Global Forces of Disruption Impacting Enterprises

Over the next decade, five disruptive forces will shake the global economy as few have done before. These five forces — the great rebalancing, the productivity imperative, the global grid, pricing the planet, and enmeshed complexities — will create a world that is more interconnected, more interactive, and more aware, while at the same time one that is trying to harness and protect the same set of finite resources. No one and nothing will escape their effect. Individuals, businesses and governments, urbanites and villagers, the affluent and the struggling will all feel the impact of these five forces.


The great rebalancing

In the coming years, the center of global economic activity will shift perceptively away from developed countries and towards developing countries. Emerging markets will likely account for more than half the growth in global GDP over the next decade, and, by 2025, almost half the world’s Fortune 500 companies will be based in emerging markets, from just more than a quarter today. In another aspect of this rebalancing of economic power, the world’s urban population is expected to grow to more than 4.2 billion by 2020 from about 3.9 billion in 2014. By then, 80 per cent of urbanites will live in developing economies. More than half of GDP growth in the coming decade will be in emerging markets. The urban population will rise to over 4.2 billion by 2020, and 80 per cent of that population will be in developing countries. Emerging markets will not only drive global economic growth, but will also be a focus of innovation and consumption.

The productivity imperative

In developed economies, productivity — pushed by technology — will be critical to economic growth and transformation. Almost 160 million jobs globally are expected to be replaced or augmented by machines over the next 10 years. Knowledge workers will carry the brunt of this global shift, with almost a third of current jobs replaced or augmented by technology, but industrial and service workers will also be affected. Already, companies like FANUC in Japan are developing “lights out” factories that do not require human workers on the factory floor, driverless trucks are being used in Australian mines by Rio Tinto, and a Hong Kong venture capital fund, Deep Knowledge Ventures, has appointed an algorithm, VITAL, as an “equal member” of its board of directors.

The global grid

Capital, trade, and information flows are creating a multi-nodal, interlinked world economy powered by a virtual global grid. While global GDP doubles every 12 years or so, data traffic doubles in less than 3 years. This tremendous upsurge of data and connectivity requires equally impressive technology solutions to harness the full power of this global grid. This free flow of information creates new business models that weren’t available just a few years earlier, such as multichannel retail operations with no geographic boundaries, models based on user-generated content, and “sharing” models that connect owners and users of virtual and physical assets.

Pricing the planet

Surging demand, constrained supply, and concern over the environment are reshaping the economics around the world’s resources. Resource consumption is expected to increase by 30 per cent by 2020, and 90 per cent of the increased demand will likely come from emerging markets. The increased demand is already putting upward pressure on resource prices that is expected to continue unabated. Commodity prices, for example, increased by 147 per cent in real terms between 2000 and 2014 and price volatility reached a record high of 30 to 40 per cent in this period. Resource scarcity will likely trigger innovative solutions to tap into constrained resources better. Already, for example, automotive companies are building cars using 85 per cent recyclable materials and 95 per cent reusable materials, and personal computers are lighter, more energy efficient, and are delivered in less packaging.

Enmeshed complexities

The evolving global economy is also clearly influenced by a range of concerns, including rising income inequalities, growing political instability in some regions, and changing regulatory priorities. These pressures could put additional burdens on companies – for example, greater reporting requirements in the financial services industry – that open valuable opportunities for India’s technology and business services industry.

Join us in October 5th in New Delhi in an interactive and informative full day NASSCOM event with Indian IT and McKinsey global leaders to understand how technology can play a role in harnessing the impact of these factors across the world.

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