Six megatrends for the future of business

We are witnessing times of profound change that promise to fundamentally alter the way we do business, work and live. One of the biggest challenges we face is understanding the profound changes that are underway, their range, speed and potential impact on individuals, business and society.

Megatrends, according to John Naisbitt, are large, transformative processes with ‘global reach, broad scope, and a fundamental and dramatic impact’. Indeed, Stefan Hajkowicz, the author of a recent CSIRO report on megatrends, says many of these megatrends are poised to ‘throw companies, individuals and societies into freefall’.

We have identified six such megatrends at the University of Sydney Business School which we believe encapsulate the patterns of transformative change underway: impactful technology, evolving communities, rapid urbanisation, empowering individuals, economic power shift and resource security.

“The fourth industrial revolution”, “the second machine age” or “Industry 4.0” recognise how impactful technology builds on digital technologies underpinned by the advent of personal computing and the Internet.

The scale and scope of technologies today make it almost impossible to predict what this megatrend will lead to in even five years. It took the telephone 76 years to reach half of all US households. Since the introduction of the IPhone 10 years ago, the smartphone has achieved the same in six years.

Impactful technologies are broad based: from artificial intelligence and machine learning to cloud and quantum computing; from drones and autonomous vehicles to virtual and augmented reality, 3D/4D printing, robotics, connected devices and the internet of things. The number of applications and domains impacted is staggering.

Robots and algorithms are getting better at building cars, driving them, writing articles, and diagnosing disease, and we ain’t seen nothing yet. There are of course significant challenges that come with impactful technology: cybersecurity and privacy concerns, rising inequality and job automation.

The furious pace of evolution is an invitation not only to understand the profound changes that are underway, but also ensure they can be empowering to individuals, businesses and communities.

The future is one of cities. 200 years ago only two percent of the world’s population lived in cities. Today, cities are home to more than half the world’s population, and generate 85 percent of global GDP. The 750 biggest cities account for 57 percent of the global GDP.

1.5 million people a week join cities across the world through a combination of migration and childbirth, with most future growth, over 90 percent in fact, taking place in African and Asian countries.

While this creates huge opportunities for smart, eco-cities, there are significant challenges that come with urbanisation: tremendous demands on infrastructure and the environment, provision of services and job creation. Cities consume three quarters of the world’s natural resources. New York, Beijing, Shanghai and London will need $8 trillion in infrastructure investments alone over the next decade.

So how do we plan, build and lead better cities? We need to understand the profound changes that are underway. We also need to lead and make better choices about the future of business and dare to imagine better ones.

This megatrend captures the world’s shifting demographics: a growing world population projected to reach nine billion people over the next 25 years and slowly top out at 10 billion people by 2050. People across the world are having fewer children and living longer.

The world’s ageing population has profound implications for the workforce as fewer people will have to support more people in retirement. For every four working-age people per elderly person today, there will be just two by 2050. For places like Europe this will mean we need to increase participation in the labour force from women and the elderly themselves, and possibly also increase the level of immigration.

Demographic change comes at a different pace across the globe, with Africa’s population set to double and the average age in Japan set to reach 53 by 2050, according to UN predictions.

Demographic and social change will mean governments and business finding huge opportunities as well as facing huge challenges, as the largest generation in history, millennials (those born between 1980 and the late 1990s) drive the economy. In the West, millennials are generally well educated, and come with different expectations on opportunity, mobility, relationships and ownership.

We need to understand and address changing global needs around healthcare, retirement, flexible recruitment and calls for more women to join the workforce around the world, lifelong learning and development of new skills throughout people’s working lives.

The economic power shift megatrend captures first and foremost the rise of the developing world over the next 25 years. The ascendancy of countries like China and India will continue as they keep making gains in productivity while having the world’s largest populations.

The pace of economic change will vary substantially across different regions. Over the coming years we will see a restructuring of the global economy, with emerging economies representing more than 50 percent of the world total by 2025.

This growth is also giving rise to a new middle class with significant purchasing power. Two thirds of the global middle class will reside in the Asia Pacific by 2030.

This megatrend has in-built volatility, as commodity prices have played and will continue to play an important role. We have seen their decline over the last couple of years and their significant impact on world economies.

Economic power shifts also bring about opposition, in the form of trade or currency protectionism, political developments and the rise of nationalistic movements. Understanding and managing these markets will become more important than ever.

We are witnessing the rise of the individual like never before. Tremendous technological advances, ubiquitous connectivity, improvements in access to education and health are empowering individuals across the world.

Entrepreneurship is driven by opportunity rather than necessity in both developed and emerging markets.

Social platforms have fundamentally changed the way people communicate, interact and organise their lives: from the way they share and organise knowledge and information to funding new ventures, and facilitating collaborative consumption.

There is an increasing expectation for experience rather than consumption, personalisation and customisation in everything we do.

Access to information anywhere, any time changes not only the way we consume but also the way we interact with companies and the degree of influence we have over companies, their strategies, products and services. Over recent years consumers have shaped technical specifications for smartphones in companies like Samsung to new series content on Netflix.

Across different regions, this megatrend will vary considerably, and sometimes have unintended, opposing consequences. People who do not yet have access to the sheer ubiquity of technology and connectivity that most of us have, will feel increasingly disempowered.

We need to understand, create and imagine new ways in which people are empowered to organise and live their lives, interact with others, create new businesses and shape existing ones.

The resource security megatrend captures the increasing pressure on limited food, water, energy and mineral resources. By 2050, it is estimated that we will need to produce 70 percent more food for a growing population with growing demands. In a little more than a decade, demand for water will increase by 40 percent and energy by 50 percent.

Competition and demand for energy, food and water will intensify. In 2015, the World Economic Forum identified water crises as the most significant global threat.

Resource security, however, goes beyond the critical water, food, energy and climate nexus. Many rare metals we have never or seldom used before have become indispensable for sustainable clean energy, computers and mobile devices.

We already need more than 60 such critical materials for wind and solar fuel generation, lighting, and making batteries, to build electric and hybrid cars, smartphones and tablets.

Increasing demand and the rare nature of many of these materials can lead to critical shortfalls and put severe limitations on renewable energy technologies. The challenges raised by this megatrend can be tackled through innovation, new solutions and new industries as well as initiatives such as the UN’s Sustainable Development Goals. We must dare to imagine radically new solutions for a radically different future.

At the business school we have a responsibility to help others understand and respond to the complex forces of change enveloping us all.

With Sydney Business Insights, we aim to further informed research and critical thinking on major issues and trends as they impact on the future of business. Sydney Business Insights brings together researchers, powerful insights from industry, government and community. We create resources that are free to read, watch or listen to, share or republish, making ideas accessible and encouraging conversation.

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