Last month, the McKinsey Global Institute published Ten IT-enabled business trends for the decade ahead. As is generally the case with McKinsey, this is a well researched, well written report. There are few surprises. Any technology expected to have a transformative impact on business over the next decade has to at least be already in the hands of leading edge users. Disruptive innovations take time to play out.
“Many trends reflect the growing dominance of the Internet as an enabling technology, as well as a model and metaphor for commercial and social interactions,” says the report in its introduction. “Twenty years into the Internet revolution, businesses and consumers have come to expect that information is a Google search away, friends and associates are always available on social networking sites, and goods and services (including public goods such as education and government services) can be had instantly from an online vendor anywhere in the world at any time of the day.”
The social matrix, the Internet of all things, big data and advanced analytics, and realizing anything as a services are the report’s top four trends. SMAC - Social, Mobile, Analytics & Cloud, - has become the new plastics, capturing the future of IT in one word, or rather, one acronym. Just about everyone agrees that these are foundational technologies, like the Internet twenty years ago, that every business must embrace.
However, while these technologies are being widely discussed, they are still in the early stages of deployment. For example, according to a March, 2013 McKinsey study on The Evolution of the Networked Enterprise, more than 80 percent of the companies surveyed use social technologies, but only 10 percent are deriving the expected business value from being truly networked. And, while cloud is already providing many consumer services, including access to films, music and mobile apps of all sorts, companies are just starting to deploy and learn how to best use it, as was recently discussed in the 2013 MIT Sloan CIO Symposium. Its potential for driving business innovation remains untapped.
Given their wide acceptance and growing deployment, there is little doubt that by 2025 these four IT trends will have a transformative impact on companies and industries around the world. And while not as well known and possibly not as impactful, the next four IT trends are likely to also be widely embraced over the next decade: automation of knowledge work, integrated digital/physical experiences, me + free + ease, and the e-volution of commerce.
But, the last two trends, - the next three billion digital citizens and the transformation of government, health care and education, - feel different in nature. While also having an impact on business and economies, they will likely have an even stronger impact on the quality of life of individuals, nations and societies around the world. Consequently, these two trends are significantly more complex and their evolution is harder to predict because they are directly affected by strong societal forces. Let me say a few words about each.
McKinsey estimates that over the coming decade, up to three billion additional people could connect to the Internet with mobile devices and wireless networks, and thus become part of the global digital economy. In addition, more than 1.8 billion people will become consumers by 2025, that is, they will earn enough to buy goods and services beyond meeting their basic needs.
“This rapid rise in connectivity could be a key driver in the development of communities in less developed regions,” notes the report. The mobile Internet will help bring mobile payments and financial services to the unbanked. Financial inclusion is one of the most important drivers of economic growth and consumption. So is the rise of local entrepreneurship driven by expanding access to digital services. Local companies and global businesses will develop products and services specifically aimed at these newly enfranchised consumers.
This may well be the most consequential IT trend of all. A related prediction was made in a December 2012 report by the US National Intelligence Council looking at the key global trends in the 2030 timeframe. The study identified individual empowerment as their top megatrend. It concluded that as a result of widespread economic development, significant strides will be achieved in reducing extreme poverty by 2030, and that the percentage of the population classified as middle class will expand substantially in almost all countries. “Even the more conservative models see a rise in the global total of those living in the middle class from the current 1 billion or so to over 2 billion people. Other see even more substantial rises with, for example, the global middle class reaching 3 billion people by 2030.”
The mobile Internet is now bringing the empowerment benefits of the digital revolution to just about everyone in the planet and helping to improve their standard of living. The promise of up to three billion additional digital citizens is turning the Internet into a platform for truly inclusive innovation and economic development.
But along with its huge benefits, widespread economic empowerment comes with its own set of challenges. The Global Trends 2030 study lists the increasing demand for food, water and energy as one of its four megatrends. With billions rising out of poverty and joining the middle class and a rising global population, we can expect an increased demand for these critical resources as well as for products and services of all kinds. Major technology innovations and global collaborations are needed to help us evolve to an economy based on more sustainable production and consumption patterns.
Which brings us to the last and equally challenging IT trend, the transformation of government, health care and education. The private and public sectors have reacted quite differently to the structural changes brought about by the digital technology revolution. For the past twenty years, companies have embraced IT to significantly improve their productivity, reduce costs, and to better adapt to fast changing markets conditions and increased competition. Companies have learned how to become effective digital organizations.
“However, such benefits have been less apparent in government, health care, and education,” notes the McKinsey report. “These vital services account for nearly a third of global GDP but have lagged in productivity growth. Until recently, they have been slow to adopt Web-based platforms, big data analytics, and other IT innovations. However, we believe government, health care, and education can enter a new era of IT-enabled productivity growth. Indeed, the growing power and accessibility of IT is meeting with escalating pressure to deliver better public and social services at lower cost, increasingly overcoming deep resistance to change.”
Aligning government with 21st century economic realities will require innovations at least as disruptive and profound as those embraced by the private sector. Government spending has been steadily going up in affluent nations over the past century. A March, 2011 Economist special report on The Future of the State includes data showing that the average government spending as a percentage of GDP in thirteen rich world countries went from 10 percent in 1870, to 28 percent in 1960, and 48 percent in 2009.
Citizens in these democratic, affluent countries have continued to demand more services from their elected government officials. They want improved education, health care, safety, transportation, and so on. This is all part of becoming an advanced economy and an affluent society. As the standard of living goes up in emerging economies, their citizens are already demanding many of the same public services.
While the private and public sectors are inherently different, several practices that have helped improve productivity and reduce costs in business over the past 20 years can be applied to government. But, making government more efficient is absolutely necessary, but not sufficient. It’s also necessary to step up to the rising costs of social services, especially health care.
IT-enabled systems can deliver health-care services more efficiently on the scale required to support an aging population with multiple chronic problems. “Controlling health care spending and improving outcomes for patients are goals shared by nations around the world,” notes the report. “Many of the IT-enabled approaches we describe in this report are being applied today, but significant potential remains in scaling up and effectively operationalizing IT to capture the full benefits.”
So is the case with education. A good, affordable education is a prime requirement of our 21st century knowledge economy. But, “In most places, major educational institutions are structured today as they were in the 19th century and deliver their services in much the same ways,” observes McKinsey and then adds a hopeful note: “We believe the trends described in this report will combine to force educators to rethink models of learning and embrace new platforms and modes of teaching.” Recent advances in online learning, still in the experimental stages, could over time significantly expand the number of people around the world with access to a quality education at reasonable costs.
It’s hard to predict how these ten IT trends will develop over the next decade. There will be serious speed bumps to be overcome along the way, such as personal privacy and cybersecurity. Companies will have to adapt to new business models and organizational structures. Sophisticated technologies and fast changing markets will put a premium on skills and creativity at all levels. Some of the trends will take longer than a decade to fully play out, and some will be significantly reframed along the way. But, when you put it all together, I am confident that IT will continue to have a transformative impact on business and society for many years to come.