According to the McKinsey report, in order to uncover areas that are likely to form arenas in the future, the researchers reviewed the formation of today's popular tracks. The study found that areas with the following three key elements tend to have high growth and dynamism, and eventually evolve into important tracks. These three elements can be seen as "track catalysts", i.e., major changes in business models or technologies, continuous upgrades in investment incentives, and large or rapidly growing market sizes.
According to the report, in 2005, the iPhone generation had not yet been born, and no one had used cloud services at that time. Mass-produced electric cars look more like science fiction. But by now, these scenarios are commonplace and part of a wave of innovation that has fundamentally changed businesses, economies, and the way we live.
The data clearly shows how the market is changing. At the end of 2005, only four of the world's top 20 companies by market capitalization will remain in the top 20 by September 2024. The combined market capitalization of these 20 top companies has more than sixfold from about $4 trillion in 2005 to $25 trillion in September 2024. Most of the new entrants to the top 20 are from what McKinsey defines as an "emerging track".
This trend was also evident between 2005 and 2020. Of the 100 most valuable companies in the world, only 46 companies made the list in 2005 ended in 2020, meaning that there are 54 new entrants. Nearly half of them are from specific "emerging tracks", increasing the number of leading companies in these tracks from 10 in 2005 to 33 in 2020.
The so-called "emerging track" has two core characteristics: one is that its revenue and market value are growing much faster than the overall economy, and the other is that the market share and market value ranking of the companies in the track are constantly changing. McKinsey research found that between 2005 and 2020, a total of 12 such tracks emerged, including cloud services, e-commerce, internet consumption and biopharmaceuticals, which are reshaping the global business landscape.
Figure: Emerging fields are reshaping the world
The emerging track has not only reshaped the business landscape, but also profoundly changed our daily lives, including the way we socialize, access to information, work processing, entertainment consumption, and medical services.
In 2005, for example, the process of going to the movies was relatively simple: check the newspaper schedule, call a friend, drive to the nearest theater, or try your luck at a video store to see if you could rent a DVD of your choice. Today, viewers can use their mobile phones to check movie schedules online, buy tickets in advance, communicate with friends in group chats, and potentially travel to the theater via ride-hailing (or even electric car). Or, they can choose to watch the movie online, start a video call, and watch the movie together on the movie app.
Behind this simple event, there are several emerging tracks: smartphones rely on semiconductors, software, and consumer electronics, online ticketing and streaming subscriptions are inseparable from e-commerce, payments, and internet services, while advances in electric vehicles, industrial electronics, cloud computing, and video and audio entertainment technologies are bringing new cinematic experiences.
Looking back from 2005 to 2020, the development stages and growth trajectories of different competitive industries are different. In the past, the competitive industry has undergone similar changes in different eras, such as the oil, gas and mining industries, driven by the growth of energy and raw material demand, the automotive and commercial aviation industries due to the rise of the global middle class, and the personal computer industry relying on the rapid development of technology.
However, one of the unique features of today's business landscape is that multiple competitive industries are emerging at the same time, and the common driver is the exponential growth of digitalization. Advances in digital technology have not only given rise to new business models, but have also dramatically accelerated technological innovation on a global scale. In the next part, we will explore how these competitive industries are different from other traditional industries.
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)
