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What the Five Megatrends Mean for Your Business

June 18, 2014

In this video, PwC’s Tim Ryan reviews the five global megatrends – or global macroeconomic forces – and their impact on businesses and their customers. Ryan explains why businesses need to have a plan to deal with demographic shifts, increasing urbanization, shifts of economic power, climate change and resources, and technological breakthroughs. 

Full transcript:

The quality of leadership in business today is the best it’s ever been, and it has to be. The number of challenges that leaders are facing today are significant. The environment is challenging and the pace of change is dizzying. As human beings, we all deal with curveballs; personal life, professional life. Things that we didn’t plan for happen, and it’s up to us if we want to be successful with those curveballs and persevere.

At PwC, we have the privilege of visiting with thousands of companies and executives throughout the year. We have tremendous insight that we’re provided through the dialogues we have with those executives. And from what we’ve seen over the last several years, business is doing terrific. Yes, the environment has been tough, companies are doing very well in delivering great results for their shareholders and their other stakeholders. There are several reasons for optimism. For example, over 70% of companies in 2014 that reported their capital expenditures to the Street are exceeding Wall Street expectations. Patent filings are up over 7% over the last year, and bankruptcies are down almost 12%. And from my perspective, one of the most common characteristics of successful business leaders is the ability to persevere when something that you didn’t plan came your way. Leaders have learned how to fail. Let me say that again: Leaders have learned how to fail. What we have seen at companies across the globe is companies introducing to their cultures a willingness to try, make mistakes, and learn. Learning from failures is unto itself a critical business process.

The second reason businesses are doing so well today is there’s plenty of opportunities. In order to succeed, one needs an opportunity. And at PwC, we’re seeing our clients take advantage of a number of opportunities, and we call those the five global megatrends. A megatrend is a macroeconomic force that’s shaping our society. It’s factual, scientific, and it’s certain.

The most important thing to understand about megatrends is that they affect society as a whole, and because they affect society as a whole, we’re talking about the business’ customers, employees, and stakeholders. And the reason they’re so important? Because in order to stay relevant to these groups, a company needs to address these megatrends. Demographic shifts; the changes taking place in demography across the globe is a drama that’s playing out before our very eyes. Today, 40% of our world is getting older. We know those as countries such as Japan, Russia, Spain, and Italy, and 55 other countries that have aging population challenges. Across our globe today, there’s 350 million people over age 70. In just 25 years, that number goes to 850 million.

Accelerating urbanization: In 2008, for the first time ever, more than 50% of our planet lived in cities. What’s even more astonishing is that in just the next 20 years, that number will go to over 70%. This will go down in history as the great migration, as people flock from rural areas to urban areas all across the globe. So what does that mean? Well, for one thing, it means that there will be over $40 trillion spent on infrastructure in just the next 25 years.

Shift of economic power: By 2050, the GDP of the emerging market seven countries will be double that of the G7 countries. Newfound capital will be invested all across the globe as they look to diversify their newfound wealth.

Climate change and resource scarcity: To support a population of more than 8.3 billion people by 2030, the earth will need 50% more energy, 40% more water, and 35% more food. Demand and competition for these commodities will only increase as populations rise.

Technological breakthroughs: The challenges posed by demographic shifts, accelerating urbanization, shift in economic power, as well as climate change and resource scarcity, those are intimidating, and in many cases, this last megatrend is the answer. Technological advancements across our world are allowing businesses and society to meet the needs of the other megatrends. For example, we’ve made significant progress in desalination to meet the world’s growing needs for fresh water, and in one case, technology’s been developed to turn moisture into water to feed growing agricultural needs in certain parts of the world. The cloud is changing the way businesses are run, mobile is allowing access to new markets that weren’t accessible in the past, and big data is driving advancements in artificial intelligence that in the past were only a dream.

When you reflect on the megatrends, three pieces of advice come to mind. First, while the megatrends aren’t new, and they’re certainly not proprietary, the second order effect of what these megatrends mean to your business, to your customers, your employees, and your stakeholders, that’s wide open. That’s where the opportunity lies. Take your business on a deep dive into what the megatrends mean for you and create a sustainable competitive advantage.

Second: Understand the skillsets that leaders will need in the future in order to succeed.

And finally, be optimistic! Business’s track record over the past several years has been remarkable. Business has proven—you have proven—the ability to be successful in very challenging times, and be confident that it will continue.                

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