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The Disruptive Dozen McKinsey Global Institute July, 2013 CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of McKinsey & Company is strictly prohibited Highlights from MGI report on Disruptive Technologies

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Page 1: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

The Disruptive Dozen

McKinsey Global Institute

July, 2013

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

Highlights from MGI report on Disruptive Technologies

Page 2: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

11

Some very long-run context – Ours is a time of unprecedented growth and innovation

0

2,000

4,000

6,000

8,000

10,000

19001850180017501700165016001550200150100500 20001950

Estimated GDP per capita, world GDP per capita, real USD

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

First Industrial Revolution

1760s to 1840s

Second Industrial Revolution1860s to 1920s

Printing press

Efficient steam

engine

Mass steel

Internal combustion engine

Internet & world wide web

Technology advancements

First steam engine

1450 1769 1855Today

1698 18601970s-

80s

Page 3: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

22

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

▪ Media tablets and beyond

▪ Mobile-centric applications and interfaces

▪ Contextual and social user experience

▪ Internet of Things

▪ App stores and marketplaces

▪ Next-generation analytics

▪ Big data

▪ In-memory computing

▪ Extreme low-energy servers

▪ Cloud computing

10 Disruptive Technologies for Business Information Management

▪ Big data revolution and energy-efficient computing

▪ Satellites and commercial applications of space

▪ Robotics and autonomous systems

▪ Life sciences, genomics and synthetic biology

▪ Regenerative medicine

▪ Agri-science

▪ Advanced materials and nano-technology

▪ Energy and its storage

Eight great technologies

▪ Gesture based interfaces: Controlling computers without touching them

▪ Augmented reality: Fusing the real and the virtual

▪ Compressed air batteries: The world’s most cost-effective energy storage

▪ Autonomous electric vehicles: The end of cars as we know them

▪ Ultra-cheap web devices: Five billion people with internet access

The five most disruptive technologies of 2012

▪ OnLine Electric Vehicles (OLEV)

▪ 3D printing and remote manufacturing

▪ Self-healing materials

▪ Energy-efficient water purification

▪ Carbon dioxide (CO2) conversion and use

▪ Enhanced nutrition to drive health at the molecular level

▪ Remote sensing

▪ Precise drug delivery through nanoscaleengineering

▪ Organic electronics and photovoltaics

▪ Fourth-generation reactors and nuclear-waste recycling

The top 10 emerging technologies for 2013

▪ The Internet of Things

▪ Not just Big Data, but a zettaflood

▪ Wisdom of the cloud

▪ The next ‘Net’

▪ The world gets smaller

▪ The power of power

▪ Tea. Earl Grey. Hot (3D printing)

▪ Another family tree (Advanced robotics and virtual ‘avatars’)

▪ Yes, there's a cure for that (Medical technologies)

▪ Humans or Borg? (Augmented homo sapiens)

10 technologies that will change the world in the next 10 years

▪ Electric clothes

▪ Adaptive cruise control

▪ Better bikes

▪ Predictive medical analysis in cars

▪ Planes made of carbon fiber

▪ Subway entertainment

▪ Better looking movies

▪ Teeth with sensors

▪ Smart disinfectants

▪ Gourmet frozen food

Innovations that will change tomorrow

▪ Fighting the Power

▪ The Intelligent Home

▪ The Interface of You

▪ You’re the Doctor

▪ Technology that Knows You Better than You Know Yourself

The Five Most Disruptive Technologies at CES 2013

▪ Robots taking our jobs

▪ The Internet of machines

▪ Flatter organisations

▪ 3D printing

▪ Nano-technology

▪ Mobile apps redefining service industries

▪ The fight for control of the mobile payments system

▪ Reinventing entertainment

▪ The fall and rise of social media

▪ Newspapers cease to exist

▪ Data rights become an issue

The top twenty business trends in 2020

▪ The DIY economy continues to rise

▪ A new education revolution

▪ Reskilling the workforce

▪ Older workers re-entering the workforce

▪ Dealing with a society at retirement age

▪ China moving up the value chain

▪ Rising incomes in South Asia and Africa

▪ The great deleveraging

▪ Taming the Big Data tsunami

▪ Robotic moon base

▪ High speed rail link connecting China and Europe

▪ Autonomous and flying cars

▪ Biofuels competitive with fossil fuels

▪ Devices controlled by microchips implanted in humans

▪ Ultra-thin OLED screens

▪ Commercial space travel to the moon and asteroids

▪ $1,000 computer with the processing power of the human brain

▪ Ubiquitous, mobile universal translation

▪ Augmented reality

▪ Synthetic brain

12 reasons 2020 will be an awesome year

▪ Virtual Avatars

▪ Intelligence in Anything

▪ The Cloud to Become the Norm

▪ Connecting the Cloud With the Crowd

▪ Virtual Hospitals Thanks to Bio-Connectivity

▪ Ultra-Intelligent Electronic Agents

▪ New Image and Video Analysis Algorithms and Tools

▪ Improved Call Sound Quality

▪ Digital Jewelry, e.g. Augmented Reality devices

9 Bold Predictions for the Digital World of 2020

▪ Deep learning

▪ Temporary social media

▪ Prenatal DNA screening

▪ Additive manufacturing

▪ Baxter: The Blue Collared Robot

▪ Memory Implants

▪ Smart Watches

▪ Ultra-Efficient Solar Power

▪ Big Data from Cheap Phones

▪ Supergrids

10 breakthrough technologies 2013

Page 4: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

33

The correlation between hype about a technology and its potential economic impact is not clear

SOURCE: Factiva; McKinsey Global Institute analysis

100

1,000

10,000

100,000

100 1,000 10,000

Potential economic impact across sized applications$ billion (log scale)

Media attentionNumber of relevant articles in major general interest and business publications over 1 year (log scale)

Mobile Internet

Automation of knowledge work

The Internet of Things

Cloud technology

Advanced robotics

Autonomous and near-autonomous vehicles

Next-generation genomics

Energy storage

3D printingAdvanced materials

Advanced oil and gas exploration and recovery

Renewable energy

NOTE: Estimates of potential economic impact are for only some applications and is not a comprehensive estimate of total potential impact. Estimates include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted.

Page 5: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

44

Disruptive Technologies – Not a prediction, but a careful selection

▪ Technology breakthrough or rapid advancement (cost/perf/capability)

▪ Scope of impact (people, companies, sectors, etc.)

▪ Scale of economics at stake (cost, spend, GDP, etc.)

▪ Disruptive potential (e.g. to value chains, industry structures, profit pools)

▪ Energy efficiency▪ Sustainable food

resources▪ Access to clean

water▪ Environmental

management▪ Economic

development ▪ Millennium

Development Goals

Potential for economic disruption

Potential to solve global economic

challenges ▪ Nature and size of

potential economic impact

▪ Implications for stakeholders– Companies– Employees– Entrepreneurs– Consumers– Governments– Society

Page 6: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

55

IT and how we use it

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

Cloud technologyUse of computer hardware and software resources delivered over a network or the 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 involving unstructured commands and subtle judgments

Mobile InternetIncreasingly inexpensive and capable mobile computing devices and Internet connectivity

Page 7: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

66

What else can Watson be used for? How about Watson in your pocket?

Page 8: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

77

What is this stuff?

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88

Disruption in numbers: IT and how we use it

Technology improvement/ difference example Disrupted pools

▪ 6x growth in sales of smart wireless devices since 2007

▪ 4.3 billion more people left to be connected to the web

Mobile internet

▪ 3x - monthly cost of owning a server vs. renting in the cloud

▪ 80% of NA institutions hosting or planning to host critical apps on the cloud

Cloud

▪ 80-90% price decline in MEMS(micro electro-mechanical systems) sensors in last 5 years

▪ 100 million M2M B2B industrial devices

Internet of Things

▪ 100x increase in computing power from IBM’s Deep Blue to Watson

▪ 230+ million knowledge workers

Automation of work

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99

Machines working for us

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

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

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

Page 11: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

1010

What is special about this robot?

Page 12: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

1111

How long before your car can drive itself?

Page 13: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

1212

What is special about this NASA rocket engine?

Page 14: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

1313

Disruption in numbers: Machines working for us

Technology improvement/ difference example Disrupted pools

▪ 85% lower price for a Baxter robot versus average industrial robot

▪ 320 millionmanufacturing workers ▪ 250 million annual

major surgeries

Advanced robotics

▪ 300,000 miles driven by Google autonomous car without system-caused accident

▪ 1 billion cars and trucks globally

Near autonomous driving machines

▪ 90% price decline in 4 years for home 3D printers

▪ $11 trillion global manufacturing industry GDP

3D printing

Page 15: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

1414

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 extraction of unconventional oil and gas economical

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

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

Page 16: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

1515

What is this stuff?

Page 17: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

1616

Disruption in numbers: Rethinking energy

Technology improvement/ difference example Disrupted pools

▪ 40% price decline for a vehicle lithium-ion battery pack since 2009

▪ 1.2 billion people without electricity

Energy storage

▪ 3x increase in efficiency of US gas wells, 2007–11

▪ 22 billion barrels of oil equivalent in natural gas produced globally ▪ 30 billion barrels of

crude oil produced globally

Advanced oil & gas

▪ 19x growth in solar PV and wind generation capacity since 2000

▪ 13 billion tons of CO2

emissions annually from electricity generation

Renewable energy

Page 18: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

1717

Changing the building blocks of everything

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

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

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

Page 19: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

1818

Who are these guys, and why are they so happy?

Page 20: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

1919

What is this device?

Page 21: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

2020

What do all of these products have in common?

Page 22: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

2121

Disruption in numbers: The building blocks of everything

▪ 10 months – time to double sequencing performance

▪ 26 million annual deaths from cancer, cardio-vascular disease, or Type 2 diabetes

Next-generation genomics

Technology improvement/ difference example Disrupted pools

▪ 115x - strength to weight ratio of carbon nanotubes versus steel

▪ $1.2 trillion revenue from global semiconductor sales

Advanced materials

Page 23: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

2222

Economic potential for sized applications

$ trillion, annual by 2025

Impact from other potential applications Low High

Range of sized potential economic impacts in each category

IT and how we use it

Changing the building blocks of everything

Rethinking energy comes of age

Machines working for us

0.2–0.6

Automation ofknowledge work

Energy storage

Autonomous and near-autonomous vehicles

0.2–0.5

5.2–6.7

0.2–1.9

Advanced robotics

0.1–0.6

1.7–4.5

3D printing

0.7–1.6

Renewable energy

Next-generationgenomics

0.1–0.5Advanced oil and gasexploration and recovery

Advanced materials

0.2–0.3

Internet of Things 2.7–6.2

Cloud technology 1.7–6.2

Mobile Internet 3.7–10.8

SOURCE: McKinsey Global Institute analysis

Page 24: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

2323

The surplus is up for grabs

Enterprise vs. Enterprise Producer vs. Consumer

Country vs. CountryKnowledge and capital vs. Labour

Page 25: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

2424

Potential economic impact in developed versus developing economies

SOURCE: McKinsey Global Institute analysis

Impact on

% of potential economic impact for sized applications

Mobile Internet

50 50

Autonomousvehicles

80 20

Advancedrobotics

80 20

Cloudtechnology

30 70

Internet of Things

70 30

Automation ofknowledge work

80 20

Developed economies

Developing economies

20 80

Advanced oil & gas

80 20

Advancedmaterials

90 10

3D printing

Renewableenergy

60 40

Energy storage

60 40

Next-gengenomics

80 20

Page 26: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

2525

What does it all mean?

1 IT, big data, and advanced analytics everywhere

2 Combinations of technologies will multiply the impact

3 Benefits will not be evenly distributed

4 Consumers will be big winners

5 Entrepreneurs have a bright future

6 The nature of work will change

7 “Business models and the pursuit of surplus”

8 Incumbents must evolve on multiple fronts, fast

9 Policies and rules will have a hard time keeping up (but must)

Page 27: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

2626

What’s cool about this?

Page 28: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

2727

Thank you

www.mckinsey.com/mgi

Download our reports

@ McKinsey_MGI

www.facebook.com/McKinseyGlobalInstitute

McKinsey Global Institute

Page 29: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

2828

Appendix

Page 30: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

2929

1.0–4.8

Payments

0.9–1.3

Interaction workers

0.1–0.4

Transaction workers

Sum of sizedpotential economicimpacts

3.7–10.8

Other potential appli-cations (not sized)

Additional consumersurplus

Education

0.9–2.1

0.3–1.0

Health care

0.2–0.3

0.2–0.5

Retail0.1–0.4

Public sector

Sized applications of mobile Internet could have direct economic impact of $3.7 trillion to $10.8 trillion per year in 2025 (1/2)

SOURCE: McKinsey Global Institute analysis

Sized applications

Potential economic impact of sized applications in 2025$ trillion, annually Estimated scope in 2025

Estimated potential reach in 2025

Potential productivity or value gains in 2025

1 Estimates of adoption are based on Internet penetration rates in advanced and developing economies.NOTE: Estimates of potential economic impact are for some applications only and are not comprehensive estimates of total potential impact. Estimates

include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted. Numbers may not sum due to rounding.

Service delivery

▪ 70–80% mobile penetration among patients accounting for 95% of health-care spending

▪ 10–20% cost reduction in chronic disease treatment through remote health monitoring

▪ $15.5 trillion cost of treating chronic diseases

▪ K–12 adoption of online/hybrid learning– Developed world: 80–90%1

– Developing: 65–80%▪ 90–100% adoption in post-

secondary, corporate, and government education

▪ 5–15% rise in secondary graduation rates

▪ 10–30% productivity gain in post-secondary, corporate, and government education

▪ $11 trillion global spending on education

▪ Implementation of advanced electronic payment systems in– 80–100% of advanced

economies– 65–80% of developing

economies1

▪ 50% productivity gain in managing transactions across all stakeholders

▪ $3 trillion in global transaction revenue

▪ 30–50% of retail consumption▪ Mobile devices used in 50% of

purchases

▪ 6–15% productivity gain of online hybrid retail versus traditional

▪ $7.2 trillion cost of retail

▪ Adoption by 90–100% of governments for online or mobile services

▪ 60–75% cost savings on administrative tasks driven by labor efficiency

▪ $0.9–1.2 trillion government spending on customer-facing services

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3030

Sized applications of mobile Internet could have direct economic impact of $3.7 trillion to $10.8 trillion per year in 2025 (2/2)

SOURCE: McKinsey Global Institute analysis

Sized applications Estimated scope in 2025Estimated potential reach in 2025

Potential productivity or value gains in 2025

1 Estimates of potential economic impact for worker productivity applications exclude labor productivity impact sized as part of service delivery applications.

NOTE: Estimates of potential economic impact are for some applications only and are not comprehensive estimates of total potential impact. Estimates include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted. Numbers may not sum due to rounding.

Other worker produc-tivity1

▪ 80–90% of workers in advanced economies

▪ 65–80% of workers in developing economies

▪ 4–5% increase in efficiency through social technology via mobile

▪ $19 trillion in interaction worker salaries

▪ 80–90% of workers in advanced economies

▪ 65–80% of workers in developing economies

▪ Mobile devices needed for 10% of work tasks

▪ 10–30% productivity gain from time saved accessing information

▪ $15 trillion in transaction worker salaries

▪ 100% of users ▪ $500–1,500 per user in developed world

▪ $300–1,000 per user in developing world

▪ 3.6–4.9 billion mobile users

Potential economic impact of sized applications in 2025$ trillion, annually

Interaction workers0.9–1.3

Payments0.2–0.3

Retail0.1–0.4

Public sector0.2–0.5

Education0.3–1.0

Health care0.9–2.1

Sum of sizedpotential economicimpacts

3.7–10.8

Other potential appli-cations (not sized)

Additional consumersurplus

1.0–4.8

Transaction workers0.1–0.4

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3131

5.2–6.7

Legal

0.3–0.4

Education0.8–1.0

Health care

0.2–0.3

Finance0.4–0.5

Managers0.8–1.1

IT0.4–0.5

Science andengineering

0.6–0.7

Customer serviceand sales

0.6–0.9

Clerical1.1–1.3

Sized applications of automation of knowledge work could have direct economic impact of $5.2 trillion to $6.7 trillion per year in 2025

SOURCE: McKinsey Global Institute analysis

Sized knowledge worker occupations

Potential economic impact of sized applications in 2025$ trillion, annually Estimated scope in 2025

Estimated potential reach in 2025

Potential productivity or value gains in 2025

NOTE: Estimates of potential economic impact are for some applications only and are not comprehensive estimates of total potential impact. Estimates include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted. Numbers may not sum due to rounding.

Other potential applications(not sized )

Sum of sized potential economic impacts

Common business functions

Social sector services

Technical professions

Professional services

▪ 50–65 million full-time equivalents (FTEs) of work potentially automatable

▪ $35,000 value per FTE of additional productivity

▪ $4.4 trillion in knowledge worker costs

▪ 125 million knowledge workers

▪ 20–30 million FTEs of work potentially automatable

▪ $50,000 value per FTE of additional productivity

▪ $2.8 trillion in knowledge worker costs

▪ 55 million knowledge workers

▪ 15 million FTEs of work potentially automatable

▪ $60,000 value per FTE of additional productivity

▪ $2.2 trillion in knowledge worker costs

▪ 35 million knowledge workers

▪ 15–20 million FTEs of work potentially automatable

▪ $60,000 value per FTE of additional productivity

▪ $2.9 trillion in knowledge worker costs

▪ 50 million knowledge workers

▪ 10 million FTEs of work potentially automatable

▪ $65,000 value per FTE of additional productivity

▪ $1.5 trillion in knowledge worker costs

▪ 25 million knowledge workers

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3232

Sum of sized potentialeconomic impacts

2.7–6.2

Other potentialapplications (not sized)

Vehicles ~0.05

Retail

1.1–2.5

Security

0.2–0.5

Electricity

0.1–0.3

Urban infrastructure

0.1–0.2

0.1–0.2

Resource extraction

~0.1Agriculture

0.02–0.10

0.9–2.3

Health care

Manufacturing

Sized applications of the Internet of Things could have direct economic impact of $2.7 trillion to $6.2 trillion per year in 2025 (1/2)

SOURCE: McKinsey Global Institute analysis

NOTE: Estimates of potential economic impact are for some applications only and are not comprehensive estimates of total potential impact. Estimates include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted. Numbers may not sum due to rounding.

Sized applications

Potential economic impact of sized applications in 2025$ trillion, annually Estimated scope in 2025 Estimated potential reach in 2025

Potential productivity or value gains in 2025

▪ $47 trillion in global manufacturing operating costs

▪ 80–100% of all manufacturing ▪ 2.5–5.0% saving in operating costs, including maintenance and input efficiencies

▪ $15.5 trillion cost of treating chronic diseases

▪ $400 billion cost of counterfeit drugs, 40% addressable with sensors

▪ 50 million nurses for inpatient monitoring– Developed world: $30

per hour– Developing: $15 per

hour

▪ 70–80% mobile penetration in patients who account for bulk of health-care spending

▪ Counterfeit drug tracking– Developed world: 50–80%– Developing world: 20–50%

▪ Inpatient monitoring– Developed world:

75–100%– Developing: 0–50%

▪ 10–20% cost reduction in chronic disease treatment through remote health monitoring

▪ 80–100% reduction in drug counterfeiting

▪ 0.5–1.0 hour time saved per day by nurses

▪ 27,000–31,000 TWh global electricity consumption

▪ $200 billion spending on transmission lines

▪ 300 billion consumer minutes outage

▪ 25–50% of consumers could adopt energy management

▪ 25–50% of grid monitored through sensors

▪ 50–100% of consumer meters automated

▪ 2–4% reduction in demand peaks in the grid

▪ Reduction of total load on grid▪ Operating/maintenance savings;

shorter outage time through automated meters

Page 34: NASSCOM Engineering Summit 2013: The Disruptive Dozen - McKinsey Global Institute

3333

Sum of sized potentialeconomic impacts

2.7–6.2

Other potentialapplications (not sized)

Vehicles

0.1–0.2

Urban infrastructure0.1–0.3

Electricity0.2–0.5

Manufacturing0.9–2.3

0.1–0.2

Resource extraction

~0.1

Health care1.1–2.5

Agriculture

0.02–0.10

Retail

~0.05

Security

Sized applications of the Internet of Things could have direct economic impact of $2.7 trillion to $6.2 trillion per year in 2025 (2/2)

SOURCE: McKinsey Global Institute analysis

1 Automotive premiums used as proxy for cost of collisions.NOTE: Estimates of potential economic impact are for some applications only and are not comprehensive estimates of total potential impact. Estimates

include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted. Numbers may not sum due to rounding.

Sized applications

Potential economic impact of sized applications in 2025$ trillion, annually Estimated scope in 2025 Estimated potential reach in 2025

Potential productivity or value gains in 2025

▪ $3.7 trillion in global mining operating costs

▪ 80–100% of all resource extraction

▪ 5–10% saving in operating costs from productivity gains

▪ 200–300 hours commuting time per urban worker per year

▪ $200 billion spent on urban water

▪ $375 billion cost of waste handling

▪ 40–70% of working urban population living in cities with smart infrastructure

▪ 50–70% of large urban regions adopting smart water infrastructure and waste handling

▪ 10–20% reduction in average travel time through traffic and congestion control

▪ 10–20% reduction in water consumption and leaks with smart meters and demand control

▪ 10–20% reduction in cost of waste handling

▪ $6 trillion cost of crime ▪ Adoption of advanced surveillance by countries accounting for 50–70% of global GDP

▪ 4–5% crime reduction through improved surveillance

▪ $200 billion lost due to stockouts

▪ 30–80% of retail adopting smart logistics

▪ 1.5–2.0% increased sales

▪ $1.2–1.3 trillion in agricultural production (wheat, maize, rice, soybeans, barley)

▪ 20–40% adoption of advanced irrigation systems and precision farming

▪ 10–20% increase in yields from precision application of fertilizer and irrigation

▪ 10–30% of all insured cars equipped with sensors

▪ 25% reduction in cost of vehicle damage from collision avoidance and increased security1

▪ $630 billion in automotive insurance premiums1

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3434

Sum of sizedpotentialeconomicimpacts

1.7–6.2

Otherpotentialapplications(not sized)

Applicationdevelopmentand packagedsoftware

0.2–0.3

Surplus fromcloud-basedInternet

1.2–5.5

Infrastructureand operatingexpenses

0.3–0.4

Sized applications of cloud technology could have economic impact of $1.7 trillion to $6.2 trillion per year in 2025

SOURCE: McKinsey Global Institute analysis

1 We have not sized the impact of increased flexibility and convenience to enterprises.2 Estimates for enterprise cloud based on a global IT budget that does not include telecommunications.NOTE: Estimates of potential economic impact are for some applications only and are not comprehensive estimates of total potential impact. Estimates

include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted. Numbers may not sum due to rounding.

Sized applications

Potential economic impact of sized applications in 2025$ trillion, annually Estimated scope in 2025

Estimated potential reach in 2025

Potential productivity or value gains in 2025

Enterprise productivity1

Nearly all Internet applications use cloud as a core enabler

$25–85 surplus per user per month2–3 billion more Internet users, most in developing economies

20–30% productivity gains▪ Reduced infrastructure and

facilities footprint▪ Higher task standardization and

automation

$1.26 trillion or 40% of global IT spending in base scenario2

10–15% productivity gains▪ Standardization of application

environment and packages▪ Faster experimentation

and testing

$1.68 trillion or 60% of global IT spending in base scenario2

Varying levels of cloud adoption across enterprises▪ All enterprises could

have potential to use cloud

▪ Most enterprises may use a hybrid cloud

▪ The share of public cloud usage may increase as cybersecurity improves

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Sized applications of advanced robotics could have direct economic impact of $1.7 trillion to $4.5 trillion per year in 2025

SOURCE: McKinsey Global Institute analysis

1 Using QALY (quality-adjusted life years) estimates.NOTE: Estimates of potential economic impact are for some applications only and are not comprehensive estimates of total potential impact. Estimates

include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted. Numbers may not sum due to rounding.

Sized applications

Potential economic impact of sized applications in 2025$ trillion, annually Estimated scope in 2025

Estimated potential reach in 2025

Potential productivity or value gains in 2025

Sum of sized potentialeconomic impacts

1.7–4.5

Other potentialapplications (not sized)

Commercial servicerobots

0.1–0.2

Personal and home robots

0.6–2.0

0.6–1.2

Robotic humanaugmentation

0.2–0.5

Surgical robots0.2–0.6

Industrial robots

▪ 50 million amputees and people with impaired mobility in advanced economies

▪ 5–10% of amputees and people with impaired mobility in advanced economies

▪ $240,000–390,000 per person for extended/ improved quality of life1

▪ 355 million applicable industrial workers

▪ 30–60 million FTEs of work potentially automatable across key job types

▪ 75% potential improvement in productivity per unit of work automated

▪ 200 million major surgeries in countries with developed health care

▪ 5–15% of major surgeries in countries with developed health-care systems

▪ 60,000–180,000 lives saved per year

▪ 50% reduction in sick and inpatient days

▪ 90–115 billion hours spent on tasks such as cleaning and lawn care per year in advanced economies

▪ 25–50% of households in advanced economies

▪ 20–50 billion hours saved per year▪ $10 value per hour of time saved

▪ 130 million applicable service workers

▪ 10–15 million FTEs of work potentially automatable across key job types

▪ 35–55% potential improvement in productivity per unit of work automated

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3636

Sized applications of autonomous and near-autonomous vehicles could have direct economic impact of $200 billion to $1.9 trillion per year in 2025

SOURCE: McKinsey Global Institute analysis

NOTE: Estimates of potential economic impact are for some applications only and are not comprehensive estimates of total potential impact. Estimates include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted. Numbers may not sum due to rounding.

Potential economic impact of sized applications in 2025$ trillion, annually Estimated scope in 2025

Estimated potential reach in 2025

Potential productivity or value gains in 2025

0.1–1.4

Other potentialapplications (not sized)

Autonomous trucks0.1–0.5

Autonomous cars

0.2–1.9

Sum of sized potentialeconomic impacts

▪ $2–8 per hour in value of time saved

▪ 70–90% fewer accidents ▪ 15–20% gain in fuel efficiency

▪ 900 million new cars produced in or after 2018

▪ 500 hours per year spent in car by average owner

▪ 5–20% of all driving autonomous– 20–30% of cars sold from

2017–20 with potential to be autonomous

– 50–100% driving time spent under full computer control

▪ 70–90% fewer accidents▪ 10–40% greater fuel efficiency▪ 1–2 drivers per 10 trucks (for

monitoring)

▪ 24 million trucks produced in 2018 or later

▪ 10–30% of new trucks with autonomous driving capabilities

▪ 50% driven by human drivers

▪ Potential applications not sized include commercial drones, military drones, and/or autonomous and near-autonomous submersible vehicles for applications such as fossil fuels exploration

Sized applications

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3737

Sized applications of next-generation genomics could have direct economic impact of $700 billion to $1.6 trillion per year in 2025

SOURCE: McKinsey Global Institute analysis

1 Developing economies excluding the least developed.2 Will vary across cancer types.3 We take into account the overlap of diabetes- and cardiovascular-related deaths.4 Measured by parents’ willingness to pay.NOTE: Estimates of potential economic impact are for some applications only and are not comprehensive estimates of total potential impact. Estimates

include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted. Numbers may not sum due to rounding.

Potential economic impact of sized applications in 2025$ trillion, annually Estimated scope in 2025

Estimated potential reach in 2025

Potential productivity or value gains in 2025

Sum of sized potentialeconomic impacts

0.7–1.6

Other potentialapplications (not sized)

Agriculture0.1–0.2

Substance production0.1–0.2

Disease treatment0.5–1.2

▪ Patients with access to relevant treatment– Cancer: 20–40%– Cardiovascular: 15–40%– Type 2 diabetes: 20–40%

▪ Access to prenatal genetic screening: – Developed world: 100%– Less-developed: 30–50%1

▪ Extended life expectancy– Cancer: 0.5–2 years2

– Cardiovascular: 1 year– Type 2 diabetes: 1 year3

▪ Value of prenatal screening4

– Developed world: $1,000– Less-developed: $200

▪ Estimated deaths from relevant diseases– Cancer: 12 million– Cardiovascular: 23 million– Type 2 diabetes: 4 million

▪ 160 million newborns

▪ Ethanol: 20–40% of world production

▪ Diesel: 2–3% of world production

▪ 15–20% cost saving in ethanol production

▪ 150–200% price premium for diesel▪ 30–70% CO2 reduction from fuels

over life cycle

▪ 60 billion gallons per year of ethanol

▪ 350–500 billion gallons per year of diesel

▪ 60–80% of agricultural production improved using genomics data

▪ 20–80% of current genetically engineered crops to be further enhanced

▪ 5–10% increase in yields due to process optimization

▪ 5–10% increase in yields from use of advanced genetically engineered crops

▪ $1.2–1.3 trillion worth of major crops (wheat, maize, rice, soybeans, barley, tomatoes)

Sized applications

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3838

Sized applications of energy storage could have economic impact of $90 billion to $635 billion per year in 2025, including consumer surplus (1/2)

SOURCE: McKinsey Global Institute analysis

NOTE: Estimates of potential economic impact are for some applications only and are not comprehensive estimates of total potential impact. Estimates include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted. Numbers may not sum due to rounding.

Sized applications

Potential economic impact of sized applications in 2025$ billion, annually Estimated scope in 2025

Estimated potential reach in 2025

Potential productivity or value gains in 2025

25–35

Electrifyingnew areas

Peak loadshifting

Frequencyregulation

10–25

Sum of sizedpotential eco-nomic impacts

~10

90–635

Infrastructuredeferral

Other potentialapplications(not sized)

Electric andhybridvehicles

20–415

0–50

25–100

StabilizingelectricityaccessDistri-

buted energy

▪ 115 million passenger vehicles sold

▪ Over 1 billion vehicles in the market

▪ 40–100% of vehicles sold in 2025 could be electric or hybrid

▪ Fuel price: $2.80–7.60 per gallon▪ 0.22 KWh per mile fuel efficiency

for EVs

▪ 13,000 TWh electricity consumption in emerging markets

▪ 2–70 hours per month without electricity

▪ 35–55% adoption with solar and battery combination

▪ 35–55% of companies in Africa, Middle East, and South Asia own diesel generators

▪ $0.75–2.10 per KWh value of uninterrupted power supply to an enterprise

▪ $0.20–0.60 per KWh value per household

▪ 60–65% rural electrification rate

▪ 1.2 billion people without electricity access

▪ 60 KWh monthly electricity requirement of average household

▪ 50–55% adoption based on number of people projected to earn above $2 per day

▪ $0.20–0.60 per KWh value per household for direct lighting, TV, and radio benefits

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Sized applications of energy storage could have economic impact of $90 billion to $635 billion per year in 2025, including consumer surplus (2/2)

SOURCE: McKinsey Global Institute analysis

NOTE: Estimates of potential economic impact are for some applications only and are not comprehensive estimates of total potential impact. Estimates include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted. Numbers may not sum due to rounding.

Sized applications

Potential economic impact of sized applications in 2025$ billion, annually Estimated scope in 2025

Estimated potential reach in 2025

Potential productivity or value gains in 2025

Infrastructuredeferral

Other potentialapplications(not sized)

90–635

Sum of sizedpotential eco-nomic impacts

25–35

Stabilizingelectricityaccess

Electrifyingnew areas

0–50

25–100

Electric andhybridvehicles

20–415

10–25

~10

Peak loadshifting

Frequencyregulation

Utility grid

▪ $295 billion per year investment in T and D infrastructure deferral

▪ 10% spent to reduce congestion

▪ 15% adoption based on share of transmission lines economical for energy storage

▪ Possible deferral of infrastructure investment by 2.5 years

▪ 27,000–31,000 TWh global electricity consumption

▪ 1.5% electricity production reserved for frequency regulation

▪ 2.5% additional reserved for renewable integration

▪ 100% technology adoption, more efficient, and cost competitive with incumbent solutions

▪ $30 per MWh weighted average frequency-regulation price

▪ 12% of total electricity production possible to shift

▪ 850 million tons additional CO2 release

▪ 10–20% adoption of energy storage, given costs compared with cycle gas turbines

▪ $65–80 per MWh between non-renewable peak and base load

▪ $45–65 per MWh between peak and average wind price

▪ $30–45 per MWh between peak and average solar price

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4040

Sized applications of 3D printing could have direct economic impact of $230 billion to $550 billion per year in 2025

SOURCE: McKinsey Global Institute analysis

1 Focuses on use of 3D printing to directly manufacture low-volume, high-value parts in the medical and transport manufacturing industries. Other potentially impactful applications might include manufacturing of low-volume, high-value replacement parts for other industries.

NOTE: Estimates of potential economic impact are for some applications only and are not comprehensive estimates of total potential impact. Estimates include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted. Numbers may not sum due to rounding.

Consumer use of 3D printing

100–300

Sum of sized potentialeconomic impacts

230–550

Other potentialapplications (not sized)

Tool and moldmanufacturing

30–50

Direct productmanufacturing1

100–200

Potential economic impact of sized applications in 2025$ billion, annually Estimated scope in 2025

Estimated potential reach in 2025

Potential productivity or value gains in 2025

▪ $4 trillion in sales of consumer products that might be 3D printed

▪ 5–10% of relevant products (e.g., toys) could be 3D printable, assuming easy consumer access

▪ 60–80% value increase per 3D-printed product– 35–60% cost savings to

consumers– 10% added value from

customization

▪ $300 billion spending on complex, low-volume items such as implants and tools

▪ $470 billion spending on complex, low-volume parts in transportation

▪ 30–50% of products in relevant categories replaceable with 3D printing

▪ 40–55% cost savings to buyers of 3D-printed products

▪ $360 billion global market for injection-molded plastics

▪ 30–50% of injection- molded plastics produced with 3D-printed molds

▪ 30% production cost reduction using superior 3D-printed molds

Sized applications

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4141

Sized applications of advanced materials could have direct economic impact of $150 billion to $500 billion per year in 2025

SOURCE: McKinsey Global Institute analysis

1 QALY is quality-adjusted life year. NOTE: Estimates of potential economic impact are for some applications only and are not comprehensive estimates of total potential impact. Estimates

include consumer surplus and cannot be related to potential company revenue, market size, or GDP impact. We do not size possible surplus shifts among companies and industries, or between companies and consumers. These estimates are not risk- or probability-adjusted.

Potential economic impact of sized applications in 2025$ billion, annually Estimated scope in 2025

Estimated potential reach in 2025

Potential productivity or value gains in 2025

Sum of sized potentialeconomic impacts

150–500

Other potentialapplications (not sized)

Drug delivery150–500

20 million new cancer cases worldwide in 2025

5–10% of cancer patients could benefit from nano-based drug delivery treatments

$130,000–230,000 QALY value created per patient1

▪ $100,000–200,000 for 1–2 years increased life expectancy

▪ $30,000 from reduced chemotherapy side effects

Example applications not sized include nanomaterials for electronics and composites and applications of other advanced and smart materials, such as self-healing concrete or memory metals

Sized applications

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4242

Sized applications of advanced oil and gas exploration and recovery could have direct economic impact of $95 billion to $460 billion per year in 2025

SOURCE: McKinsey Energy Insights; US Energy Information Administration; McKinsey Global Institute analysis

1 Potential economic impact estimated by calculating incremental gross output from 2025 production and prices, and converting into value added through GDP multiplier tables; currently estimated reserves are for information only.

2 Only direct value added—indirect and induced impact, as well as downstream benefits, could nearly double the impact.NOTE: Potential economic impact not comprehensive; includes potential impact of sized applications only. Numbers may not sum due to rounding.

Sized regions and applications

Potential economic impact of sized applications in 2025$ billion, annually Currently estimated reserves

Estimated incremental annual production in 2025 Assumed price in 2025

Sum of sized potential economic impacts2

95–460

Other potentialapplications (not sized)

Rest of the world –light tight oil

10–60

Rest of the world –shale gas

15–65

North America –light tight oil

60–300

North America –shale gas1

10–35

▪ 71 trillion cubic meters (Tcm) of reserves – 60 Tcm in United States– 11 Tcm in Canada

▪ 145 billion cubic meters (Bcm)

▪ $70–280 per million British thermal unit (MMBtu); nearly $2–8 millionper Bcm

▪ 64 billion barrels of reserves– 57 billion barrels in

United States– 7 billion barrels in Canada

▪ 5.4–9.0 million barrels per day

▪ $50–150 per barrel

▪ More than 150 Tcm of reserves – 36 Tcm in China– 22 Tcm in Argentina

▪ 70–220 Bcm ▪ Regional pricing (per MMBtu)– China, Australia: $8–10– Argentina: $7–8– Europe: $6–11

▪ More than 130 billion barrels of reserves– 24 billion barrels in Russia– 13 billion barrels in

Argentina

▪ 0.5–1.7 million barrels per day

▪ $50–150 per barrel

▪ Potential unsized applications include coalbed methane and methane clathrate

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Sum of sizedpotential eco-nomic impacts2

165–275

Other potentialapplications(not sized)

Wind5–30

Solarphotovoltaics

15–90

Total cost impact

145–155

Wind40–45

Solarphotovoltaics

105–110

Sized applications of renewable energy could have economic impact of $165 billion to $275 billion per year in 2025

SOURCE: McKinsey Global Energy Perspective; US Environmental Protection Agency; McKinsey Global Institute analysis

Sized renewable energy sources1

Potential economic impact of sized applications in 2025$ billion, annually Estimated scope in 2025 Estimated reach in 2025

Potential productivity or value gains in 2025

1 Value calculated for a set of regions representing approximately 90% of the total market.2 Only direct value added—indirect and induced impact not sized.NOTE: Potential economic impact not comprehensive; includes potential impact of sized applications only. Numbers may not sum due to rounding.

Costimpact

Social impact (CO2

avoided)

▪ 1,330–1,570 TWh, or 5% of total electricity generation

▪ 1,100–1,300 TWh incremental generation vs. base scenario

▪ 60–65% drop in the levelized cost of electricity (LCOE) over base scenario

▪ 700–880 million tons ▪ $20–100 per ton of CO2 avoided

▪ 2,700–3,500 TWh, 10–11% of total

▪ 500–550 TWh incremental generation vs. base scenario

▪ 25–30% drop in LCOE over base scenario– Onshore: 13–15%– Offshore: 50%

▪ 280–300 million tons ▪ $20–100 per ton of CO2 avoided

▪ Potential applications not sized include hydro, biomass, ocean thermal and wave energy, geothermal, next-generation nuclear, and concentrated solar power.

▪ 27,000–31,000 TWh global electricity consumption

▪ 8,500–9,500 TWh renewables generation (wind, solar, hydro)

▪ $4.5–5.5 trillion annual generation cost of global electricity

▪ 2–degree Celsius maximum temperature rise target by 2050

▪ 450 ppm global greenhouse gas concentration limit by 2050