the disruptive dozen by jacques bughin

7/18/2019 The Disruptive Dozen by Jacques Bughin

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Digitization and TheDisruptive Dozen

Jacques Bughin, MGI CouncilMcKinsey Global Institute

Santiago , July 2015

CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of McKinsey & Company is strictly prohibited



1

▪ Jacques Bughin is a Director with McKinsey & Company’s Brussels office-

▪ Jacques is a core leader of the Media and Entertainment and Corporate Finance and Strategy practices. He has been a core member ofMGI, MTI and co-ed Digital Economy Initiative, a major internal and external knowledge program launched by McKinsey

▪Since joining the firm in 1992, he has been based in the Amsterdam, London, Montreal, New York, and Toronto offices, working mainlyon projects related to telecom, media, and high-tech He has helped clients all around the world

Background

▪ Jacques received a master’s summa cumlaude in Economics from the University ofNamur (Belgium) and University ofPennsylvania

▪ He holds doctoral degrees in Economics andin Operations Research

▪ He has lectured at many universities,including Toronto, London, and Brussels

▪

He is also a fellow of the ECARES, a think-tank on economic policy in Belgium, and afellow of the Applied Economics of the KULUniversity.

Jacques Bughin, [email protected], 32-477-480-230, 32-2-6454144

Who is who

Example of publication

1. McKinsey Global Institute – co-author of – Big Data – Social technologies

– Disruptive technologies – Internet matters

2. 35 McKinsey Quarterlies

3. More than 50 academic research publications , e.g., inManagement Science, European Economic Review

4. Business interviews, e.g., in Le Monde , The Economist,Business Week, Fortune

5. Multiple books of which Managing media companies , Wiley(ed)., coauthored with Annet Aris



2

Agenda

1. Why and how

2. The next 12

3. What to make out of it



3

Why: GDP growth taking off , fuelled by tech changes

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

200019001800170016002001000 50 150 1750 1850 1950250 16501550

GDP per world capitaIn real USD

SOURCE: Angus Maddison's "World Population, GDP and Per Capita GDP, 1-2003 AD”; Projection based on Global Insighteconomic data; WIPO IP Statistics

First IndustrialRevolution

1760s to 1840s

Second Industrial Revolution1860s to 1920s

Printingpress

1450

Efficientsteamengine

1769

Masssteel

1855

Internalcombustionengine

Internet &world wide web

Today

Technologyadvancements

Firststeamengine

1698 18601970s

– 80s



4

Why: Technology is the largest fuel

% contribution of technology change to world output growth

ESTIMATES

SOURCE: R. Solow; Hall; Wikipedia; Annals of Statistics; McKinsey estimates

50%

44%

38%

33%

1998-20121970-20001940-19701920-1950

▪Technological change is acore engine of growth:

– Technology advancesaccounting for a total of USD8 trillion added valuegrowth in last 20 years

– Value added is only the tip ofthe iceberg- technology haspossibly redistributed 3 timesmore of value amongenterprises, or USD 25

trillion



5

Digital technology has been the key engine lately

% contribution of technology change to world output growthDigital

SOURCE: R. Solow; Hall; Wikipedia; Annals of Statistics; McKinsey estimates

50%

44%

38%

33%

25%

2%0%0%

1998-20121970-20001940-19701920-1950



6

Why: Technology disruptive growth, 20 years ago

Disrupted

▪ Mechanicalexcavator

▪ Traditional Retail

Disruptive▪ High-end

excavator▪ Large scale

retailing

▪ Early copiers

▪Small copiers



7

Why: Technology disruptive growth, current decade

Disrupted

▪Web 1.0 portal ▪ Newspapers ▪ Phone

makers▪

You as a worker

SOURCE: McKinsey Global Institute analysisphone makers

Disruptive

▪ Social media ▪ Personalizedsocial-based

shared news

▪ Advancedmaterials,

e.g,Stereolitho-graphy

▪ Low-costmodular robot

designed to workside-by-sidefactory workers

Printing



81 –commerce, books for amazon, 2- music, 3 video

Music

Video

Books

2 million songs

included in Prime

37 million songs

17,000 movietitles

15,000 movietitles

25,000 movietitles

+/- 35 millionbooks worldwide

+/- 1.5 million foreach largecountry (e.g., US,India)

1 million booksdigitized

190 countries 150 countries 11 countries 120 countries 41 countries

Why: Hyperscale digital businesses are capturing entireindustries

Inventory

Reach

Examples

19%1 27%1 63%2 36%3 31%3

Digital marketshare worldwide



9

Why: Have you heard about…

…..Corning ‘s Gorilla 3.0 glass protecting mobile screens from scratches and microbes…

….Belkin’s WeMO, in internet of things visual interface which converts electrical devices into

programmable appliances.

.... Mcor technologies’ 3D which uses ordinary copier paper as a medium to create 3D objectsdesigned by the consumer…

….Kolibree, a sensor-embedded toothbrush that sends data–as many embedded devices do—directlyto your smartphone….

….Fujitsu’s PulseWallet, which uses a biometric three-dimensional reading of a single vein in her palm,designed to facilitate mobile payments by linking the user’s palm print to stored credit card information.

…..Ningbo Jiye Electrical Co., which offers solar-powered smartphone charging case for as little as$15.



10

How: Disruptive technology defined

SOURCE: McKinsey Global Institute analysis

Rapid technologychange

• High rate of technology change (interms of cost or performance)

OR

• Significant increase in the rate oftechnology change

Extensive reach of technologyimpact

• Potential to touch the lives of billions ofpeople or millions of workers

AND

• Potential to impact multiple sectors

Transformative potential impact

• Potential to significantly change people’s jobs andlives (day-to-day, health, and environment)

OR

• Large portion of impact and disruption in the next 10years

Large economicvalue at stake

• Potential to impact large pools ofeconomic value by 2025

Economicallydisruptive

technology

Measurable ineconomic terms by

2025Not only economic, but societal



11

"640 k ought to be enough foreverybody",

– Bill Gates, 1981

"We do not like their sound, and guitarmusic is on the way out"

– Decca, 1962

" There is absolute no reason why peoplewould want a PC in their home"

– DEC, 1977

"I suppose we shall soon travel by air-

vessels, and at length find our way to themoon in spite of he want of atmosphere"

– Lord Byron, 1882

"Louis Pasteur's theory of germs isridiculous fiction"

– Pierre Pachet, Professor atUniversity of Toulouse, 1872

How: Predicting is hard especially the future



12

How: Not a prediction, but a careful selection

Collect existing list

1

Screen list based onour 4 definition criteria

2

Further detailed impacton list of technologies

3

▪

Hype list built up,through various sources: – Media – Academic intelligence – Business intelligence

▪ Reviewed by external

experts+ McKinseyexpertise

▪

Speed of technologydiffusion▪ Impact (breadth & size)▪ Measurable in GDP

activity and more▪ Disruptive nature (value

chain, consumer)

▪

Detail by industry▪ Taxonomy of impact – Employees – Consumers – Entrepreneurs – Governments, etc.



13

How: We relied on external advisory to cross-check our results

▪ H. Varian, Google

▪ E. Brynjolfsson, MIT

▪ P. Warrior, Cisco

▪ D. KirckPatrick, Techonomy

▪ B. Schwartz, Brooking Institute

▪ About 10 experts per technology

▪ Report took 3-4 months of intense

research via MGI

External advisory Board, e.g.The Disruptive Dozen technologydeep-dive



14

Agenda

1. Why and how

2. The next 12




15

Technology trend “lists” everywhere

▪ By 2029, 11 petabytes of storage will be available for $100▪ In the next 10 years, we will see a 20-time increase in home networking speeds.▪ By 2013, wireless network traffic will reach 400 petabytes a month.▪ By the end of 2010, there will be a billion transistors per human—each costing one ten-millionth of a cent.▪ The Internet will evolve to perform instantaneous communication, regardless of distance.▪ The first commercial quantum computer will be available by mid-2020.▪ By 2020, a $1,000 personal computer will have the raw processing power of a human brain.▪ By 2030, it will take a village of human brains to match a $1,000 computer.▪ By 2050 (assuming a global population of 9 billion), $1,000 worth of computing power will equal the processing power of all human brains on earth.▪ Today, we know 5 percent of what we will know in 50 years. In other words, in 50 years, 95 percent of what we will know will have been discovered in the past 50 years.▪ The world’s data will increase sixfold in each of the next two years, while corporate data will grow fiftyfold.

▪ By 2015, Google will index approximately 775 billion pages of content.▪ By 2015, we will create the equivalent of 92.5 million Libraries of Congress in one year.▪ By 2020 worldwide, the average person will maintain 130 terabytes of personal data (today it is ~128 gigabytes).▪ By 2015, movie downloads and peer-to-peer file sharing will explode to 100 exabytes, equivalent to 5 million Libraries of Congress.▪ By 2015, video calling will be pervasive, generating 400 exabytes of data—the equivalent of 20 million Libraries of Congress.▪ By 2015, the phone, web, email, photos, and music will explode to generate 50 exabytes of data.▪ Within two years, information on the Internet will double every 11 hours.▪ By 2010, 35 billion devices will be connected to the Internet (nearly six devices per person on the planet).▪ By 2020, there will be more devices than people online.▪

With IPv6, there will be enough addresses for every star in the known universe to have 4.8 trillion addresses.▪ By 2020, universal language translation will be commonplace in every device.▪ In the next five years, any surface will become a display.▪ By 2025, teleportation at the particle level will begin to occur.▪ By 2030, artificial implants for the brain will take place.

Top 25 Technology Predictions



22

We focused our work on an original list of 100 contenders

12 winners

▪ Fission

▪ Fusion panel

▪ Carbonsequestration

▪ Advanced waterpurification

▪ Quantum computing

5 close contenders All 83 others reviewed



23

And the winners are? A few tips

“We see computers

everywhere, not in statistics”

▪ Technology disruptions can be visible ( e.g.cost decrease by 50% in one year, etc), yet it

usually takes time to percolate andpenetrate all sectors of life/economy

“The internet economy is

barely 3% of GDP but we can’t

live without it”

▪ Major technology disruption affects as much

user surplus as economic activity

“Technology without science

and funding will not be calledtechnology”

▪ Nanotechnology driven by HumanGenome Project

▪ Internet ancestor, the Arpanet was a publiclyfunded project



24

So … The Disruptive Dozen: Speed, Scope, and Economics at stakeIT and how we use it

Cloud technologyUse of computer hardware and software resources delivered over a network orthe Internet, often as a service

Internet of ThingsNetworks of low-cost sensors and actuators for data collection, monitoring,decision making, and process optimization

Automation of knowledge workIntelligent software systems that can perform knowledge work tasks involvingunstructured commands and subtle judgments

Mobile InternetIncreasingly inexpensive and capable mobile computing devices and Internetconnectivity



25

The Disruptive Dozen: Speed, Scope, and Economics at stakeIT and how we use it





Machines working for us

Advanced roboticsIncreasingly capable robots with enhanced senses,dexterity, and intelligence used to automate tasks oraugment humans

Autonomous and near-autonomous vehiclesVehicles that can navigate and operate with reduced or nohuman intervention

3D printingAdditive manufacturing techniques to create objects byprinting layers of material based on digital models



26

IT and how we use it





The Disruptive Dozen: Speed, Scope, and Economics at stake





Rethinking energy comes of age

Energy storageDevices or systems that store energy for later use,including batteries

Advanced oil and gas exploration and recoveryExploration and recovery techniques that make extractionof unconventional oil and gas economical

Renewable energyGeneration of electricity from renewable sources with

reduced harmful climate impact



27

IT and how we use it









The Disruptive Dozen: Speed, Scope, and Economics at stake

Rethinking energy comes of age

Energy storageDevices or systems that store energy for later use,including batteries

Advanced oil and gas exploration and recoveryExploration and recovery techniques that make extractionof unconventional oil and gas economical

Renewable energyGeneration of electricity from renewable sources with

reduced harmful climate impact

Changing the building blocks of everything

Next-generation genomicsFast, low-cost gene sequencing, advanced big dataanalytics, and synthetic biology (“writing” DNA)

Advanced materialsMaterials designed to have superior characteristics(e.g., strength, weight, conductivity) or functionality



28

Agenda

1. Why and how

2. The next 12




29

Key learning

1. 10 disruptive technologies, if right, is 50% of totalproductivty growth of the future

2. Do not confuse hype with impact: renewable energyversus advanced robotics

3. Digital is the platform

4. Globalisation, millenialisation, and new behaviors

5. What does a world look like if all tech get to flourish in the

same time?



30

Impact of the Disruptive Dozen technologyUSD million

14

8

Contribution

split

6

Worldwide

GDP volumeimpact2014-2025

35%

Top 2

disruptive

20%

Worldwide

GDP volumeimpact2014-2025

100% =14

Top 10

disruptive

43%

Top 5

disruptive

Other technicalchange

Top 12



31

Hype versus impact

Articles in media2012; #

Hype

Mass

Niche

500 3,000

Impact ; billion US by 2025, nominal

10,000

1,000

Low Medium High

Mobileinternet

Internetof Things

Cloudtechnology

Advancedrobotics

Autonomoustransportation

Advancedoil & gas

Renewableenergy

Next-generationgenomics

Advancedmaterials



32

Economic Potential by 2025: digital rules$ trillion, annual

Advanced materials 0.2–0.5

Next-generationgenomics

0.7–1.6

Renewable energy 0.2–0.3

Advanced oil and gasexploration and recovery

0.1–0.5

Energy storage 0.1–0.6

3D printing 0.2–0.6

Autonomous and near-autonomous vehicles 0.2–1.9

Advanced robotics 1.7–4.5

Automation ofknowledge work

5.2–6.7

Internet of Things 2.7–6.2

Cloud technology 1.7–6.2

Mobile Internet 3.7–10.8

Range of sized potential economic impacts Impact from otherpotential applicationsLow High



33

The digital universe expansion

2005-15

CoreApplication

▪ Search/E-mail/portals

▪ Social networks▪ Rich media▪ Mobile internet

2000-05 2015-25

▪ Smart cities▪ Connected health, cars,

etc.▪ Manufacturing 4.0

Corecapabilities

▪ Web channel ▪ Big data ▪ Artificial intelligence

Connectiontype

▪ Information/ website ▪ People/socialnetworks

▪ Connected devices/Internet of Things

Access type ▪ Narrowband (98kb/s) ▪ Broadband (15mb/s;

3G4G)

▪ Mega-band every-

where (Fiber, 5G)



34

Note: Worldwide; May 2013Further information regarding this statistic can be found on page 8.

Lead digitization providers build economic value

Market value of the top 20 largest internet companies worldwide in 2014 (Bn USD)377

157144

132

66 63 59

35 33 29 25 24 23 19 18 16 14 13 11

0

50

100

150

200

250

300

350

400

M a r k

e t v a l u e ( i n b i l l i o n U . S .

d o l l a r s )

Top 20 Digital businessses already worth ¼ ofglobal top 20 worldwide

40% of total market valued added in late 5 years



35

Globalisation: Split Developed/DevelopingShare impact; %

80

70

30

80

80

60

60

80

2080

90

50

20

30

70

20

20

40

40

20

8020

10

50

Developed Developing



36

In practice



37

Digital Millenials to be the dominant work-force by 2020

50%



38

A new business world: new companies

McKinsey Digital; McKinsey Strategy and Corporate Finance practice

Sector

Travel,

transportation,logistics

Banking

Telecom andmedia

Example impacts

Health

Automanufacturing

Developments in thedigital age:

Transparent accessto data on a massive

scale

Decreasing cost ofcomputing power

Ubiquitous

connectivity



39

What if combined

mobile internet+ RFID+ energy storage+automated cars = new transport, new cities,

no longer car insurance, etc, etc



40

A call for action

1. 10 years is long and short- long enough to fall off of strategicplan, short enough to have disruption at your door

2. Boom and bust/consolildation – one big bet, and a few moreincremental

3. Think à la Google- Search, incremental 20% product, andseparate big enough Google

4. Digitize your growth platform



41SOURCE: Source

Text



42

Quoting Steve jobs- thank you



43

Thank you!

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the disruptive dozen by jacques bughin

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