Megatrends 2020-2030 … what they mean for you and your business, and how to seize the new opportunities for innovation and growth
December 6, 2019
Growth is shifting, innovation is relentless, disruption is accelerating, expectations are high, and social tensions are rising. Making sense, and making use, of these dramatic forces of change will help you to make better strategic choices, shape markets to your advantage, and create a brighter future.
Everyone talks about “megatrends” … so what are the most significant forces of change?
I spent some time comparing the many different approaches to tracking and articulating these patterns of change, to find out which trends are the most common, and the most significant.
Isn’t it obvious? Technology is shaping everything? Yes, but its the implications of that, which matter.
As McKinsey says “the trend is your friend” … It’s the oldest adage in investing, and it applies to projecting future business performance too. Their analysis shows that riding the right waves of change, created by industry and geographic trends, is the most important contributor to business results … a company benefiting from such tailwinds is 4-8 times more likely to rise to the top of future performers.
So what is a “megatrend“? Trends are an emerging pattern of change likely to impact how we live and work. Megatrends are large, social, economic, political, environmental or technological change that are slow to form, but once in place can influence a wide range of activities, processes and perceptions, possibly for decades. They are the underlying forces that drive change in global markets, and our everyday lives.
Download a summary of the keynote and workshop Megatrends 2020-2030 by Peter Fisk
Megatrend 1: Shifting economic power
Population growth is at the heart of the shift in economic power. The influence of emerging and developing economies will mean huge changes for business, society and the way we invest.
1. Emerging economies are now the growth markets
In less than a generation, developing economies have gone from being producers of goods for developed countries, to becoming an important destination for consumer goods and services in their own right. They now account for nearly 80 percent of global economic growth, and 85 percent of growth in global consumption – more than double their share in the 1990s.
2. China will be the new global superpower
Two centuries ago Napoléon Bonaparte said, “China is a sleeping giant… when she wakes, she will move the world.” How right he was. Only 15 years ago, China’s economy was one tenth the size of the US economy. If it continues to grow as predicted, it will be bigger than the US economy by the late 2020s.
As a result, China expects to have 200 cities with a population of over one million people by 2025. To tackle overcrowding in Beijing, China is building a new city – Xiongan New Area – from scratch 100km southwest of the capital. Initially it will be double the size of Manhattan and is expected to become twice the size of New York and Singapore.
3. Global demographics will change
In 2016, Asia’s population was estimated at 4.4 billion, having quadrupled in size during the 20th century. It is now forecast to grow to over 5 billion people by 2050. Asia benefits from a wealth of resources, and has an ecological variety which makes it well-placed to support this growth. As a result, we can expect to see further economic growth across this region.
Despite some challenges for the Chinese economy driven by debt levels and property market valuations, the potential long term growth of the Chinese economy relative to the US and Europe looks likely. China is already on a path to replace the US as the world’s leading superpower. When it does, political agendas, global trade and the sphere of influence are likely to shift towards Beijing from Washington.
2. Chinese business growth is relentless
China now boasts at least 100 unicorns (private companies with a $1 billion valuation), and by the end of 2019 it is forecast to be the largest user of the international patent system. It currently lies in second behind the U.S. An impressive six million enterprises were registered in China last year, up from 2.5m in 2013. The fastest growing sectors included science and technology, entertainment, sport and finance, whilst the number of mining, electricity and gas companies showed a slight decline.
The best ideas, the best partners, the best practices are increasingly from the east rather than the west. American institutions and corporate leadership is declining. Look at the number of Indian CEOs in Silicon Valley. The continuing liberalisation of the Chinese economy means the assumption that the world speaks English will likely become a thing of the past.
Megatrend 2: Resource scarcity
The impact of global warming is all around us. Rising temperatures could eventually have a significant impact on crop yields, causing food prices to surge, which in turn could impact poorer communities. At the same time, coastal areas will be increasingly susceptible to regular flooding as sea levels rise.
The global population is expanding rapidly and becoming increasingly prosperous. This is leading to significant demand for energy, water and food, which is putting a strain on the traditional, finite resources of the planet. According to The United Nations Food and Agriculture Organization (FAO), the global population will surpass 9.1 billion by 2050, at which point they predict the world’s agricultural systems will not be able to supply enough food for everyone. And the UN projects that the global demand for fresh water will exceed supply by 40% in 2030, with some cities, like Cape Town, already suffering from ‘water stress’.
The average surface temperature of the planet has been on an upward path since the late 19th century and this trend looks set to continue. The burning of fossil fuels is the primary cause of global warming. Carbon dioxide and other gases are released and trapped within the atmosphere, which in turn means heat can’t escape. Atmospheric carbon dioxide levels have rocketed since the time of the industrial revolution and show no sign of abating.
The graph shows CO2 levels during the last three glacial cycles:
Average temperatures are forecast to rise by more than two degrees before 2100, creating significant and irreversible damage and increasing strain on global resources. A study by Pricewaterhouse Coopers (PwC) estimates that this two-degree threshold could be reached as early as 2036.
In order to meet the increased food demands of the future, the agricultural industry will need to continue to innovate to become more productive with less resources and inputs. Technology is playing a key role via the rising adoption of precision agriculture. Precision variable rate technologies such as one that can detect weeds with sensors and spot sprays could slash herbicide usage by up to 95%. McKinsey says that with a 20-40% adoption rate for precision, agriculture yields could be boosted by 10-15% globally by 2025.
2. Shift from oil to clean energy
Sustainable energy sources are increasing in importance as the rhetoric condemning fossil fuels continues and changes in commodity consumption occur. But change is also about using energy more efficiently in everything we do.
As tariffs are placed on internal combustion engine vehicles, experts predict that by 2040 we will all be driving electric vehicles.11 And while the idea of driverless cars still feels like science fiction, the UK Government has set a target of having the first autonomous cars on the road by 2021, with companies such as Daimler planning ‘full production of autonomous vehicles by the early 2020s’.
Megatrend 3: Technological breakthrough
“We’re in the midst of a fourth industrial revolution, which will become known as the digital revolution.” says Klaus Schwab. The rapid advancement of technology, especially that of artificial intelligence and machine learning, is arguably at the centre of all megatrends.
1. The pace of change is exponential, not linear
The extent and pace of technological change is likely to have wide-reaching implications across almost all industries. People may be replaced with machines, and machines, robotics and AI may learn faster than humans. Think about linear growth compared to exponential growth – its impact multiplies at every year.
2. Data is the new oil
Data is the key enabler of this fourth industrial revolution. Indeed, it’s hard to imagine how powerful it could become. Jack Ma, the founder and executive chairman of Alibaba, likens data to the discovery of electricity. He said, “The world is going to be data. I think this is just the beginning of the data period.” The total amount of global data is expected to increase tenfold by 2025, the majority of which will be created and managed by business.
3. Automation of humanity
60% of all occupations could see at least 30% of their component activities automated. Many repetitive jobs can already be done by a machine, but with the rise of Artificial Intelligence, human expertise can now be learned and mastered by a system. Yes, this means that certain jobs will be replaced by machines, but it also means that the potential for new and emerging industries and opportunities is greater than ever before.
1. IOT drives connected living
By the year 2020, our world will be even more connected to the internet. Our cars, coffee machines, fridges and central heating will all be controlled from our tablets and smartphones. To put this into context, Gartner estimates that in 2014 there were 7 billion ‘things’ connected by the internet. By 2020, that will rise to 26 billion.
As robots and artificial intelligence take on more jobs, costs should decrease, and more people will be able to afford better products. At the same time, dramatic improvements could be made to infrastructure, and transport costs might plummet.
People will live longer and better lives, as healthcare technology improves patient outcomes and eradicates certain diseases. This will mitigate some of the issues of long-term care we discussed in the previous chapter.
Megatrend 4: Social change
There are already more over-65s in Asia than there are people in USA. By 2042 there will be more over-65s in Asia than the populations of the Eurozone and North America combined. Changes in global demographics (world population, density, ethnicity, education level and other aspects of the human population) will bring about significant social change, and therefore challenges and opportunities, for both government and business.
According to the UN, the global population is forecast to increase by over 1 billion by 2030, with most of this growth coming from the emerging markets. By 2050, the UN estimates that 80% of the global population over the age of 60 will be in countries that are currently deemed to be ‘less developed’.
In Japan 30% of the population is over the age of 60. Today in China, 29 million over 80 years old; by 2050, there will be 120 million. The UN’s latest demographics report forecasts that, by 2050, this will be the case in 55 countries. People will be living longer in retirement, which will result in the need for large-scale changes in government policy. This will also create a strain on healthcare services and providers, with many nations enforcing laws to ensure the elderly are properly cared for.
We’re having fewer children – particularly in wealthier and educated sections of society. This potentially has far-reaching consequences for business, including lower productivity, less labour-force participation, and less investment growth. Younger generations will be increasingly burdened with the expectation of looking after the elderly, which in turn could further reduce productivity.
In the US alone, healthcare spending is set to rise by 8% of GDP each year between now and 2040. That’s around $3,400 billion every year. According to analysis by the World Economic Forum, the retirement savings gap across eight major economies is growing by $28 billion every 24 hours and could reach $400 trillion by 2050 – around five times the size of the global economy today. There will be a renewed focus on saving for retirement and finding effective ways of drawing an income when people retire. As a result, there could be a greater need for financial help, and the rise of robo-advice solutions.
As populations age, it becomes increasingly likely that businesses will use technology to plug the shortfall in labour supply. Robots are more productive (they don’t sleep, get sick or need performance reviews, although they may have technical problems). As a result, there will be a greater need for skilled jobs such as data scientists.
Consumers are increasingly focussed on what they eat, how they are eating it and how it is produced; creating significant changes in the food supply chain. For instance, organic foods sales in the US has risen 224% from 2005 to 2016. Fresh food is being preferred over processed foods and products with specific health related benefits, such as avocadoes and berries, have seen outsized growth. Consumers want their food to be more convenient, resulting in more online delivery, meal-kit solutions and convenient snacking options at supermarkets.
Megatrend 5: Rapid Urbanisation
More than half of the world’s population now lives in towns and cities, and by 2030 this number will swell to about 5 billion. Much of this urbanization will unfold in Africa and Asia, bringing huge social, economic and environmental transformations.
In 1990 there were only 10 cities in the world with a population exceeding 10 million – the so-called ‘megacities’. Today the number of worldwide megacities has nearly tripled to 28. Populations are increasingly concentrating themselves in cities and large urban areas. This will further drive technological advancement and impact climate change, having its own influence on other megatrends.
These large-scale shifts in population lead to both opportunities and challenges for society. The requirements of future urban populations will be remarkably different to the cities of today, with citizens demanding connectivity to everything – every device, every entity and every object. Wireless connectivity will be paramount to improving quality of life in cities.
Globally, more people live in urban than rural areas, and as the graph below shows, that trend looks set to continue. In 1950, 30% of the world’s population lived in urban areas, and that’s forecast to increase to 66% by 2050.2
In the US, the patient-to-primary care physician ratio in rural areas is 39.8 physicians per 100,000 people, compared with 53.3 physicians per 100,000 in urban areas. This uneven distribution of physicians has proven to have an impact on the health of the population. With better healthcare outcomes likely, urban populations consequently grow faster than rural populations organically (without migration) as people are motivated to migrate towards them.
At the same time, urban areas tend to have better employment opportunities, better education and better access to social and cultural activities. This makes them more attractive places to live and makes it easier for businesses to flourish. In China, for example, the urban per capita income is more than double the rural figure.
Cities will emerge, driven by modern urban populations that embrace technology to improve the efficiency of infrastructure and services. Mass migration will mean the need for new infrastructure and services. Transport infrastructure and networks will require upgrades due to the dominance of autonomous vehicles and the greater concentration of people.
2. Healthcare and security
As population density grows to unprecedented levels, existing healthcare systems will need to be radically overhauled to deal with this influx. Traditional hospitals will come under significant strain if they do not utilise new technologies available to them. With higher crime rates in cities than rural areas, governments will employ elevated levels of surveillance on citizens in cities, increasing connectivity means that every activity is logged and monitored.
3. Consumer behaviours change
In concentrated urban environments, the traditional symbols of progress will change – a car, a garage, a bigger house. Instead different priorities will emerge as we live in apartments. Products will need to be smaller, requiring less space or storage. Food deliveries and food replenishment will be fast. Traditional communities will not emerge like in villages, and so social lives will be less related to location and neighbours. Resources will be shared, from energy suppliers to mobility solutions. Group behaviour will dominate in new ways.
Sources: With thanks to Accenture, Blackrock, Deloitte, IFTF, PwC, WEF and World Bank for data in support of this report.
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