Disruptive technologies: Advances that will transform life ...

Disruptive technologies: Advances that will transform life, business, and the global economy

Sep. 2014

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McKinsey & Company | 1

An unprecedented rise in economic growth has been fueledby innovation with disruptive technology

100

1,000

10,000

195019001850180017501700165016001550250200150100500 2000

Estimated global GDP per capita$

1450

Efficient steam engine

1769

Mass-produced

steel

1855

Internal combustion engine

Internet

Today

Technology advancements

First steam engine

1698 1860 1970s

Printing press

First Industrial Revolution

1760s to 1840s

Second Industrial Revolution1860s to 1920s

SOURCE: Angus Maddison, “Statistics on World Population, GDP and Per Capita GDP, 1–2008 AD,” the MaddisonProject database; McKinsey Global Institute analysis

InternetRevolution1990s to Present


Twelve potentially economically disruptive technologies

SOURCE: McKinsey Global Institute analysis

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

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

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

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

The 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 involving unstructured commands and subtle judgments

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

Mobile InternetIncreasingly inexpensive and capable mobile computing devices and Internet connectivity

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

Renewable energyGeneration of electricity from renewable sources with reduced harmful climate impact

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

Autonomous and near-autonomous vehiclesVehicles that can navigate and operate with reduced or no human intervention


Estimated potential economic impact of technologies from sized applications in 2025, including consumer surplus


Range of sized potential economic impacts

Impact from other potential applications (not sized)Low High

X–Y

$ trillion, annual

Renewable energy 0.2–0.3

Advanced oil and gasexploration and recovery

0.1–0.5

Advanced materials 0.2–0.5

3D printing 0.2–0.6

Energy storage 0.1–0.6

Next-generationgenomics

0.7–1.6

Autonomous and near-autonomous vehicles

0.2–1.9

Advanced robotics 1.7–4.5

Cloud technology 1.7–6.2

Internet of Things 2.7–6.2

Automation ofknowledge work

5.2–6.7

Mobile Internet 3.7–10.8


These high-impact disruptive technologies are related to ‘Big Data’ era


Range of sized potential economic impacts

Impact from other potential applications (not sized)Low High

X–Y

$ trillion, annual

Renewable energy 0.2–0.3

Advanced oil and gasexploration and recovery

0.1–0.5

Advanced materials 0.2–0.5

3D printing 0.2–0.6

Energy storage 0.1–0.6

Next-generationgenomics

0.7–1.6

Autonomous and near-autonomous vehicles

0.2–1.9

Advanced robotics 1.7–4.5

Cloud technology 1.7–6.2

Internet of Things 2.7–6.2

Automation ofknowledge work

5.2–6.7

Mobile Internet 3.7–10.8


World-class use of Big Data is divided into three steps

Improve CoreExtend core

Step out

Applications Applications Applications

SOURCE: Expert interview; McKinsey analysis

▪ Build a unified source for various internal data

▪ Focus on the current core business or marketing issues

▪ Expand a scope of data use to outside of the organization

▪ Identify new opportunities within the current business area

▪ Launch a separate business based on Big Data and Advance Analytics targeting outside organizations

▪ Data commercialization

▪ Platform sales

▪ New product development

▪ New service and business model development

▪ Personalized location-based real time promotion

▪ Micro segmentation▪ NPTB (Next Product

To Buy)▪ Price optimization▪ Promotion optimization▪ Loyalty program

optimization

CCBB

AA


Algorithm emails are created based on the customer’s browsing behavior on the website

Day 1 Day 2 Day 3 Day 6 Day 8 Day 9 Day 11 Day 12Day 4

▪ Browsed: Laptops

▪ Offer: 30% off hard drives and portable storage for Father’s Day

▪ Browsed: Toys

▪ Offer: Outdoor toys for the summer with Super Saver Shipping

▪ Browsed: Outdoor power and lawn equipment

▪ Offer: Introduction of Neutron landscaping equipment

Source: Expert interview; company website; literature review; McKinsey analysis

AA


Mastercard Advisor is an example of Data Monetization where credit card transaction data is provided to marketing agencies

▪ Maxpoint is a digital marketing agency that has combined extensive open data from Department of State, CDC’s of different countries to identify target customers located in a particular postal code area

▪ Digital Zip, a proprietary technology of Maxpoint that layers offline and online data sources helps to build brand, expand market share and ultimately boost sales within stores

▪ eXelate is a data company that powers smart digital marketing decisions worldwide for marketers, platforms, publishers and data providers

▪ On its smart data platform, eXelate offers accurate, actionable and agile data and analytics on demographics, intention to purchase and behavioral patterns of different countries online

▪ Not only does it have several trillions of online data points that it directly measures and collects, it also has data distribution partnerships with leading information players including Nielsen, Nielsen Catalina, and MasterCard Advisors

BB

SOURCE: Company website, web search, team analysis


SingTel made bold moves into the digital space includingpersonalized marketing platform

SOURCE: Company Website

Advertising

Lifestyle

Commerce

Social media

payTV

Description SingTel’s Group Digital Life

▪ A global advertising platform that gives advertises an integrated digital marketing proposition

▪ Lead and shape the global digital advertising revolution through Amobee’s comprehensive mobile advertising solutions

▪ A lifestyle delivery platform that offers personalized digital infotainment

▪ Double-down on successful plays in infotainment , particularly in food, news and gaming

▪ A digital commerce platform (local, mobile, personalized) to compete the purchasing cycle

▪ Participate in the upside of the m-commerce growth

▪ A social media interaction platform engaging a critical mass of mobile OTT customers

▪ Own the social and digital interactions spaces through tailor-made content experiences

▪ A pay TV platform that adds value to our telco assets that could be extended regionally

▪ Consolidate TV play in Singapore and explore opportunistic options across its associates footprint

CC


Creating opportunities for productivity and innovation

Creating transparency, e.g., as follows:▪ Making public sector data available in departments to reduce search time▪ Integrating design/engineering R&D databases to enable concurrent engineering

Segmenting populations to customize actions, e.g., as follows: ▪ Segmenting labor department training programs based on skill and will▪ Real-time microsegmentation of customers to target promotions and advertising

Replacing/supporting human decision making with automated algorithms, e.g., as follows:▪ Automated risk engines to flag candidates for further examination in tax agencies▪ Automatic fine-tuning of inventories and pricing in response to real-time in-store

and online sales

Innovating new business models, products, and services, e.g., as follows:▪ Location-enabled services, from navigation apps to people tracking ▪ Using product sensor data to create innovative after-sales service offerings

Enabling experimentation to discover needs, expose variability, and improve performance, e.g., as follows: ▪ Comparative effectiveness studies to determine optimal treatment pathways▪ Use of dashboards to uncover performance variability among subunits

1

2

3

4

5Source: McKinsey Global Institute


$2bn-$10bnin new business opportunities

in select sectors for aggregating, linking, and

packaging data

$100bn-$300+ bnshifts in profit pools the major

sectors affected through: better pricing, product design,

and operations

? bnfrom new game-changing business opportunities –

many of which are still to be envisaged

Significant value at stake, particularly in improving the competitiveness of the core business of most large companies

Data Analytics>decisions New services

Fasterexperimentation

Transparency

Automation (empirical

rules)

New services Smartersegmentation

▪ Transactions

▪ Mobile

▪ Sensors

▪ Social

▪ Science/engineering

▪ Audio/video

▪ New risk management solutions

▪ New marketing services

▪ New logistics services

▪ New energy solutions

▪ Personalized/targeted health solutions

Source: McKinsey Global Institute


Strategy choices

Data Analytics>Decisions New Services

▪ Internal or external data?

▪ Secure privileged access or prevent being locked out of external data?

▪ Leverage market innovation or accelerate data access?

▪ Source of revenues?

▪ Strategies enabled, threats addressed?

▪ Value to be targeted: pricing, product design, operations, etc.?

▪ Sources of differentiation, e.g., talent, proprietary analytics, speed?

▪ Extending the core vs. new businesses/services?

▪ Opportunities to change the rules?

▪ Target now or leave as ‘call option’ for later?

▪ Right to play?

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