The global forces inspiring a new narrative of progress
Growth
is shifting, disruption is accelerating, and societal tensions are rising.
Confronting these dynamics will help you craft a better strategy, and forge a
brighter future.
“The trend is your friend.” It’s the oldest adage in
investing, and it applies to corporate performance, too. We’ve found through
our work on the empirics of strategy that capturing tailwinds
created by industry and geographic trends is a pivotal contributor to business
results: a company benefiting from such tailwinds is four to eight times more
likely to rise to the top of the economic-profit performance charts than one
that is facing headwinds.
It’s easy, however, to
lose sight of long-term trends amid short-term gyrations, and there are moments
when the nature and direction of those trends become less clear. Today, for
example, technology is delivering astounding advances, and more people are
healthy, reading, and entering the global middle class than at any period in
human history. At the same time, the post–Cold War narrative of progress fueled
by competitive markets, globalization, and innovation has lost some luster.
Why trends matter
Our work on the empirics of
strategy shows why understanding trends is an important skill for corporate
leaders.
Those contradictions
are showing up in politics, and the long-term trends underlying them are
reshaping the business environment. Corporate leaders today need to rethink
where and how they compete, and also must cooperate in the crafting of a new
societal deal that helps individuals cope with disruptive technological change.
That broad narrative of
intensifying competition, as well as the growing need for cooperation, contains
challenges, but also great opportunity. We hear about the challenges every day
in our conversations with global business leaders: How long can their
traditional sources of competitive advantage survive in the face of
technological shifts? How will changing consumer and societal expectations
affect their business models? What does it mean to be a global company when the
benefits of international integration are under intense scrutiny?
All good questions. But
they should not distract from the extraordinary opportunities available to
leaders who understand the changes under way and who convert them into positive
momentum for their businesses. Our hope in this article is to help leaders spot
those opportunities by clarifying nine major global forces and their
interactions. Significant tension runs through each of them, so much that we’d
characterize them as “crucibles,” or spaces in which concentrated forces
interact and where the direction of the reactions under way is unclear. These
crucibles, therefore, are spaces to watch, in which innovation “temperature” is
high.
·
The first three crucibles reflect
today’s global growth shifts. The globalization of digital products
and services is surging, but traditional trade and financial flows have
stalled, moving us beyond globalization. We’re also seeing new
growth dynamics, with the mental model of BRIC (Brazil, Russia, India, and
China) countries giving way to a regional emphasis on ICASA (India,
China, Africa, and Southeast Asia). Finally, the world’s natural-resource
equation is changing as technology boosts resource productivity, new
bottlenecks emerge, and fresh questions arise about “resources
(un)limited?”
·
The next three tensions highlight accelerating
industry disruption. Digitization, machine learning, and the life sciences
are advancing and combining with one another to redefine what companies do and
where industry boundaries lie. We’re not just being invaded by a few
technologies, in other words, but rather are experiencing a combinatorial
technology explosion. Customers are reaping some of the rewards, and our
notions of value delivery are changing. In the words of Alibaba’s Jack Ma, B2C
is becoming “C2B,” as customers enjoy “free” goods and services,
personalization, and variety. And the terms of competition are changing: as
interconnected networks of partners, platforms, customers, and suppliers become
more important, we are experiencing a business ecosystem revolution.
·
The final three forces underscore the need
for cooperation to strike a new societal deal in many
countries. We must cooperate to safeguard ourselves against a “dark side”
of malevolent actors, including cybercriminals and terrorists. Collaboration
between business and government also will be critical to spur middle-class
progress and to undertake the economic experiments needed
to accelerate growth. This is not just a developed-market issue; many countries
must strive for a “next deal” to sustain progress.
These tensions seem
acute today because of fast-moving political events and social unease. But
earlier times of transition provide encouraging precedents: the Industrial
Revolution gave rise to social-insurance programs in Western Europe and the
Progressive movement in the United States, for example. Progress has won out
over most of the past two centuries—indeed, at an accelerating rate since World
War II, which has seen global growth rates more than double the average of the
preceding 125 years. As business leaders strive to compete and cooperate in new
ways, they should take heart: if history is any guide, we’re operating in
crucibles of progress that can help create an exciting tomorrow.
Global growth shifts
No developed country has
recaptured the growth momentum we expected before the financial crisis of
2008–09. World GDP as a whole, while ahead of some long-term historical trends,
remains below what we had thought to be our economic potential. Moderated
growth has challenged individuals, and it has also made it more important for
companies to take a granular approach to identifying opportunities, placing
bets, and backing them with sufficient resources. The opportunities are large,
particularly for leaders who understand how the dynamics of global growth are
shifting as the nature of globalization changes, the largest emerging markets
grow in importance, and technology reshapes our resource trade-offs.
Beyond globalization
Globalization is still
progressing, but also facing powerful headwinds. “Anti-globalization”
sentiments are growing, and governments are responding: the United Kingdom is
moving ahead with Brexit implementation; the United States has already stepped
back from the Trans-Pacific Partnership (TPP) and may now have changes to the
North American Free Trade Agreement (NAFTA) in its sights. Meanwhile,
traditional globalization metrics are slowing. The growth of trade compared
with the growth of GDP in this decade has been half of that in the late 1990s
and early 2000s, while global capital flows as a percentage of GDP have dropped
precipitously since the 2008–09 financial crisis and have not returned to
pre-crisis levels.
At the same time, there
is evidence that other facets of globalization continue to advance, rapidly and
at scale. Cross-border data flows are increasing at rates approaching 50 times
those of last decade. Almost a billion social-networking users have at least
one foreign connection, while 2.5 billion people have email accounts, and 200
billion emails are exchanged every day. About 250 million people are currently
living outside of their home country, and more than 350 million people are
cross-border e-commerce shoppers—expanding opportunities for small and
medium-sized enterprises to become “micro-multinationals.”
Operating in tandem
with these crosscurrents are calls for localization and recognition of
pronounced differences in local tastes, which are making it more costly and
complicated to compete globally. Multinational companies need, in the words of
GE’s Jeff Immelt, “a local capability inside a global footprint.” Many
companies are trying to compete with the increasing number of world-class local
players by carefully recognizing subtle differences in local taste and custom.
Some fast-food chains, for example have global, iconic brands but also local
menu options that are distinct. Estée Lauder in 2012 introduced Osiao, its
first China-specific beauty brand, which it developed at the company’s Shanghai
R&D center. At the end of 2016, Hyundai announced it would be producing
several new models in China to compete with local brands.
Globalization was never
an unstoppable, monolithic force, as Pankaj Ghemawat of NYU has long said. As globalization’s complexities
have become increasingly evident, the importance of competing with local
precision at international scale continues to grow.
ICASA: The force of billion-person markets
It was more than 15
years ago that Goldman Sachs economist Jim O’Neil popularized the term “BRIC” in reference to the
growth prospects of Brazil, Russia, India, and China. Since then, Brazil and
Russia have sometimes faltered, while other emerging markets, particularly in
Africa and Southeast Asia, have grown in importance. Although there will be
more ups and downs in the years ahead, it’s important not to get distracted and
lose sight of the numbers. There are three geographic entities—India, China,
and Africa—in which urbanization is empowering populations that exceed one
billion people, and a fourth, Southeast Asia, with more than half a billion.
Together, these enormous “ICASA” (India, China, Africa, and Southeast Asia)
markets hold the potential for significant continued expansion. They also pose
some of the biggest risks to global growth as they confront internal obstacles:
·
In India, challenges include transitioning to
more sustainable urbanization; building a manufacturing base in India, for
India; substantially increasing women’s participation in the general economy;
and fully exploiting the country’s technical brainpower to move up the value chain.
·
China’s growth rate has begun to taper, and
despite substantial institutional changes over the past decade, the country
needs to do more to complete its transition from an investment-led growth model
to a productivity-led one. The demographic headwinds China will soon be facing
amplify the need for this transition.
·
Africa, whose working-age population is
projected to top that of China and India before 2040, has the most unfilled
potential. It also faces the greatest challenges: mobilizing its domestic
resources, aggressively diversifying individual state economies, increasing
sustainable urbanization, accelerating cross-border infrastructure development,
and deepening regional integration. Failing to achieve any one of these could
stall growth.
·
Southeast Asia’s impressive past growth has
been driven by an expanding labor force and a shift of workers from agriculture
to manufacturing. To continue growing as these factors fade, the region needs
substantial investment in infrastructure that supports digitization and
urbanization.
Economic power
generates geopolitical power, as China’s success has most recently confirmed.
The more these markets overcome their unique challenges, the more central their
role will be on the global stage. How these players assert that new power may
not conform to approaches followed by OECD countries.1Institutions reflecting these
markets’ new clout, such as the Asian Infrastructure Investment Bank, are
already emerging So are economic arrangements that align with their interests,
such as China’s One Belt, One Road initiative, which seeks to
connect, through maritime links and physical roads, more than half the world’s
population and roughly a quarter of the goods and services that move around the
globe.
The opportunity remains
enormous: we expect more than roughly half of global growth over the next ten
years to come from these geographies. Whether a company is from one of these
markets and already capturing regional growth or is seeking to enter one or
more of them, its ability to reallocate resources, realign its footprint, and
react to unexpected dips will shape whether it can successfully compete in the
rebalancing global economy.
Resources (un)limited?
A modern-day Malthus
might wring his hands at our world’s ability to sustain billions more people
emerging from poverty, eating more protein, driving carbon-emitting
automobiles, and enjoying a fuller basket of other consumer goods. There is,
however, a counterforce at work today, as technological advances change the resource equation in a variety of ways:
·
Advances in analytics, automation, and the
Internet of Things, along with innovations in areas such as materials science,
are already showing great promise at reducing resource consumption.
Cement-grinding plants can cut energy consumption by 5 percent or more with
customized controls that predict peak demand. Algorithms that optimize robotic
movements can reduce a manufacturing plant’s energy consumption by as much as 30
percent. And smart lighting and intuitive thermostats are significantly
reducing electricity consumption in businesses as well as homes.
·
Technology is transforming resource
production. Gas and oil output has increased significantly because of advances
in fracking, deepwater drilling, and enhanced oil recovery. Seawater
desalination currently contributes hundreds of millions of cubic meters per
year to Israel’s water supply (up from less than 50 million in 2005), and the
country now gets 55 percent of its domestic water from desalination.
·
Technologies are combining in new ways, with
the potential to reduce resource intensity dramatically. Vehicle
electrification, ride sharing, driverless cars, vehicle-to-vehicle
communications, and the use of new materials are rapidly coming together to
reduce automobile weight, change driving patterns, and improve the utilization
of cars and of road capacity. In fact, analysis by our colleagues suggests that
global demand for oil could flatten by around 2025 under plausible scenarios regarding
the adoption of light-vehicle technologies and slowing plastics consumption.
Technology isn’t a
panacea, of course; technological solutions come with external consequences.
Fertilizers, for example, helped trigger a boom in agriculture, but fertilizer
runoff polluted many water supplies. Fossil fuels lifted the standard of living
for billions of people but have led to deteriorating air quality, oil spills,
and carbon dangers that are ecologically existential and drivers of investment
to meet regulations and arrangements (such as the Paris Agreement) aimed at
slowing the impact of climate change.
But there is also
opportunity. While companies are working through the implications of resource
constraints for their business models, they will generate new ideas—creating
less resource-intensive processes, turning waste into raw materials, and
building a more circular economy. We can expect an accelerating
resource-innovation cycle: growth will strain supplies, technology will yield
solutions, externalities will arise, and further ideas will emerge in response.
As technology continues
to progress and data flows reveal efficiency opportunities across operations,
companies should have more influence over their cost structure, and resource prices
should be less correlated to one another and to macroeconomic growth than they
were in the past. McKinsey research suggests, for example, that
iron-ore demand could decline over the next two decades as a result of
softening demand for steel and increased recycling, but copper demand could
jump, given its role in a wide range of electronics and consumer goods.
Resource-related business opportunities will turn up in unexpected places, and
there’s room for a multitude of new products and services. An example is new
carbon-based materials that are lighter, cheaper, and conduct electricity with limited
heat loss. They could transform entire industries, including automobiles,
aviation, and electronics. Business leaders will have more opportunities to
seize the initiative as they stretch their thinking about the changing nature
of resource constraints.
Accelerating industry disruption
“Disruption” isn’t just
one of the most overused words in management writing; it’s also one of the most
imprecisely used. When we say industry disruption is accelerating, we mean that
in many sectors, critical foundations of industry structure—the economic
fundamentals, the power balance between buyers and sellers, the role of assets,
the types of competitors, even the borders of industries—are rapidly shifting.
While that degree of change can be uncomfortable or even destructive, it can
also contain the seeds of opportunity.
Our work on digitization highlights both sides of the
coin. By reducing economic friction, digitization is enabling competition that
pressures revenue and profit growth. It also is creating fresh opportunities to
improve performance through supply-chain, product, process, and service
improvements. Ensuring alignment between a company’s digital and its corporate
strategy appears to be one of the factors differentiating winners and losers—a
useful reminder that leading today requires tough choices about big, disruptive
forces.
Combinatorial-technology explosion
The most radical
technological advances have not come from linear improvements within a single
subject or expertise, but from the combination of seemingly disparate
inventions and disciplines. As W. Brian Arthur has noted, “The overall
collection of technologies bootstraps itself upward from the few to the many
and from the simple to the complex.”
For example, consider
how increased online connectivity, cryptography, and advanced analytics have
combined to create a distributed, global database for transactions called
blockchain. It’s potentially a game changer, because transaction costs
represent a substantial share of the world’s commercial costs. In fact, the
desire to avoid transaction costs such as the negotiating and writing of
contracts helps explain why firms exist, according to Nobel laureate
Ronald Coase. Since blockchains can process transactions without
intermediaries, their potential impact on costs and competition is profound.
Or consider machine
learning, whose potential we have barely begun to tap. It is starting to
combine with other technologies in a variety of unexpected ways. Recently, a
team from Houston Methodist Hospital developed an algorithm that translates
text from the hospital’s patient charts into a prediction of breast-cancer risk
30 times as fast as a human can.
Combinatorial effects
are revolutionizing many aspects of biological technologies. Low-cost genetic
sequencing enabled by massive computing power is laying a foundation for
developing “precision medicine” and providing people with facts that can
influence life choices. Advances in materials science have allowed the
development of stents (widely used to expand clogged arteries) that naturally
dissolve after their job is done, potentially freeing patients from longer-term
medications. Wearable and ingestible sensors, meanwhile, are being developed to
increase the effectiveness of drug therapies by helping ensure medications are
taken and physiological responses monitored.
The effects of
technology combining can go beyond the products or services a company provides
to alter the very definition of what a company does. The automotive industry,
for example, isn’t just about building cars anymore. As artificial intelligence
and computational power merge with advanced automobiles and consumer products,
companies are thinking about how they can provide “mobility solutions,” or even
utility solutions, given the size of batteries in electric cars. This is
disruption writ large.
And everything is
accelerating. Arthur’s combinatorial effects are compounding the impact of
Moore’s law, creating more scope to innovate and to conceive new businesses.
Leaders with imagination and foresight who can keep up with the pace of change
have unprecedented opportunities.
C2B: Customer in the driver’s seat
Digitization has
brought consumers an ever-expanding menu of goods and services to choose from,
some of which are free. Many goods and services consumers once paid for are now
available online at a swipe or a click. Wikipedia’s English-language pages
alone would fill the equivalent of more than 2,300 encyclopedias if printed.
Skype, which allows users to make free video and audio calls to other Skype
users, provides over two billion minutes of calls every day. And infinite
variety means that just about any taste or preference is being catered to.
Think of detergents on Amazon, where customers can find a selection of
strawberry-scented washing powders exclusively meant for black clothes.
In an environment where
so much costs so little and proliferating variety fragments markets, customers
are capturing more of the surplus. In the United States alone, the Internet
provides consumers with an estimated unpaid annual welfare gain of $100
billion. Take, for example, global
mobile-data traffic and revenues: from 2008 to 2020, mobile data are expected
to expand by more than 900-fold, while revenues from the data are forecast to
grow by a factor of only 3.25.
Customers also are
taking the driver’s seat in steering the products that companies develop. They
are able to communicate with companies directly and in large numbers for the
first time. What they want is more variety, more specificity, and greater
self-expression. Google is renowned for its practice of rapidly incorporating
direct customer feedback in product design. Chinese mobile-phone maker Xiaomi
engages directly with consumers in person or online. Adidas has even built
robot-operated “SpeedFactories,” which create sneakers designed by individual
consumers, while Doob Group enables consumers to scan their bodies and create
unique, 3-D-printed figurines.
It remains to be seen
how the willingness of customers to pay a premium will evolve. Right now, as
Ray Kurzweil, the futurist and now a director of engineering at Google,
recently noted, “There is an open-source market with millions of free products,
but people still spend money to read Harry Potter, see the latest
blockbuster, or buy music from their favorite artist.” Those examples may seem
like outliers, but as Kurzweil pointed out, “coexistence of a free open-source
market and a proprietary market” is also “the direction we’re moving in with
clothing.”3In such a world, it won’t be just
customers who have more choices; companies, too, have more decisions to make
about their business models and how they create value.
Ecosystem revolution
In a classic 1960 Harvard Business Review article, Theodore Levitt
asked readers to consider, “What business are you really in?” Because of
digitization and the blurring of industry boundaries, Levitt’s question needs
an addendum: “And what’s your ecosystem?” Businesses can broadly be grouped
into three categories, with ecosystems emerging as both a powerful source of
value creation and a heated competitive arena:
·
Linear value chains, which dominated for most
of the 20th century, comprise a series of value-adding steps with the goal of
producing and selling products: think automotive assembly.
·
Horizontal platforms, which gained prominence
with the rise of personal computing and the Internet, cut across value chains.
Companies operating under this model own hard assets and sophisticated
architecture, typically built around value-adding software and technology
stacks.
·
“Any-to-any” ecosystems, such as those of
Uber and Airbnb, have emerged most recently. These companies also operate at
the center of platforms, but they are distinctly asset-light.
The horizontal
platforms of players such as Google, Amazon, and Facebook have been creating
value for years and currently account for five of the ten largest US companies
by market cap. And horizontal plays aren’t just digital. Companies of all
stripes still ship their designs to Taiwan Semiconductor Manufacturing Company
(TSMC), which relies on its sophisticated semiconductor factories to turn
brilliant designs into high-performance chips.
Leading horizontal
platforms have shifted value pools quickly and unpredictably. The shrinkage of
the compact-disc industry from $17 billion in US sales in 2001 to $2 billion a
dozen years later, as sales from music downloads, subscriptions, and synchronizations
have soared, is one well-known example of how disruptors “destroy billions to
create millions.” So far, many of the traditional industries that have endured
these disruptions still exist, but their structure, and the players capturing
most of the value, are often unrecognizable relative to the pre-platform era.
Now any-to-any models
have taken the fore. These companies are at the center of platform-based
ecosystems, and unlike horizontal players, they are distinctly asset-light.
Alibaba is the world’s largest retailer measured by gross merchandise volume,
and it does not own any warehouses. The world’s largest accommodation provider,
Airbnb, does not own rooms; the world’s largest taxi company, Uber, does not
own cars—and neither company existed ten years ago. That’s disruption, although
the staying power of any-to-any models remains to be seen, given the low
barriers to creating software-based platforms.
The lines of
demarcation between categories are beginning to blur as value chains,
platforms, and ecosystems open, expand, and combine. Linear value chains aren’t
immune: Under Armour, a leader in sports apparel and accessories, has announced
plans to build the biggest connected fitness platform in the world.
In today’s rapidly
evolving landscape, leaders face a continuum of possibilities: build an
ecosystem, use someone else’s platform, stick to one’s linear-value-chain
knitting, or fashion some combination of the above. Navigating this crucible
ultimately comes down to asking hard questions about a company’s sources of
differentiation and positional advantage, and placing all options on the table,
even if that means disrupting or cannibalizing one’s own business.
A new societal deal
The biggest opportunity
of all—and arguably the biggest need—transcends companies and competition. If
private-, public-, and social-sector leaders can cooperate to create a new
societal deal, they will forge a brighter future for individuals and for a wide
range of institutions. Collaboration will be critical to overcome forces
undermining openness, to drive middle-class progress, and to encourage
experimentation that recharges growth and redresses income inequality.
Business leaders
typically spend about 30 percent of their time on external engagement, but by
their own assessment, few do so effectively. For more business leaders to “step
up to the plate” and “play a key role in driving solutions,” as Unilever
CEO Paul Polman says, they will
need to do more to embed society’s concerns in their business priorities, to
make external engagement an
integral part of their strategy, and to adopt a long-term mind-set.
The dark side
Progress thrives on
openness, and openness almost by definition means exposure. The Internet, for
example, has brought critical dangers even as it has unleashed a business and
social miracle. Everyday acts, such as connecting your phone to your car via
Bluetooth, create vulnerabilities most of us do not yet consciously consider.
The costs of fighting cyberthreats are rising into the trillions. Meanwhile,
rogue states continue to frustrate the global community, and the strains from
combating terrorism are reverberating worldwide. The number of terrorist
incidents and casualties remains relatively small but has been rising; global
terrorism death levels by the end of 2015 were more than five times higher than
they were in 2001.
Sometimes,
international cooperation can counteract destructive power that is concentrated
in the hands of a few. Consider how multiple states came together to beat back
pirates in the Somali basin beginning in 2010, saving the world economy about
$18 billion per year.
The achievement
of digital resilience also
requires collaboration. At a minimum, more collaboration is needed between the
broad cross-functional leaders responsible for security-related decisions
within a business. In an interconnected world, companies may also need to
explore shared platforms and data sharing about cybersecurity threats across
the boundaries of their own businesses and industries. As leaders figure out
how to strike the right balance between competing effectively, guarding the
corporate ramparts, and cooperating in self-defense, they will be helping to
redefine what it means to live together, safely, in our interdependent world.
Middle-class progress
The rising tide of
progress has not lifted all boats equally. Globalization and automation are
polarizing the labor market, with more on the way as expanding machine-learning
capabilities increase the automatability of a wide range of tasks in developed and
emerging markets alike. As middle-wage workers are displaced, many are forced
to “trade down,” reducing their income and putting pressure on existing
lower-wage workers. There is also widening earnings disparity. Workers with
advanced degrees have generally seen their earnings rise, while wages for those
with only high-school diplomas have stagnated, and wages for those who do not
hold a high-school diploma have declined. Youth unemployment has reached 50
percent or more in several major developed economies.
Demographic trends are
exacerbating matters. The number of workers earning income for each dependent
is falling as populations age, making it harder for society to support the
young and the old. Entitlement programs such as pension plans are woefully underfunded.
Trust has fallen among
the threatened middle class. Significant segments within Western democracies
now have a negative view toward immigration and blame their governments for
failed policies. Globally, 60 percent of working-age, college-educated,
upper-income individuals express trust in business, government, media, and
nongovernmental organizations (NGOs). Yet only 45 percent of the remaining
population do so. This trust gap is largest in France, the
United Kingdom, and the United States, and overall trust throughout scores of
countries has declined to the lowest levels in more than five years.
A central part of the
narrative behind the “Leave” campaign in the United Kingdom and the Trump
campaign in the United States was that the leaders of major institutions had
forgotten about the middle class. Business leaders can help rebuild that trust.
In fact, citizens expect this from them. In a 2015 survey,4more than 80 percent of employees
agreed that a business can “take specific actions that both increase profits
and improve the economic and social conditions in the community where it
operates.”
The need for
middle-class progress isn’t just a developed-markets issue. As the emerging
world’s new consuming class comes to the fore, it is striving for opportunity
beyond entry-level roles, and observing the income polarization that often
accompanies industrialization. Some of the ICASA balancing acts previously described,
such as China’s transition from an investment-led to a productivity-led growth
model, will determine the success of the middle classes in those markets.
Economic-growth experiments
While running for
president in 1932 during the depths of the Great Depression, Franklin Roosevelt
remarked, “The country needs and, unless I mistake its temper, the country
demands, bold, persistent experimentation.” We are on the cusp of a new wave of
experimentation today, because there are no clear answers to some of the
challenges looming before us.
Exhibit one is growth.
There is no consensus as to why it has been stuck in lower gear for years, or
where it is headed. Northwestern University economist Robert Gordon argued in
his 2016 book, The Rise and Fall of American Growth, that the
productivity slowdown that started in 1970 is likely to continue and hamper
growth. Other researchers, including our colleagues at the McKinsey Global
Institute, argue that automation enabled by artificial intelligence, robotics,
and other advances will likely raise productivity—which
would increase growth, provided that those productivity gains go hand-in-hand
with jobs and demand for goods and services, as they have in the past. Will
they?
One thing that does
seem clear is that many growth policy tools have reached their limits. Central
banks and governments in the developed world responded to the financial crisis
by slashing interest rates (Exhibit 9), creating innovative facilities to try
to keep the credit flowing, and in some cases bailing out financial and
nonfinancial players. Different mixes of austerity and structural reforms also
were tried. When these proved insufficient to restart growth, leaders around
the world turned to new, sometimes overlapping policy experiments, in search of
a more effective solution. And they continue to debate alternatives, some as
yet untried. The combined list is long and includes quantitative easing (QE),
helicopter money (also called “the people’s QE”), debt mutualization (Europe),
debt monetization (Japan), guaranteed minimum income (Brazil), and massive
stimulus programs combined with a regulatory rethink (the United States).
We’re entering
uncharted territory in other areas, too. As the world ages, new approaches will
be needed to support retirees who haven’t saved enough or are counting on
pension and healthcare benefits that seem unsustainable without placing
crushing burdens on the workers of today and tomorrow. Or consider
infrastructure spending. The McKinsey Global Institute (MGI) finds that the
world will need to spend $3.3 trillion annually between 2016 and 2030 to keep
up with projected growth—nearly $1 trillion more than we have been spending
annually. MGI research also suggests that infrastructure spending can be cut by
as much as 40 percent through better project design and execution—areas ripe
for public–private experimentation.
The results of
experimentation—with respect to growth, aging, infrastructure, income
inequality, and more—will have dramatic implications for our world, for the
business environment, and for corporate performance. Analysis by our colleagues
suggests that 30 percent of corporate profits can be traced to social and
regulatory issues, and that shares of companies that connect effectively
with all stakeholders outperform their competitors’ by more
than 2 percent per year on average. Employees, too, will reward companies that
are part of the experiments ahead. About 85 percent of employees working at
companies engaged in societal issues said they are committed to achieving their
leadership’s strategy, motivated to perform and have confidence in the future
of their company—some 20 percent more in each case than employees of companies
not engaged.
Growth shifts.
Accelerating disruption. A new societal deal. These are powerful forces that
demand thoughtful responses and contain the seeds of extraordinary opportunity.
Leaders reaching for these opportunities will need to question their own
assumptions and imagine new possibilities. Those who do will compete more
effectively; they also will be better able to contribute to broader solutions,
and ultimately to a new and more inclusive narrative of progress.
By Ezra Greenberg, Martin
Hirt, and Sven Smit
http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-global-forces-inspiring-a-new-narrative-of-progress?cid=other-eml-alt-mkq-mck-oth-1704&hlkid=91784d61161c40438d2142c544184c45&hctky=1627601&hdpid=7d3750cd-9830-4cf0-9ae1-59684c505992
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