Professional Documents
Culture Documents
Ey Magazine
Ey Magazine
com/megatrends
EYQ
What’s after
what’s next?
The upside of disruption
Megatrends shaping 2018 and beyond
1
Foreword
Welcome to EY’s new The upside times, and with different levels of
of disruption report. When we uncertainty and scales of impact.
launched the previous report in Most meaningfully for corporate
2016, those considering disruption decision-makers, they demand
as a top business challenge were different kinds of responses.
in the minority. Today, corporate
leaders almost universally see In distinguishing between causes
disruption as both an opportunity and effects, our framework can help
and an existential threat. Responding organizations prioritize among a
necessitates a view that is both seemingly endless set of disruptive
wider and more narrowly focused. forces.
2
Contents
Introduction 4
Megatrends 24
Industry redefined 25
Future of work 27
Super consumer 29
Behavioral design 34
Adaptive regulation 39
Remapping urbanization 44
Innovating communities 49
Health reimagined 54
Food by design 56
Molecular economy 61
Weak signals 81
Acknowledgments 83
Your contacts for this report 85
3
Introduction
The intersections between new waves of primary forces — and between megatrends
themselves — creates new megatrends and future working worlds. Understanding
this connectivity is key to responding to disruption. For this reason, we have
highlighted these interconnections using yellow text. Follow these yellow
hyperlinks to see how different elements connect with each other.
4
We live in interesting times. Or, consider the extreme climate
events that have struck so much of
We are surrounded by the everyday the world. In 2017, Hurricane Harvey
miracles of smartphones and sensors. hit Houston with more than 60 inches
We see retailers swept away by the of rain in just five days — the most
relentless tide of e-commerce. extreme rainfall event in US history.
We are so inundated by stories about Meanwhile, Mumbai and other cities
driverless cars that they seem like old across south Asia were paralyzed by
news — years before anybody in the floods caused by one of the heaviest
world has even owned one. Change is monsoons on record. As this report is
constant, and we are inured to it. being released, Cape Town may soon
become the world’s first major city to
run out of water.
So, it should not be surprising that
much has changed since we launched
our last Megatrends report in April Now, consider something that
2016. Yet, even against the backdrop is further in the future but truly
of constant change, much of what unprecedented and revolutionary.
is unfolding before our eyes is truly We are entering the era of human
astonishing — even unprecedented. augmentation. While technology
has always augmented human
capabilities, the technologies that
Consider the political earthquakes are now coming into their own,
of 2016 and the aftershocks that including artificial intelligence (AI),
followed. In rapid succession, voters robotics, autonomous vehicles
in the UK voted to leave the European (AVs) and blockchain, promise to go
Union, while citizens of the US further. For the first time in human
elected to the most powerful office in history, technologies will be able
the world a political neophyte whose to act autonomously on our behalf
electoral prospects had been roundly with far-reaching consequences for
dismissed by pundits and pollsters everything, from work to marketing
alike. In the months that followed, to regulation.
populists and nationalists were newly
energized, giving mainstream parties
a run for their money.
5
Disruption requires a wider — but more focused —
point of view
Corporate leaders have not always But, the events we’ve described
viewed disruption as a top business here suggest the need for an even
challenge. That has now clearly wider view. Disruption does not
changed. Executives and board stem solely from innovative startups
members are focused on disruptive and technologies. Political events
innovation as never before, and climate change can create
recognizing it as both an opportunity disruption as well. Regardless of the
for differentiation and an existential source, these trends are disruptive
threat. Companies have stopped for businesses and governments.
wondering whether it merits serious They shift market power among
attention and are focusing instead competitors, challenge existing
on how to best respond. Business business models and approaches,
transformation has become the new realign trade patterns, reorient
mantra as companies adapt to the era supply chains, drive business
of disruption with digital strategies, relocations, and more.
new business models and more.
Even as disruption demands a
Responding requires a view that broader perspective, it calls for
is simultaneously wider and more a narrower focus. It necessitates
narrowly focused. prioritizing and emphasizing the
most important challenges in an
Consider how disruption is already ever-expanding universe of
widening the playing field. A decade potentially disruptive trends.
ago, financial services companies
looked primarily within their peer How do you resolve this apparent
group for competitive threats. duality — and where do you start?
Today, they are focused more broadly,
including on disruptive financial
and regulatory technology entrants
and cryptocurrencies. Similar shifts
have occurred across practically
every sector, from automotive to
telecommunications.
6
The upside of disruption
7
The answer is a framework for disruption
Primary forces
Primary forces are the root causes they have been around for centuries
of disruption. or millennia. But, they evolve in waves
and each new wave is disruptive in
different ways. For instance, while
We identified these through a root- technological disruption goes back to
cause analysis, similar to Toyota’s at least the first Industrial Revolution,
legendary “5 whys” process. We it has disrupted business in distinct
listed every disruptive trend we could waves; recent waves include mobile,
identify and asked ourselves what social and sensors.
was causing it. We then identified
the causes behind those causative
factors, and so on, until we could In this year’s Megatrends report,
go no further. we highlight three examples of the
latest waves occurring in each of the
primary forces: human augmentation
At the end of this process, we found (technology), populism (globalization)
that the vast majority of disruption and aging (demographics). These
originates in some combination of topics form core themes for this
three primary forces: technology, report, which we explore through
globalization and demographics. several megatrends.
These forces aren’t themselves new;
8
Megatrends
9
Weak signals
10
Primary
forces:
The next waves
11
The three primary forces In this section, we focus on one
— technology, globalization and example of an emerging wave
demographics — that are the root for each primary force:
causes of disruption, have existed
for millennia. While they are not • The set of technologies that are
new, they evolve in waves and the collectively enabling the era of
interaction among these new waves human augmentation
gives rise to new megatrends.
• The upsurge in populism that
is fueling a backlash against
globalization
Human augmentation
12
But, to get these individual and What lies beyond could be even
societal benefits, we will not only more transformative: a convergence
need to broadly share our behaviors of information technology,
and data, but also reframe our biotechnology and nanotechnology
relationship with technology. that promises to overhaul the very
This raises difficult questions about definition of what it means to be
autonomy, identity and privacy. human. Neuroprosthetics,
Companies will need to carefully brain-machine interfaces, DNA
craft behavioral design of these editing, ingestible nanobots and
systems to build customer adoption embeddable radio-frequency
and loyalty. Governments will need identification (RFID) chips are still
new approaches to regulation to in labs. But, in the not-too-distant
address issues such as algorithmic future, they may become tools that
bias, transparency, consumer safety, upgrade us from organic to bionic.
inequality impacts and privacy. We could find ourselves on an
entirely new evolutionary path.
The era of human augmentation
is just beginning.
13
14
15
Globalization: The next wave
Populism
16
Source: World Bank, World Development Indicators.
Source: EY calculations based on data from UN, Human Development Reports, extracted from EY’s Growing Beyond Borders tool.
17
Source: EY index calculated using media reports about select major elections in 2016 and 2017. The index is based on several factors,
including whether the populist movement won or lost, its reshaping of the traditional (left vs. right) political landscape, and its electoral
performance relative to expectations and prior performances.
Source: Citi, Technology at Work, v. 2.0 and World Bank, World Development Report (2016). Chart shows selected emerging markets
with jobs potentially at risk from automation.
18
Source: EY calculations based on data from Oxford Economics, extracted from EY’s Growing Beyond Borders tool. Chart shows
continents/regions with the highest share of populations younger than 25.
Source: EY calculations based on data from Oxford Economics, extracted from EY’s Growing Beyond Borders tool. Chart shows
continents/regions with the highest share of populations younger than 25.
19
Source: EY calculations based on data from United Nations High Commissioner for Refugees, extracted from EY’s Growing Beyond
Borders tool. Chart shows selected regions in which countries have taken in large numbers of refugees or displaced persons.
Source: EY calculations based on data from United Nations High Commissioner for Refugees, extracted from EY’s Growing Beyond
Borders tool. Chart shows regions with lowest scores for tolerance toward immigrants.
20
Demographics: The next wave
Engaged aging
The world is getting older. Life The future of aging is one in which
expectancy has gone from 34 in 1913 technologies — sensors and apps now
to 67 at the turn of the millennium. and, soon, algorithms, autonomous
By 2020, for the first time in human vehicles and robotic assistants
history, the world’s population of — enable seniors to age independently.
people aged 65 and older will exceed Urban planners, policymakers,
the number of children under the health care providers and technology
age of five. And, the World Economic companies will need to team together
Forum estimates that the global cost to develop innovative solutions that
of chronic diseases — driven largely by allow people to age in place. Societies
aging populations — will total US$47 and individuals would benefit from
trillion between 2010 and 2030. reframing health not merely as the
absence of disease, but as an asset
If demographics are destiny, it’s not that requires lifelong investment.
hard to read what those numbers Every individual could have a unique
imply for our collective future. healthy aging profile that tracks
Forget the millennials for a moment. physical, cognitive, social and
The much bigger disruption is what’s material wellness.
about to happen at the other end of
the demographic distribution: aging With a shift this big, getting there
populations across much of the world. is never easy — all the more so
These trends threaten to overwhelm in a space as complex as this.
health care and pension systems, Policymakers should align incentives
draining public coffers and crowding to encourage disparate stakeholders
out other societal priorities, from to collaborate and accelerate the
education to defense. pace of innovation.
21
22
23
Megatrends
24
Disruption
Industry redefined
25
Questions
As industry walls dissolve, what are the new barriers to entry?
How does competition change when your rivals become your collaborators?
26
Work
Future of work
When EY first wrote about the future • Learning and education: Preparing
of work in our 2016 Megatrends workers for the future of work will
report, the topic was just starting to take a very different approach to
attract attention. Skeptics doubted education, emphasizing skills over
predictions about massive disruptions knowledge and lifelong learning
of labor by AI and robots. over front-loaded educational
systems.
Now, we are overwhelmed with
analyses of the future of work from • Leadership response: Perhaps the
the mainstream press, business biggest shift over the last couple
literature and consultants. Predictions of years has been how leaders in
that seemed distant two years ago the private and public sector are
are entering the real world — from taking active measures to prepare
the live-testing of autonomous ride- for the future of work. Companies
sharing in key cities to the opening are revamping their approaches
of the world’s first fully automated to human resources and talent,
retail outlet, the Amazon Go store employee motivation, recruiting,
in Seattle. training and skills development.
Policymakers are exploring
Our analysis of the future of work now new solutions, from regulatory
spans these aspects: responses to new safety net
solution, such as a universal
• More than technology: We are basic income.
exploring how work is being
re-invented, not just by technology, Much of the content in the other
but also by demographic factors sections of this report flows from
(e.g., millennial workers) and the “future of work” megatrend.
cultural drivers. What we were talking about when
we began this analysis — though
• Social contracts and public policy: we didn’t yet have a name for it —
The changing nature of work is was human augmentation. Since
upending social contracts, for we were examining technologies
example, by widening inequality that could autonomously perform
and undermining aspects of social human work, it was only natural
contracts tied to the employer- to start by considering their
employee relationship, from most immediate impact: work.
retirement savings to workplace Two years later, a fuller range of
protections. This will require new implications is coming into view,
public policy solutions. from the impact on consumers to
human behavior to regulation.
The future of work is really about
the future of humankind — and we
are just starting to understand the
breadth of its impact.
27
Questions
How will machines and humans partner to do what each of them does best?
Do your people have the skills they need to work alongside robots and algorithms?
28
Consumer
Super consumer
When humans are augmented by AI, who gains the most — consumers or brands?
29
We can now discern a vision of tomorrow’s super consumer
30
There are challenges and complexities to realizing
the super consumer vision
While consumers’ expectations are In Europe and the US, concerns about
high, reality lags behind. Some of privacy and the ownership of one’s
the mismatch is technology-related. personal data are more than just a
Today’s AI is good at performing rumble, especially amid stories about
narrowly defined tasks but less high-profile data breaches, fears
adept at completing generalized of government abuse of personal
intelligence tasks that require data and tales of personal virtual
human-like reasoning. The multitude assistants spying on their owners.
of “smart” devices and systems on Will consumers continue to relinquish
the market cannot interoperate. control of their data to providers in
Quantum computing is immature and exchange for free services? Or,
cannot, at present, meet the massive will part of becoming a super
demand for additional processing consumer involve monetizing
power that increased data flows and one’s own personal information?
sophisticated algorithms will require. Generational differences may blunt
some of these concerns. After all,
The fast pace of change creates other digital natives have grown up in an
challenges. Consumer interfaces and environment where personal data
channels are proliferating. Companies is readily exchanged for convenient
struggle with where to make their services and unique experiences.
investments for the future while
executing on the basics today. And, empowerment may not look as
it does now. With the arrival of the
The rise of the super consumer will Internet, consumers became directors
be a worldwide phenomenon, but of their own lives while sitting at
could play out at different speeds and keyboards and tapping on phones.
levels of complexity across the world. It’s a different kind of empowerment
AI investment and adoption has when people opt to become passive as
increased dramatically in both China computers make decisions for them.
and India over the past few years, Some consumers may resist becoming
suggesting that Asia might well lead “owned” by one of the emerging AI
the way in terms of generating new ecosystems or delegating decisions
super consumers. At the same time, to these ecosystems. (For more on
persistent economic inequality and these behavioral challenges, see
infrastructure disparities across the “Behavioral design”.)
globe, and within nations themselves,
could lead to a class of disempowered
consumers who fail to benefit from
the AI revolution.
31
Companies must do the work now to close the
expectation gap
32
Questions
What will it take for intelligent machines to gain the full trust of consumers?
When AI makes the buying decisions, how will you get your brand noticed?
What steps will you take today to deliver optimal consumer experiences tomorrow?
Do you have a dual strategy — one for today’s customers and one
for tomorrow’s customers?
33
Behavior
Behavioral design
How will insights from psychology improve the partnership between humans
and new technologies?
34
Human augmentation will supercharge the
behavioral revolution
35
AI and AVs are already triggering
such fears. We expect more as
technologies such as passenger
drones and brain-machine interfaces
come into their own.
Control is important
The illusion of control bias predisposes For instance, AVs could, in theory,
us to want to feel that we have control enable a complete redesign of
even in situations where we don’t. automotive cabins to look more
The “door close” button in many like living rooms, but the need
elevators, for instance, does not affect for control might instead dictate
how soon elevator doors shut; it merely retaining steering wheels and brake
gives users a sense of control. pedals. Similarly, virtual shopping
assistants could reinvent the
This aspect of human psychology shopping experience, but it’s not
will become increasingly relevant as yet clear whether consumers will be
human augmentation technologies comfortable with surrendering control
start acting on our behalf. over their purchasing decisions.
36
Behavioral design principles for the human
augmentation era
37
Questions
Do you understand your customers’ behavioral barriers to adopting innovation?
Would you trust an autonomous vehicle with no steering wheel or brake pedal?
How could augmented and virtual reality nudge our real-world behaviors?
38
Government
Adaptive regulation
Regulation can be a contentious issue. The reason for this shift is disruptive
Critics argue — often justifiably innovation. On one hand, disruptive
so — that it is onerous, inefficient technologies and business models
and an impediment to innovation. But, are straining existing regulatory
imagine an entirely different approach. approaches and making them
Imagine a future in which consumer unsustainable. On the other,
safety is protected not by monitoring these technologies are creating
regulatory compliance and penalizing opportunities to conduct regulation
infractions, but by using big data in an entirely new way.
and algorithms to prevent breaches
before they can even occur. Imagine
regulations that rewrite themselves
to keep up with ever-changing market
conditions. Imagine regulation
conducted jointly by industry and
regulators — a collaborative, rather
than contentious, exercise. This is
where things are headed. The future
of regulation is adaptive.
39
Sharing economy platforms are already
challenging regulators
40
The answer is adaptive regulation
41
Such methods could be applied more to change. Applying open data on a
broadly as AI grows increasingly large scale must still allow companies
sophisticated and the volume of open, to protect proprietary or competitive
real-time data explodes. This would information. Regulators will need to
be a fundamentally different approach develop safeguards to mitigate the
to regulation. The slow, sequential risk of unforeseen outcomes from
process of collecting data, reporting, algorithms that behave and evolve in
monitoring compliance and penalizing unpredictable ways.
infractions would be replaced by
techniques that are real-time and But, the potential benefits are
preventive. This would have significant tremendous. Regulation imposes
implications for corporate functions, significant costs on businesses and
processes and competencies, society. Approaches that are both
and will disrupt the armies of more effective and less expensive
middlemen, from lawyers to auditors, should be welcome news for
who owe their existence to traditional businesses and taxpayers alike.
ways of conducting regulation.
42
Questions
In a world of AI and crowdsourcing, should regulation only be done by regulators?
When algorithms manage our lives, who will manage the algorithms?
How aligned is regulation in your sector for the disruptions that lie ahead?
How are you engaging in the conversation to develop new regulatory approaches?
43
Cities
Remapping urbanization
Climate change and sea-level rise will transform the shape of cities
We often think of climate change in first major city to run out of water.
terms of long-term effects: warming Climate change is increasing the
temperatures and rising sea levels destructiveness of extreme weather
that will alter the environment and events: hurricanes (or typhoons),
reshape civilization. The urban rainstorms, blizzards, forest fires
environment is particularly vulnerable and droughts.
because half of humanity lives on 1%
of the land and cities grew up near These contingencies have profound
waterways and oceans. While areas implications for urbanization patterns.
threatened by sea-level rise represent Urban planners are fundamentally
only 2% of the world’s land, they cover rethinking their traditional approaches
13% of the world’s urban population because they aggravate flooding. The
— and 21% of the urban population vast majority of the urban footprint —
of developing countries. buildings, roads, driveways and parking
lots — uses impermeable materials that
Climate change is already having prevent water from being absorbed.
very real effects that are challenging The problem has compounded as
the direction of urban planning. cities, from Houston to Kolkata, have
Jakarta is sinking rapidly and could expanded into neighboring plains and
be underwater within a decade. wetlands to house soaring populations.
Cape Town is about to become the
44
To make cities more resilient to Cities are also starting to plan for
extreme weather, urbanization the long-term effects of sea-level
patterns are starting to shift. rise, which promise to be even more
Planners are realizing that disruptive. A global survey of 350
infrastructure needs to be built cities conducted by Massachusetts
differently, with extensive use of Institute of Technology (MIT) found
permeable pavement and more that 75% of cities have plans to
green spaces in the form of mitigate and adapt to climate
parks, ponds and green roofs. change; but, 78% said that a lack
Planners must rethink or relocate of funding for implementation is
urban development in vulnerable a significant challenge.
locations. As many cities take steps
in this direction, China is leading the
way with its “Sponge Cities” initiative,
which has been deploying these
tactics on an unprecedented scale
since 2013 — initially in 16 cities,
with plans to eventually take the
approach nationwide.
45
The future of mobility
46
The future of work
47
Questions
How could we rethink urban planning to improve public health?
Will location still matter in a world of remote work and effortless mobility?
Is your office location strategy rightsized for climate disruption and remote work?
How should your talent strategy adapt to remote work and the future of mobility?
48
Cities
Innovating communities
City limits
A suite of factors will challenge the This situation has created an outflow
growth projections for the world’s of mainly young people seeking lower
megacities and hotbeds. Climate barriers to entry, lower costs of living
disruptions, resource scarcity, and cheaper access to entrepreneurial
pollution, infrastructure gaps and real resources. In India, for example,
estate valuations can inhibit growth. a growing number of start-up
Given its water scarcity and pollution, entrepreneurs are leaving or avoiding
can Beijing add 6.5 million people hotbeds, such as Bangalore, in favor
to reach the population that the of smaller cities where resources and
United Nations (UN) predicts for it talent are more accessible.
— 27.7 million in 2030? Can the San
Francisco Bay Area add 1.6 million At the same time, in markets such
people by 2040, as projected, if as the US, the high cost of hotbed
the median regional home price is areas contributes to growing income
already US$785,000? All-in costs for inequality because many current
office space already exceed $250 per residents can no longer afford to
square foot in Hong Kong and $200 live and work in these areas. People
per square foot in London. outside the hotbeds can’t afford to
move to those regions to pursue the
jobs being created in them.
49
Disruption and city reinvention
50
Second-tier and smaller cities benefit
51
Despite challenges of history and cost and risk of experimentation.
size, legacy and smaller cities have It’s also easier for the citizens of
some factors working in their favor. smaller communities to see the
Smaller sizes and fewer stakeholders benefits of innovative initiatives.
can generate greater agility and Small communities become the test
social cohesion. Similarly, smaller beds for city innovation.
project sizes and lower day-to-day
operational pressures reduce the
Business has an important role to play The citizens of legacy and smaller
in catalyzing city transformations. cities are employees, customers,
A company that is a large employer, suppliers and shareholders.
taxpayer and consumer of city Helping them seize the upsides of
services can convene key players and disruption unlocks not just value
facilitate consensus among different for money, but also shared value.
resources, experience and global
networks to the table.
52
Questions
What is the upside for businesses in catalyzing legacy and
small city transformations?
Is job mobility rather than labor mobility the answer to income inequality?
53
Health
Health reimagined
54
Questions
How will human augmentation technologies improve care, expand access
and lower costs?
How will new technologies and approaches enable us to remain active and
independent as we age?
How will the move to health reimagined play out in emerging markets —
and what could industrialized nations learn from them?
How will the move to health care platforms affect your business model?
55
Resources
Food by design
The US$5 trillion global food industry growth render this kind of resource
is experiencing the cross-currents consumption increasingly untenable.
of disruption. The diffusion of the modern western
diet contributes to a variety of global
Food companies deliver mass health problems, such as heart disease,
products from far-flung supply chains cancer and diabetes. More people
even as consumers demand local, now suffer from obesity than from
transparently sourced, personalized malnutrition.
foods. Agriculture generates 24%
of greenhouse gases, consumes Innovations at the intersections of
70% of fresh water and occupies food, biotech, wellness and digital are
nearly 40% of the global landmass. emerging from these cross-currents
Climate change and population to design new ways to eat.
Protein by design
56
cellular agriculture, dubbed clean demand. They also come without the
meat, grows animal cells in a medium sustainability and health tensions
of amino acids, sugars, minerals and that characterize conventional meat
water, much more efficiently than supply chains.
an animal can, achieving one calorie
of output for just three calories of While the large food companies
input. Growing animal products in the are invested in processing and
controlled lab environment avoids the distributing meat, they don’t own
pollution, greenhouse gases, water herds or farms and can adjust nimbly
consumption and sanitary problems to consumers’ shifting preferences.
of conventional production. Meat can The companies raising livestock are
also be grown much closer to demand, most threatened by the emergence
cutting short an extended global of protein by design.
supply chain.
China, one of the main drivers of
Rather than pursuing niche vegan global meat demand, also recently
markets, the companies developing gave a boost to the scaling clean meat
meat substitutes and clean meat aim industry. It signed a US$300 million
squarely for the mainstream market trade agreement with Israel for
where their products must compete lab-grown meat from the Israeli
on taste, cost and convenience, start-ups SuperMeat, Future Meat
not on consumer values. Success Technologies and Meat the Future.
depends on achieving scale to lower Lab-grown meat addresses the
costs and continuing innovation in Chinese imperatives of lowering
the product experience. As with greenhouse gas emissions,
renewable energy or EVs, market improving food safety and
adoption will begin with consumers increasing food security.
willing to pay a premium or have
a suboptimal experience, then
move to the mainstream as cost
and performance improve. At the
same time, we can expect the cost
of conventional animal products
to rise as the increasing negative
externalities of their production
become integrated into prices.
Large meat suppliers appear ready
to help these innovations scale.
The venture arm of Tyson Foods,
which is exploring and investing in
non-meat protein alternatives,
has invested in the plant-based
protein company Beyond Meat.
Both Tyson Foods and Cargill have
invested in the clean meat start-up
Memphis Meats. These products
become part of an overall protein
portfolio that can scale with
57
Smart vertical farming: produce by design
58
Human biome: diet by design
59
Questions
How long can we avoid paying the true cost of food?
How will vertical urban agriculture change the social and sustainability dynamics
of cities?
If personalized diets become the key to wellness, what industry is the food
business in?
How can the global food industry serve one diet at a time?
60
Manufacturing
Molecular economy
61
Manufacturing looks to nature for inspiration
Bits are the building blocks of The desire to create useful and
digital computing. Atoms are the beautiful things is inseparable from
building blocks of physical matter. the human experience. But, nature
They are both assembled by code. has been making things for billions
Binary code provides executable of years, developing clean, efficient
instructions for computers. DNA and distributed methods through the
carries coded instructions that evolutionary process. The disruptive
determine the structure and function phase of nanotechnology and its
of living organisms. In principle, applications will mimic the processes
biological principles and information of nature while exploiting new
are translatable into computing and powerful capabilities and tools.
environments and vice versa. And, we will make useful and
beautiful things by leveraging
Why is this important? these knowledge sets.
Human beings have been making
things for thousands of years.
62
Efficient production and the molecular manufacturing dream
Natural systems are distributed and bring forth a global maker movement.
self-organizing. From cells to ants to Digital technologies plus 3-D printing
flocks of birds, productive collective enable distributed but coordinated
behavior at a global level emerges manufacturing, with benefits in
from the collaboration of agents at the form of shorter supply chains,
the local level. Similarly, technological lower shipping costs, less unsold
advances are enabling a distributed inventory, local product tailoring
manufacturing paradigm, benefiting and new business models, such as
existing manufacturers even as they manufacturing as a service.
63
Today’s massive distribution networks Community-based production is rising
that enable service calls and spare in parallel with the decentralization
parts delivery will slowly disappear. of large manufacturing. Consumers
Production will take place closer are becoming producers. MIT’s
to where the need is, including Neil Gershenfeld contends that
battlefields or disaster areas. the projected growth in fabrication
Robotics, 3-D printing and laboratories (fab labs) across the world
software-directed assembly of (more than 1,200 today) will lead to
large parts could even enable exponential growth in their capability
manufacturing in space. to program and fabricate physical
forms, creating new
sources of manufacturing R&D
and entrepreneurial talent.
64
Questions
When we can build everything atom by atom, will scarcity become a thing
of the past?
When smarter factories give you operational visibility, what new opportunities
will you see?
When parts can be made anywhere, how will you rethink your supply chain?
How are you digitizing your products to extend your connections to customers?
65
Future
working
worlds
66
The global order
67
The crown jewel of China’s Domestically, China is relentlessly
international strategy is the Belt focused on innovation, rapidly
and Road Initiative (BRI), heralded acquiring western technologies and
as the modern-day Silk Road. BRI promoting indigenous innovation to
entails building a vast network of land narrow technology gaps. Nowhere is
and sea links across more than 60 this more evident than in the areas
countries. The plan recognizes of AI, quantum computing and EVs.
the massive infrastructure gap With the help of the country’s internet
in developing economies as an giants, China is already using AI on
underlying impediment to economic image scans at hospitals for cancer
progress. On balance, China focuses detection. Public buses in Shenzhen
on trade and economic development have already been fully converted into
while being mostly agnostic about the EVs. China now accounts for nearly half
local politics of its trading partners. of all plug-in vehicle sales worldwide.
China has led in founding a new set China is also making efforts to
of international institutions, such as increase its soft power. Through
the Asia Infrastructure Investment nonprofits, such as the China Culture
Bank (AIIB) and the New Development Centers and Confucius Institutes,
Bank (NDB), to finance these China is promoting its language
infrastructure projects in developing and culture around the world. In
economies. China believes that these the commercial realm, private
new institutions can improve the companies, such as Wanda, have
speed of approval and execution of heeded the Party’s call to strengthen
development projects. While it has the country’s soft power by acquiring
been working with the World Bank western media assets in the areas of
and the International Monetary Fund films, television and movie theaters.
(IMF), the structure and voting rights
of these western legacy institutions
have remained relatively inflexible
despite changing power dynamics.
New institutions, such as the AIIB
and NDB, could help address
this mismatch.
68
These institutions and initiatives will shape the next
global system
69
What will the next global system look like?
70
Questions
Will connectivity democratize prosperity?
How will your strategies, policies, talent and networks adapt to a multipolar world?
Is your company prepared for a world in which innovation could come from anywhere?
How is your global strategy looking beyond China and India to focus on fast-growing
economies in Africa and elsewhere?
How should the composition of your board and C-suite change in a multipolar world?
71
Societies and economies
We may not give it much thought, The societies of the future are
but we all live within a social contract. likely to have very different social
Every society has one. A social contracts from the ones we see
contract (also known as a social today. The reason is that disruption
compact) is simply the collection of has been straining long-standing
implicit or explicit agreements that social contracts, and the next waves
enables citizens to live together of technology, globalization and
in a civil society. It encompasses demographics promise to take
everything, from the rule of law to them past the breaking point.
regulation to a society’s approach What follows after this will likely be
to health care. quite different from what we have
seen so far — simply because new
These contracts are neither uniform economic realities will demand new
nor static — they vary across societies solutions and traditional approaches
and over time. Regardless of such may no longer be viable.
differences, though, all social
contracts attempt to provide stability
by seeking to balance the needs of
citizens and governments, workers
and employers, and the individual
and the collective.
Rising inequality
72
These trends will have tremendous
ramifications for social contracts
in the developing world. Workers
in emerging markets, who have so
far benefited from the globalization
of supply chains and workforces,
could find their jobs replaced by
automation. Demographics could
make this issue even more volatile;
except China, most of the developing
world skews overwhelmingly young.
With large numbers of unemployed
youth, developing countries’ social
contracts would face even greater
strain than those in the West.
Where will these rising pressures take Some societies may proactively
us? What will the social contracts of implement reforms to make social
the future look like? As with today’s contracts more sustainable. In others,
compacts, we expect different societies revolutions — at the ballot box or in the
to arrive at different solutions for the streets — may generate change.
challenges created by disruption.
73
Four principles
74
Key issues
75
Questions
How will society’s constituents — citizens, governments and businesses —
make social contracts more inclusive and long-term?
How will societies replace eroding worker protections and social safety nets in the
future of work?
At a time when companies are increasingly vocal on political issues affecting their
stakeholders, how are you responding?
How are you measuring and reporting value to align with the long-term interests
of all your stakeholders?
76
Firms and markets
Superfluid markets
Business in the future looks very Integrity and trust between buyers
different. Here’s a look ahead and sellers is established through
to 2030: code. Organizations compete solely
on value creation as efficiency is no
Supply meets demand seamlessly longer a differentiator.
across market types. Problems, such
as excess capacity and inventory, In physics, superfluids have the
no longer exist. Companies are unique property of zero viscosity.
hyper-lean, staffed primarily with They flow without friction. Similarly,
freelancers who come together for a new generation of technologies and
specific tasks, then disband. Every innovators is bringing us closer to
company asset is obtained as a the age of superfluid markets, where
service. Autonomous organizations traditional frictions and inefficiencies
compete with those still run by are greatly reduced or even eliminated.
people. Intelligent machines help
manage and direct the work flow.
Markets exist to bring together Over time, market frictions have been
buyers and sellers of goods, services, steadily receding:
information, labor and other assets
of value. Globalization, technological The viscous market age: Up until the
advances and other forces that arrival of the Internet, most markets
emerged during the Industrial Age were viscous. It was a world of paper,
dispersed markets and made them typewriters and ringing telephones.
more complex. Companies arose, Executing buyer-seller transactions
in part, as structures for efficiently was an expensive, slow and opaque
coordinating participation in more process. These frictions were largely
intricate, costly and far-flung related to the lack of information on
markets. In each industry, a web of the part of market actors, as well as
intermediaries also emerged to make information asymmetry that tended
transacting easier. to benefit sellers at the expense of
buyers. The need to navigate market
access generated multidisciplinary
companies with large workforces.
77
The fluid market age: The arrival of The superfluid market age: We have
the Internet and digital commerce now entered the age of superfluid
introduced a level of fluidity not enjoyed markets. New technologies are
in the viscous market age. The Internet converging to eliminate even more
democratized access to information, inefficiencies and frictions from
reducing information asymmetry. New markets. The price and performance
virtual markets arose, matching buyers of computing continues to climb
and sellers in a more frictionless way. an exponential curve. Data storage
Entire industries were disrupted. For capacity in the cloud is virtually
companies, the digitization of business infinite. The physical world is being
processes, from hiring to procurement sensed, tagged and linked to the
and sales and marketing, greatly Internet. Massive amounts of new data
reduced the internal coordination costs are being generated. AI algorithms
of participating in markets. As a result, are analyzing that data. New market
companies began to unbundle, pursuing interfaces are arising. Blockchain
alternate ways to get work done like technology shows promise
outsourcing and co-creating with to establish trust between market
customers. participants in a decentralized,
encrypted and secure manner.
New markets will form and Excess or idle capacity will fade away.
superfluidity will reinvent existing Digital intermediaries have already
markets. The collision of real-time aggregated idle consumer assets,
communications and the IoT will such as cars and apartments. This
give rise to “stock exchanges” sharing economy model will spread
for all kinds of goods, not just to expensive but underutilized
commodities. Everything, from capital equipment — from tractors to
drones to manufacturing equipment, magnetic resonance imaging (MRI)
will become available on an as-a- machines — owned by businesses.
service basis. New markets for raising The model will also extend to services
capital (e.g., initial coin offerings) will industries, where individual skill
emerge. The increasing recognition capacities are also under-leveraged.
of personal data as a valuable asset
will likely lead to new personal data
exchanges.
78
Markets will become more Technology leapfrogging will supply
autonomous. Digitized assets linked “missing markets” in low income,
to intelligent systems with blockchain rapid growth economies. Mobile
as the underlying trust engine could money transfer and payment systems
eventually enable fully autonomous will create new financial markets.
markets to flourish. Machines will The IoT will enable rural electricity
begin to transact autonomously markets through the installation of
with other machines as well as smart solar units managed centrally
directly with people — automatically in off-grid areas and paid for using
requesting service, triggering mobile phones. Blockchain-enabled
inventory replenishment and bidding land registries will enable real estate
for power, among other activities. markets free of corruption and
ownership disputes.
79
Questions
How will you compete on value when competing on efficiency is no longer an option?
What new frictions will arise in your business as the old frictions melt away?
Will you make your markets superfluid or will others do it for you?
What new technologies and strategies are you deploying to help supply better
meet demand?
How are you incorporating new computing interfaces (e.g., chatbots, wearables)
to interact with customers, suppliers and employees?
How can you ensure that the intermediaries in your industry add more value
than they extract?
80
Weak signals
81
Weak signals
82
Acknowledgments
Individuals listed in italics are EYQ Fellows. Chris Meyer of Nerve LLC
provided feedback on the entire report.
83
Food by design Rebalanced global system
Amir Zaidman (The Kitchen FoodTech Albert Park (Hong Kong University of
Hub), Amos Shtibelman (EY), Andrew Science and Technology), Alexandra
Cosgrove (EY), Brad Barbera (Good Rogan (Teneo), Banning Garrett
Food Institute), Bruce Friedrich (Good (Singularity University), Ethan
Food Institute), Eyal Shimoni (Strauss Zuckerman (MIT), Jennifer Zhu Scott
Group), Graham Burr (Parthenon (Radian), Jim Stavridis (Fletcher
EY), Itay Zetelny (EY), Josh Balk School of Law and Diplomacy), Jon
(Humane Society of the U.S. and Shames (EY), Kevin Kajiwara (Teneo),
Hampton Creek), Lihi Segal (DayTwo), Meghan McDonough (Teneo)
Nadav Berger (PeakBridge Partners),
Rob Dongoski (EY), Sara Menker
(Gro Intelligence), Sepehr Mousavi Renewed social contracts
(Plantagon International)
Beth Brooke-Marciniak (EY), Ivan
Rossignol (World Bank), Markkula
Molecular economy Markku (European Committee of the
Regions), Thomas Kochan (MIT)
Andre Wegner (Authentise), Andrew
Caveney (EY), Brent Segal (Lockheed
Martin), Frank Thewhisen (EY), John Superfluid markets
Robinson (EY), Mohit Ahuja (EY),
Rick Rundell (Autodesk), Stefan Heck Janet Balis (EY), Jennifer Zhu Scott
(Nauto), Susanne Schroger (EY) (Radian), Sweta Mangal (MUrgency)
The views expressed in this report are those of EYQ and not necessarily those
of the external contributors.
84
Your contacts for this report:
Gautam Jaggi
EYQ (primary contact for Future of
work, Behavioral design, Adaptive
regulation, Health reimagined,
Remapping urbanization, Renewed
social contracts, Populism and Aging)
gautam.jaggi@ey.com
85
EY | Assurance | Tax | Transactions | Advisory
About EYQ
EYQ is dedicated to …
ED None