the planet this century, with limited land and water resources, reducing this massive wastage is perhaps the most significant shift possible to help us to feed the global population. Depending which region you are in, the nature of food waste shifts from production and storage to distribution and consumption; in developing counties, 40% of the loss occurs post harvest, storage and in processing, while in developed nations 40% of the losses are in retail and with the consumer. In China, losses of rice are at 45% of total production - in Vietnam it is 80%. In India, Delhi has Asia’s largest food produce market but no cool storage facility; so in soaring temperatures how can fruit and vegetables stay fresh? In South Africa, 50% of mangoes are damaged in the first mile of transportation, while in India 20m tonnes of wheat, equivalent to the entire production of Australia, are lost every year due to poor storage. Improving storage with simple, low cost methods such as using crates rather than bags and sacks can drastically cut food loss. The UN FAO has already built well over 50,000 small grain storage silos across 20 or so countries that are significantly cutting food loss. Refrigerated transport is clearly an ideal, but in the absence of that cool storage depots can have significant impact. Productivity around the world varies; India overall is half as productive as global averages – whereas US farmers produced 11 tonnes of food per acre, in India the figure is 3 tonnes. The problem is not about lack of land but inefficiencies of production; 90% of Indian farmers don’t use animal feed and therefore miss out on easy ways to improve yields. Given that we have pretty much used all the arable land we have available and urbanization and climate change are fast shifting the balance, higher productivity per hectare is a major theme. One option is clearly to adopt more GMO approaches. However, while in some regions these are embraced, in others they are demonized. The GMO actions that gain greatest support are for the introduction of drought tolerant and salt-resistant crops but many would argue that the problem can be solved without taking too many steps towards more GM food produce. Given US and Chinese support for GMO and the significant interests of companies such as Monsanto, ADM and Cargill, we are likely to see a combination of new varieties and the better adoption of today’s leading farming practices. Other actions called for include land reform in Africa and greater investment in funding famer education programmes to reduce post-harvest loss. India overall is half as productive as global averages.
  53. 53. 54 Also significant in the list of areas for improvement is water supply and irrigation: as agriculture consumes 70% of our fresh water, reducing food waste frees up more water. In the US, where 30% of purchased food is thrown away, this means that half of the water used to produce food is wasted. Globally, shifting from flooding and spray irrigation to drip-and-trickle feed of water can improve productivity by over a third. In the Western world of retail, quality standards and obsessions with food appearance are the major issues driving food waste. One easy answer is to modify food labelling, as consumer confusion between ‘use-by’, ‘sell-by’ and ‘best before’ dates is a major driver of waste. In the UK, 20% of food thrown away by consumers is incorrectly perceived as being out of date, leading to calls for the wider use of just the use by date – now being piloted by Tesco across Europe. Another simple option is to redistribute food that is not sold. While unfortunately in many countries food safety regulations forbid the reuse of food, firms like Pret a Manger have made a point of giving unsold sandwiches and salads to the homeless while apps such as the US’s Leftoverswap have taken off in linking people with left over food, and in Australia Secondbite has redirected unwanted food to community food banks. A partnership of grocers, food brands and government should focus consumer awareness through education campaigns. Networked smart fridges and storage cabinets that interact with food packing to track supplies, use- by dates and link to on-line delivery firms are a direction of travel in some countries, for many simple attitudinal shifts of the consumer may be just as effective. Similarly, our expectation of perfect looking food 24/7 in every supermarket has to change; in many developed markets 50% of some vegetables harvested do not make it onto the shelves because they don’t look right. Interconnected systems Reducing food waste frees up more water.
  54. 54. 55 Considerable waste takes place worldwide also in hotels and catering where 80% of food waste is attributed to events. Because they are cheaper to provide than plated service at tables, hotels typically favour buffets to feed lots of people. Although cost effective in terms of labour, buffets are incredibly inefficient in terms of the ratio of food consumed to that prepared, especially so with banquets. In some countries, more aware of the financial impact of the waste in food, many restaurants are seeking to improve efficiency. In many US cities, food can no longer be sent to landfill and instead it is either being redistributed or turned into energy – anaerobic digesters are popping up all over the place to turn food scraps into gas. In Europe, France has announced measures to reduce food waste and passed a law banning supermarkets from destroying unsold food, while, in the UK, Waitrose is just one of the supermarkets that has already diverted all its shop generated waste from landfill to anaerobic digestion. If we could reduce current food waste by just a quarter, that would be enough to feed all of the world’s hungry. If we can reduce it by half then we will free up enough to cope with an extra billion or so people on the planet. By 2050 the world will need 60 per cent more calories every day to feed 9 billion people. Cutting current food loss and waste levels in half will shrink the gap by 22 percent. As a step to this, in 2015 the US Department of Agriculture announced an initiative to reduce national food waste by 50 per cent by 2030. Driven both by the need for greater food security as well as resource conservation, many see that this may soon become a target elsewhere as well: the EU has the same target by 2050. Today, across the world, we have no meaningful food waste data. If, as we move forward, robust and consistent data collection occurs and is used to both improve famer education, highlight process efficiency opportunities and support clearer guidelines for consumers, then we should be able to make significant progress. By 2050 the world will need 60 per cent more calories every day to feed 9 billion people. Food waste Full cost Increasing transparency of society’s reliance on nature, intensify requirements for business to pay the true cost of the resources provided by ‘natural capital’ and so compensate for their negative impact on society. Nature’s capital In the Anthropocene, humankind is presiding over the Earth’s sixth major extinction. But as biodiversity declines, nature becomes increasingly valued and valuable. Plastic oceans There are increasing high levels of man-made pollution in many of the world’s seas and little actually disappears. By 2050 there will be more plastic than fish in the oceans. Key resource constraints Economic, physical and political shortages of key resources increase and drive increasing tension between and within countries. As we exceed the Earth’s natural thresholds, food and water receive as much focus as oil and gas. Related insights
  55. 55. 56 80% – global GDP generated by 600 urban centres 75% – world’s natural resources consumed by cities Intra city collaboration
  56. 56. 57 Intra city collaboration Increasing competition between cities overrides national boundaries and drives change. They compete to attract the best but also collaborate to avoid the downside of success – over-crowding, under-resourcing and pollution. Global trade and power is generally defined between governments at a national level; nations acting collectively to negotiate deals to their mutual benefit, on occasion with the support of organisations such as the WTO. This process is often time-consuming, and fails to deliver benefits for specific regions. For city administrations this can be particularly frustrating as they are disproportionately responsible for most of the world’s output - 600 urban centres generate 80% of global GDP. As a result, some cities have become more actively involved in generating trade and business opportunities, their influence increasing depending on the amount of revenue they generate. Such is their success that some argue the focus in the future will no longer be between nations - rather it will be between cities. The concept of the city-state, last seen in the eighteenth century, is about to enjoy a renaissance. Cities offer opportunities to prosper that cannot be found elsewhere. The sheer proximity of others allows smart people to more easily connect with other smart people to do business, attract funding and find customers. While economic size and growth are important and necessary, several other factors determine a city’s overall competitiveness, including its business and regulatory environment, the quality of human capital and indeed the quality of life. To truly prosper, cities need more than office buildings and research parks. Cafes, concerts, art shows and open spaces are all necessary to allow creative people to meet and interact. Across the world huge investments are being made to create liveable, healthy cities, encouraging more walking or cycling, improving public transport and adding green spaces - New York’s High Line, London’s Olympic Park and Seoul’s rediscovered Cheonggyecheon River are all good examples. In addition urban developers are keen to focus on culture. Abu Dhabi, for instance, is developing the new Saadiyat Island cultural district, an area a quarter of the size of Paris with three new museums (the Louvre, the Guggenheim, and the Zayed) at its centre. It aims to position the city as a leading showcase for art in the Middle East and is at the heart of a plan to reshape Abu Dhabi’s oil- dependent economy by 2030. The city brand is also important, and projecting the right image to attract the right kind of people works. New York for example is proud of its “never sleeps” by-line but Austin, Texas uses the slogan, “Keep Austin Weird”, highlighting the city’s commitment to creativity. It acts as a reminder that urban growth should not drive out the culture that shaped its identity and appeal. Urban developers are keen to focus on culture.

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