Reposted from the McKinsey Quarterly:
When McKinsey began publishing the Quarterly, in 1964, a new management environment was just beginning to take shape. On April 7 of that year, IBM announced the System/360 mainframe, a product with breakthrough flexibility and capability. Then on October 10, the opening ceremonies of the Tokyo Olympic Games, the first in history to be telecast via satellite around the planet, underscored Japan’s growing economic strength. Finally, on December 31, the last new member of the baby-boom generation was born. Fifty years later, the forces symbolized by these three disconnected events are almost unrecognizable. Technology and connectivity have disrupted industries and transformed the lives of billions. The world’s economic center of gravity has continued shifting from West to East, with China taking center stage as a growth story. The baby boomers have begun retiring, and we now talk of a demographic drag, not a dividend, in much of the developed world and China.
We stand today on the precipice of much bigger shifts in each of these areas, with extraordinary implications for global leaders. In the years ahead, acceleration in the scope, scale, and economic impact of technology will usher in a new age of artificial intelligence, consumer gadgetry, instant communication, and boundless information while shaking up business in unimaginable ways. At the same time, the shifting locus of economic activity and dynamism, to emerging markets and to cities within those markets, will give rise to a new class of global competitors. Growth in emerging markets will occur in tandem with the rapid aging of the world’s population—first in the West and later in the emerging markets themselves—that in turn will create a massive set of economic strains.
Any one of these shifts, on its own, would be among the largest economic forces the global economy has ever seen. As they collide, they will produce change so significant that much of the management intuition that has served us in the past will become irrelevant. The formative experiences for many of today’s senior executives came as these forces were starting to gain steam. The world ahead will be less benign, with more discontinuity and volatility and with long-term charts no longer looking like smooth upward curves, long-held assumptions giving way, and seemingly powerful business models becoming upended. In this article, which brings together years of research by the McKinsey Global Institute (MGI) and McKinsey’s Strategy Practice, we strive to paint a picture of the road ahead, how it differs from the one we’ve been on, and what those differences mean for senior executives as they chart a path for the years to come.