According to the McKinsey report, over the past two decades, today's dominant industries (i.e., "today's arena") have profoundly changed our lives, and tomorrow's emerging industries ("tomorrow's arena") are expected to bring even more profound change. In the first two chapters, we look back at the past and dissect the growth and evolution of the current arena driven by digital technologies. This chapter focuses on the future and explores 18 "Arenas of Tomorrow" with high growth and high vitality potential. These sectors span a number of key industries, including transportation, healthcare, digital connectivity, energy, and entertainment, and are expected to lead systemic change in the future.
In 2022, the combined annual revenue of these 18 potential arenas has reached $7.2 trillion. According to model projections, this figure could grow to between $29 trillion and $48 trillion by 2040, at a compound annual growth rate of 8% to 11%. By comparison, the current arena grew at an average annual rate of 10% between 2005 and 2020, while other industries grew at an average of just 4% over the same period. Based on the typical after-tax profit margins of these industries, the total profits of Tomorrow's Arena are expected to reach $1.9 trillion to $6.1 trillion by 2040.
From a global economic perspective, the share of arenas in global GDP is also expected to rise: from 4% in 2022 to 10% to 16% in 2040, equivalent to 18% to 34% of total future GDP growth. In fact, the current arena has experienced a similar trend: in 2005, these industries accounted for 3% of global GDP, and by 2020 they had risen to 9%. Capital flows also reflect a strong investor focus on these emerging sectors. It is estimated that between 2020 and 2023, about one-third of global venture capital money will flow into the industries covered by these potential arenas.
Figure: The 18 potential future areas include existing, spin-off, and emerging domains
The forces driving the rise of these future arenas are driven by four "supertrends": continued digitalization, technological innovation in the physical world, the global energy transition, and global population growth and rising living standards.
First, as digital technology continues to advance, the growth potential of digital products and their interfaces has increased significantly. The accelerated migration of enterprises to the cloud, the increasing complexity of cybersecurity needs, and the rapid evolution of artificial intelligence technologies will all drive the growth of the digital-related arena. In addition, there is great potential for increased Internet penetration in developing countries. Currently, Internet penetration in these regions is only 35 percent, far below the 80 percent in developed countries, indicating that digital products and services have tremendous room for growth in the Global South.
Second, innovations such as robotics and autonomous driving and shared mobility are gradually bringing advanced technologies into the physical world, creating new business opportunities.
Third, the transformation of the global energy structure is accelerating, and the process of decarbonization is increasing the market demand for clean energy and low-carbon products (such as electric vehicles, batteries, nuclear fission power stations, etc.).
Fourth, as the world's population continues to grow and income levels continue to rise, people's pursuit of a higher quality of life will also drive growth in medical care, housing and other fields.
McKinsey divides the 18 potential future arenas into three categories:
1. Continuation Arenas: These include four of the current arenas, which have the characteristics of continuous high growth and high vitality;
2. Derivative arenas: independent from some sub-fields in the current arena, showing their own development paths and growth potential;
3. Emerging Arena: It is a new industrial direction, and there are early signs that it has the initial conditions to form an "Arena Magic Formula".
To sum up, with the evolution of technology, capital flows and consumer demand, the rise of the future arena may not only reshape the global industrial pattern, but also profoundly affect all levels of human society.
Related:
18 Potential Arenas of the Future That Could Reshape the Global Economy (1)
18 Potential Arenas of the Future That Could Reshape the Global Economy (2)
18 Potential Arenas of the Future That Could Reshape the Global Economy (3)
18 Potential Arenas of the Future That Could Reshape the Global Economy (4)
18 Potential Arenas of the Future That Could Reshape the Global Economy (5)
18 Potential Arenas of the Future That Could Reshape the Global Economy (6)
18 Potential Arenas of the Future That Could Reshape the Global Economy (7)
18 Potential Arenas of the Future That Could Reshape the Global Economy (8)
18 Potential Arenas of the Future That Could Reshape the Global Economy (9)
18 Potential Arenas of the Future That Could Reshape the Global Economy (10)
18 Potential Arenas of the Future That Could Reshape the Global Economy (11)
18 Potential Arenas of the Future That Could Reshape the Global Economy (12)
18 Potential Arenas of the Future That Could Reshape the Global Economy (13) 18 Potential Arenas of the Future That Could Reshape the Global Economy (14)
18 Potential Arenas of the Future That Could Reshape the Global Economy (15)
