McKinsey Global Institute disruptive technologies full report_may2013

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The relentless parade of new technologies is unfolding on many fronts. Almost every advance is billed as a breakthrough, and the list of “next big things” grows ever longer. Not every emerging technology will alter the business or social landscape—but some truly do have the potential to disrupt the status quo, alter the way people live and work, and rearrange value pools. It is therefore critical that business and policy leaders understand which technologies will matter to th

Text of McKinsey Global Institute disruptive technologies full report_may2013

  • 1.McKinsey Global InstituteDisruptive technologies:Advances that willtransform life, business,and the global economyMay 2013

2. Copyright McKinsey & Company 2013The McKinsey Global InstituteThe McKinsey Global Institute (MGI), the business and economics researcharm of McKinsey & Company, was established in 1990 to develop a deeperunderstanding of the evolving global economy. Our goal is to provide leadersin the commercial, public, and social sectors with the facts and insights onwhich to base management and policy decisions.MGI research combines the disciplines of economics and management,employing the analytical tools of economics with the insights of businessleaders. Our micro-to-macro methodology examines microeconomicindustry trends to better understand the broad macroeconomic forcesaffecting business strategy and public policy. MGIs in-depth reportshave covered more than 20 countries and 30 industries. Current researchfocuses on four themes: productivity and growth, the evolution of globalfinancial markets, the economic impact of technology and innovation,and urbanization. Recent reports have assessed job creation, researchproductivity, cities of the future, and the impact of the Internet.MGI is led by McKinsey & Company directors Richard Dobbs and JamesManyika. Yougang Chen, Michael Chui, Susan Lund, and Jaana Remesserve as MGI principals. Project teams are led by a group of senior fellowsand include consultants from McKinseys offices around the world. Theseteams draw on McKinseys global network of partners and industry andmanagement experts. In addition, leading economists, including Nobellaureates, act as research advisers.The partners of McKinsey & Company fund MGIs research; it is notcommissioned by any business, government, or other institution.For further information about MGI and to download reports, please photo courtesy of Andy Ryan, Formlabs 3. McKinsey Global InstituteDisruptive technologies:Advances that willtransform life, business,and the global economyJames ManyikaMichael ChuiJacques BughinRichard DobbsPeter BissonAlex MarrsMay 2013 4. Disruptive technologies: Advances that will transform life, business, and the global economyMcKinsey Global InstituteTechnology is moving so quickly, and in so many directions, that it becomeschallenging to even pay attentionwe are victims of next new thing fatigue.Yet technology advancement continues to drive economic growth and, in somecases, unleash disruptive change. Economically disruptive technologieslikethe semiconductor microchip, the Internet, or steam power in the IndustrialRevolutiontransform the way we live and work, enable new business models,and provide an opening for new players to upset the established order. Businessleaders and policy makers need to identify potentially disruptive technologies, andcarefully consider their potential, before these technologies begin to exert theirdisruptive powers in the economy and society.In this report, the McKinsey Global Institute (MGI) assesses the potential reachand scope, as well as the potential economic impact and disruption of majorrapidly advancing technology areas. Through extensive research, we sort throughthe noise to identify 12 technology areas with the potential for massive impact onhow people live and work, and on industries and economies. We also attemptto quantify the potential economic impact of each technology across a set ofpromising applications in 2025.By definition such an exercise is incompletetechnology and innovations alwayssurprise. The potential applications we consider reflect what McKinsey expertsand respected leaders in industry and academia who aided our research believeare illustrative of emerging applications over the next decade or two and provide agood indication of the size and shape of the impact that these applications couldhave. The combined potential economic impact by 2025 from the applications ofthe 12 technologies that we have sized may be denominated in the tens oftrillionsof dollars per year. Some of this economic potential will end up as consumersurplus; a substantial portion of this economic potential will tranlate into newrevenue that companies will capture and that will contribute to GDP growth. Othereffects could include shifts in profit pools between companies and industries.Our goal in pursuing this research is not to make predictions, either about thespecific applications or the specific sizes of impact. Rather we hope this reportwill act as a guide for leaders to use as they consider the reach and scope ofimpact, as well as the types of impacts that these disruptive technologies couldhave for the growth and performance of their organizations. We fully expectand hope others will build on and enrich this research, as we plan to do. As acompanion piece to this research on disruptive technologies, we have updatedprior work on business trends enabled by information technologies, which will beavailable for download at the MGI website ( any case, we believe that these technologies will have large and disruptiveimpact. More importantly, the results of our research show that business leadersand policy makersand society at largewill confront change on many fronts:in the way businesses organize themselves, how jobs are defined, how we usetechnology to interact with the world (and with each other), and, in the case ofPreface 5. next-generation genomics, how we understand and manipulate living things.There will be disruptions to established norms, and there will be broad societalchallenges. Nevertheless, we see considerable reason for optimism. Manytechnologies on the horizon offer immense opportunities. We believe that leaderscan seize these opportunities, if they start preparing now.This work was led by James Manyika, an MGI director in San Francisco,and Michael Chui, an MGI principal, working closely with McKinsey directorsJacquesBughin and Peter Bisson. We are particularly indebted to our teamleadersAlexMarrs, who managed the project, and JoiDanielson, who co-led a portion of the research. The project team included HyungpyoChoi,ShalabhGupta, TimWegner, Angela Winkle, and SabinaWizander.GeoffreyLewis provided editorial support, Karla Arias assisted with research,and we thank the MGI production and communication staff: MarisaCarder,JuliePhilpot, GabrielaRamirez, and Rebeca Robboy.We thank McKinsey experts whose insight and guidance were critical to ourwork, in particular directors Matt Rogers on oil and gas exploration and recovery,Stefan Heck on renewable energy, Philip Ma on genomics, and Mona Mourshedon education and training. Roger Roberts, a principal in our Business TechnologyOffice provided multiple insights across various areas of technology. Katy George,a director in the NorthAmerican Operations Practice, provided expertise onmanufacturing, as did Lou Rassey, a principal in the practice. Susan Lund, anMGI principal, provided insight on the changing nature of work and on energy.We were assisted by many experts in our Business Technology Office, includingSteve Cheng and Brian Milch, as well as Bryan Hancock from the Public SectorPractice and Jimmy Sarakatsannis from the Social Sector Practice. We alsothank Jonathan Ablett, Sree Ramaswamy, and Vivien Singer for their help onmany topics.We are grateful to our external advisers Hal R. Varian, chief economist atGoogle and emeritus professor in the School of Information, the Haas Schoolof Business and the Department of Economics at the University of Californiaat Berkeley; ErikBrynjolfsson, Schussel Family professor of management atthe MIT Sloan School of Management, director of the MIT Center for DigitalBusiness, and research associate at the National Bureau of Economic Research;and MartinBaily, senior fellow in the Economic Studies Program and Bernard L.Schwartz Chair in Economic Policy Development at the Brookings Institution.This work benefited from the insight of many technology and business thoughtleaders, including Chamath Palihapitiya, founder and managing partner of TheSocial+Capital Partnership and a former Facebook executive; Eric Schmidt,executive chairman of Google; and Padmasree Warrior, chief technology andstrategy officer of Cisco. We also thank McKinsey alumni Jennifer Buechel,RobJenks, and David Mann, as well as Vivek Wadhwa, vice president ofinnovation and research at Singularity University; and Ann Winblad, managingdirector of Hummer Winblad Venture Partners. We thank David Kirkpatrick, CEOof Techonomy; and Paddy Cosgrave, founder of F.ounders.McKinsey colleagues from many practice areas gave generously of their timeand expertise to guide our analyses for each technology. Dan Ewing, Ken Kajii,Christian Kraus, Richard Lee, Fredrik Lundberg, Daniel Pacthod, and Remi Said 6. Disruptive technologies: Advances that will transform life, business, and the global economyMcKinsey Global Institutewere our experts in mobile Internet technology. For automation of knowledgework, we received input from Rickard Carlsson, Alex Ince-Cushman, Alex Kazaks,Nathan Marston, and Chad Wegner.Our McKinsey experts on the Internet of Things were Mike Greene, Aditi Jain,Nakul Narayan, Jeffrey Thompson, and Peter Weed. Cloud computing insightswere provided by Brad Brown, Abhijit Dubey, Loralei Osborn, Naveen Sastry,KaraSprague, Irina Starikova, and Paul Willmott. Peter Groves, Craig Melrose,Murali Naidu and Jonathan Tilley provided expertise on advanced robotics.For our research on next-generation genomics, we called on Myoung Cha,NicolasDenis, Lutz Goedde, Samarth Kulkarni, Derek Neilson, Mark Patel,Roberto Paula, and Pasha Sarraf. In autonomous and near-autonomous vehicles,our experts were Nevin Carr, Matt Jochim, Gustav Lindstrm, Cody Newman,John Niehaus, and Benno Zerlin.For expertise on energy storage, we called on McKinsey expertsJeremiahConnolly, Mark Faist, Christian Gschwandtner, Jae Jung,ColinLaw, Michael Linde