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How to Capture the Biggest Business

Opportunity in a Century

Resource Revolution

Matt Rogers

Director, McKinsey & Company

#ResourceRev

1

Resource Revolution – the Basics

▪ 2.5B people entering the middle class, putting pressure on resources—

companies need to improve resource productivity 3-5% annually to keep up

▪ Combining information technology with industrial technology can drive 10x

productivity improvements on both supply and demand side

▪ This shift in the way we produce and use resources will restructure most

traditional industrial markets and will require a new approach to management

▪ Today’s examples: Oil, Buildings, Autos, Consumer Electronics—each

industry facing a 10x productivity shift today

2

Discontinuity: 100x more people, 10x more income, 10x faster

1 billion100 million

UK

1600 1700 1800 1900 2000 2100

$7,500

$6,000

$4,500

$3,000

$1,500

$0

USA

GermanyJapan

South Korea

India

IndiaChina

China

GDP per capita in 1990 US dollars purchasing power parity

Size of bubble = population

Year

3

Concurrent supply challenge: Reserves are getting more expensive

to extract and lower grade

$1,500

$1,000

$500

$0

Costs

2005 U.S. dollarsIndexed units

120

80

40

0

Grades

Average Australian Grade Indexed 100

1844

1960 2011Energy

Labor

%Copper

g/t Silverg/t Gold

% Lead

2010

4

We have seen a steep change in labor productivity, but

not yet in energy or resources

1820 1840 1860 1880 1900 1920 1940 1960 1980 2000 2020

GDP per

hour worked

(labor)

GDP per

ton of oil

equivalent

(resource)

Productivity growth

(multiples of 1820 productivity)

48

36

24

12

0

5

Software

Nanotechnology

Systems

engineering

Biology

Interchangeable

parts

Success requires a new management toolkit

1. Reduce Waste

2. Substitute

3. Circularity

4. Optimize

5. Virtualize

6

ACES: from 67 cents/mile today to 10 cents/mile

and universal access

Autonomous

maintenance

& charging

Extend range

Electrified

Autonomous Shared

ConnectedAuto route

Match open trips & 2 minute service

▪ No up

front cost

for

batteries

▪ Use only

size car

you need

7

PRIME: Advanced Buildings with Net Zero Energy at 0-5% Premium

More useable

space

Faster to build

Easier to

configure

Moving from R2 to R30

Efficient

Productive Integrated

Modular

Better lighting; comfort; security

▪ Advanced

HVAC

▪ Solar plus

storage

▪ LEDs

plus wifi

makes

DSM

8

4D: Restructuring the utility industry

10^6 more

information

intensive

Extend range

Disruptive

Distributed

resourcesDispatched

demand

Digital

network Auto route

Matching supply and demand resources

in real time to keep market balanced

▪ Localized

demand

mgmt

9

TECH: Increasing Circularity in Technology Driven Industries

Be

tte

r P

rod

ucts

Better Supply Chains

Efficient

Total

engineeringHolistic end

game

Circular

Supply

Recycling start to finish

Inte

gra

ted

Life

Cycle

ma

na

ge

me

nt

So

ftw

are

up

gra

de

ab

leB

ette

r ma

rke

t stru

ctu

reRisk substituted out

10

For Businesses: Use less, GET MORE.

BASICS ALL SUPPLIED IN CONTAINER

EQUIPMENT AS

SERVICE FOR YOU

11

Questions for Discussion

▪ Where do you have opportunities to improve performance of the businesses in

your portfolio by taking waste out of the equation?

▪ Where are the opportunities to increase circularity?

▪ What would it take to reduce the risk and improve margins in your businesses

through substitution?

▪ Where are you at risk from being disrupted by optimization and virtualization?

Where can you turn these into advantages?

12

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Restructuring markets globally:•Transportation•Utilities and Water•Oil and Gas•Mining•Buildings and Construction•Food and Agriculture

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