Most businesses are fully occupied with meeting current customer needs and battling today’s competitiveness challenges. But according to analysts, Bain & Company, it is worthwhile to look beyond the change and turbulence of the here and now to what they call ‘the Great Eight’. These are the profound macro-trends driving growth in the global economy over the next decade.
More than evidenced-based social and economic phenomena, ‘the Great Eight’ are worthy of attention because they are trends that business enterprises can act on for commercial outcomes.
The engine for growth, at its simplest, is the constant search by firms for new opportunities and customers, matched to the firm’s ability to meet and exceed customer expectations intelligently and imaginatively. This is a useful lens through which to make sense of Bain & Company’s ‘Great Eight’.
The ‘Great Eight’ macro-trends are presented from the analysis by Bain & Company as follows.
A shift in global growth
Over the longer term, Bain & Company forecasts that the global economy will expand at a 3.6% annual rate, resulting in world GDP being estimated at $90 trillion by 2020, 40% larger than it was in 2011. Population and productivity increases both play a part. The sources of world growth will increasingly tilt to emerging economies, but Western economies remain strong contributors, with their growth path accelerating in the latter half of the decade.
Two macro-trends tell this story.
- The next billion consumers: Huge numbers of new consumers in the middle class of emerging economies, but with different aspirations and price points from consumers in developed economies.
- Old infrastructure, new investments: Economic vitality will require either renewal of critical infrastructure in developed economies or continued infrastructure building in developing economies, likely backed by public-private partnerships.
Intensifying competition for finite resources
Geopolitical instability is evident in patterns of industrialisation, changing national security challenges, and the competition for resources between developing and developed economies. A sensible business response is to invest in scenario planning to prepare for shocks and maintain flexibility in business models.
Two further macro-trends inform this part of Bain & Company’s analysis.
- Militarisation following industrialisation: As economic power shifts towards Asia, so does political and military power. This is reflected in defence and security budgets and in spending on new challenges like cyber and electronic warfare and terrorism threats by non-state actors.
- Growing output of primary inputs: Volatility in the price and supply of resources due to growing demand and resources being increasingly interlinked for new uses, e.g., corn as a source of ethanol for transport as well as a food crop; water diverted for the extraction of ores and fuel.
Smarter, healthier populations
Bain & Company argue that the development of human capital is potentially the most powerful long term growth force of all, manifested in the following two macro-trends.
- Developing human capital: The war for talent is intensifying in both developed and developing economies, making investment in education, workforce participation, and skills attraction, retention and management policies an imperative.
- Keeping the wealthy healthy: Innovation and commercial opportunities are likely from responding to the needs of ageing populations in developed economies, and from the new business offerings for health and wellbeing made possible by technology advances and convergence, e.g., robotics in home health care, transformative medical technologies.
A new wave of technological innovation
A new growth trajectory, fuelled by innovation technologies and entrepreneurial enterprises, is already resulting in novel products and services, changes in business processes and profit models, and mass customisation, e.g., 3D printing and manufacturing, advances in communications and networking technologies enabling location-free access to labour.
Bain & Company detail this path of innovation-led growth in their final two macro-trends.
- Everything the same, but nicer: The importance for driving growth and margins of a wider range of innovations, beyond technological advances. These new innovations compete on value not price. They offer premium or distinctive products and services providing exceptional customer experiences, not standardised consumer products. These are termed ‘soft, customer-centred innovations’, where the creativity of firms and the intangible attributes of offerings provide added value in the eyes of the customer, e.g., fast fashion, personalised transportation.
- Prepping for the next big thing: Innovations tend to cluster in waves and the next wave involves five mutually-reinforcing, enabling technologies—nanotechnology, genomics, artificial intelligence, robotics, and ubiquitous connectivity. These technologies are platforms with the potential to create whole new industries and ways of solving customer problems better than competitors.
Businesses need to start now on working out how to capitalise on the growth prospects for the next decade. An underlying insight is the ability to question the obvious:
- Don’t overlook opportunities in Western markets or ‘old economy’ industries.
- Focus as much on customer-centred innovations as on advanced technologies.
- Invest in upskilling people for agility, problem-solving and forward thinking, not just technical skills.
Bain & Company Inc. (2011), The Great Eight: Trillion Dollar Growth Trends to 2020
Article available at: www.bain.com/publications/articles/eight-great-trillion-dollar-growth-trends-to-2020