Megatrends for the future of business

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What are the fundamental forces that will change our world? Identifying these trends and understanding their impact is key to knowing how businesses and communities operate today and into the future. These are megatrends, a term coined by John Naisbitt in the 1980s. They are large, transformative processes with global reach, broad scope and dramatic impact. The University of Sydney Business School has identified six fundamental and interrelated megatrends. The acceleration, distribution and application of computing power, coupled with the exponential growth of data, are enabling extraordinary technological advances. We have entered the fourth industrial revolution. The pace of change is astonishing. Impactful technologies can range from artificial intelligence to quantum computing, from drones and autonomous vehicles to virtual and augmented reality, 3D printing, robotics and connected devices. 90 per cent of the world's data has been created in the past two years. In the last five years, the number of people using the internet grew by 83 per cent. Almost 60 per cent of the world's population is now connected and almost half of us use social media.

Right now, there are over 22 billion connected devices around the world. In 2030, there will be 50 billion. We are starting to see a massive web of interconnected devices from consumer products to infrastructure such as streetlights and garbage bins. Our adoption of these connected devices has only just begun. Machines are getting faster and better. AlphaGo Zero, An AI program, has mastered the game by playing against itself. The use of algorithms is accelerating at an exponential rate, with 90 per cent of stock trades now created by algorithms, up from 75 per cent since 2017. Robots are getting better at building things. Algorithms can diagnose disease, write articles, manage funds and deliver individually tailored learning. Exponentially more data is being produced through billions of phones, digital platforms and countless sensors. However, there is a deepening inequality with the spread of technology across the world and also between citizens and corporations.

Impactful technology also poses significant challenges from cybersecurity and privacy to rising inequality and job automation. Questions about bias in technologies driven by algorithms and artificial intelligence and how to make them accountable will only increase in urgency and importance. The pace of change is an invitation to understand the profound shifts that are underway and to ensure that this technology empowers individuals, businesses and communities. The necessary response to impactful tech is to refine our understanding of what it means to be human. Communities around the world are experiencing rapid and profound demographic change, creating new challenges for businesses and individuals alike. After more than 200 years of rapid growth, the world's population is set to peak at 11 billion by the end of the century.

People are living longer and are having fewer children. As populations age, there will be fewer workers to support the growing number of people in retirement. For every elderly person, today there are four people of working age. By 2050, that ratio is projected to be just two people of working age to every four elderly persons. For places like Europe, this will mean a need to increase participation in the labour force from women and the elderly themselves, plus possibly an increased reliance on immigration to sustain the workforce.

Human demographic change is occurring at a different pace across the globe. By 2050, Africa will be the major contributor to global population growth. Africa's share of global population will rise from 16 per cent in 2015 to 25 per cent in 2050. As the developed world ages, Africa's younger population will require very different approaches and policies. If managed well, a youthful population carries an energy that can be harnessed for dynamic economic growth. Demographic and social changes will see governments and businesses finding huge opportunities, as well as facing huge challenges as the largest generation in history, millennials, drive the economy.

Millennials and those that come after them will be more educated and come with different expectations regarding opportunity, mobility, relationships and ownership. If we want to thrive, not just survive in the 21st century, we must address global needs for more women joining the workforce, lifelong learning and adequate health care. The future is one of cities. Today, more than half the world's population live in cities generating 85 per cent of global GDP. Globally, we are on track for 60 per cent urbanisation by 2030. In the developed world, consolidation will be even more intense, with an estimated 81 per cent of the population living in cities. The majority of this will happen in Africa and Asia. Whilst urbanisation creates huge opportunities for smart eco-cities, there are also significant challenges that come with different types of urbanisation, including 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 dollars in infrastructure investments alone over the next decade.

By 2030, solid waste management will dominate municipal budgets in low and middle income countries. This megatrend has built-in tension due to demographic change. Many cities are set to grow with 1.5 million people a week joining cities across the world through a combination of migration and childbirth. However, around 100 of the top cities are expected to shrink over the next 10 years, in part due to ageing populations in countries like Germany, Italy, Japan, South Korea and China. New centres of growth are emerging in Asia and in Africa. So, how do we plan, build and lead better cities? Healthy cities are about everything we do in our urban lives, our work and our communities, our natural and built environment, the social, digital and financial layers around them. Cities are undergoing profound changes from new practices in construction and utilities, to transport and logistics, from how we do healthcare, to how we share our cities. They are as much about smart technologies and financial flows as they are about the art that flourishes and outlasts laws.

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The focus of future cities is ultimately on increasing opportunity and improving the quality of life for the people living in them. We are witnessing the rise of the individual like never before. Tremendous technological advances and connectivity are empowering individuals across the world. Almost five billion people are using mobile phones and of those devices, more than half are smartphones. Social platforms have fundamentally changed the way people communicate, interact and organise their lives. From sharing information and organising knowledge on Wikipedia, WeChat and Twitter, to funding new ventures on Kickstarter or peer-to-peer marketplaces on Airbnb, Uber or Airtasker. Use of mobile payment is 11 times higher in China than in the United States. Chinese tech firms Alibaba, Tencent and Baidu rival Facebook, Google and Amazon in innovation, the size of their customers, profitability and social impact. There is an increasing expectation for experience and personalisation rather than consumption.

Access to information changes not only the way we consume, but also the way we interact with companies and the influence we have over the products and their services. This megatrend will vary substantially across different regions. Those who do not have access to technology and connectivity, available to most, will feel increasingly disempowered. New forms of organisation such as the gig economy also raised new questions around responsibilities of businesses and the status and rights of workers. This megatrend is accelerating as more individuals are connected to internet services and as large social platforms invent new ways to draw people into their ecosystems. While giving people a voice, the same data practices and business models also amplify misinformation and disinformation, harmful and extremist content. Rising rates of depression, stress and anxiety amongst adolescents are linked to increased use of social media and the introduction of smartphones. Technology, however, could also be an opportunity for improved, individualised delivery for mental health services.

As this trend continues to amplify our voices, governments and individuals need to understand the trade-offs between access and privacy, between empowerment and isolation. The world economy is set to shift as Asia becomes the largest trading region, fuelling the rise of a mass affluent community and a new breed of corporations. Just two countries, China and India, will account for 35 per cent of the world's population and 25 per cent of global GDP. This megatrend looks at the global economic power shift. We will see a restructuring of the global economy with non-OECD economies expected to account for 57 per cent of GDP by 2030.

The economic influence of the G7 countries will shift to the emerging seven countries. by 2040 the E7 economies will be double that of the G7. India and China will take up a rising share of the world output as the world's economic centre of gravity shifts towards Asia. However, the individual purchasing power of citizens in the West will remain higher than consumers in both India and China. China will need to secure even more of the world's natural resources and grow markets for its expanding economy. Under the Belt and Road Initiative, China will invest in economic development and transportation in more than 130 countries. By 2030, 5 billion people will be middle class. This global mass affluent community possess significant purchasing power. Two thirds of them will reside in Asia Pacific. The shift in wealth to the rich will accelerate. Currently, about half of the world's wealth is held by 1 per cent of the population. By 2030, the richest 1 per cent will own two thirds. Globalisation itself has produced unequal returns. Rising inequality is challenging trust in global economic institutions and agreements. More frequent trade wars and rising protectionism will drive uncertainty and instability.

How will individuals, corporations and governments renegotiate their expectations of one another in an era of amplified individuals and rapidly changing economies? The rise of powerful technology companies, big tech, has come with access to vast troves of data and the global reach. Various digital platforms are now akin to other infrastructures essential for our society, giving them power over our economy and our society. The degree to which lawmakers will make fundamental changes to the way these companies are regulated and taxed will determine the true balance of power. Economic power shifts of this magnitude will fundamentally change both individual and nation's prosperity. These opportunities, along with significant risks, will play out on the world stage. The climate and resource security megatrend captures the increasing pressure on critical resources within the mega ecological narrative of climate change. By mid-century, demand for food and water will place these resources on the stress. We will need to produce 60 to 100 per cent more food and five billion people could be facing a critical lack of water. The world's fish stock is being pushed towards collapse.

At the current rate, 88 per cent of the stock will be overfished by 2050. This unprecedented demand on the Earth's resources is unfolding against the bigger story of global climate change. We are witnessing unstoppable bushfires and smoke-filled cities. Glaciers and islands are disappearing, tropical archipelagoes are increasingly lashed by intense monsoon storms. Climate change is not a prediction, it is our new normal. Prolonged droughts, rising sea levels and more frequent severe weather events threaten to make more areas unlivable, displacing many millions of people from their home. Climate disruption is also accelerating global biodiversity crisis threatening 1 million species to the brink of extinction. This megatrend contains in it the environmentalist's paradox. The more we deplete our resources and degrade our ecosystems, the more average human wellbeing improves globally. But how long can we sustain rising consumption in the face of ecosystem degradation that is also increasingly global? By 2050, demand for energy will increase by 30 per cent above current global use.

Technological and market innovations are racing to unlock the promise of renewable energy. With innovations like battery storage, solar and wind technologies, we are creating the potential to rethink energy production and revolutionise how consumers access energy. More than 60 rare metals are critical for renewable technologies, for batteries, electric and hybrid cars, smartphones and tablets. However, increasing demand and the rare nature of such materials could severely limit the continued production of new technologies. Corporations are principal agents in the production of greenhouse gas and can no longer ignore the trade-off between economic and environmental wellbeing. It is no longer possible to continue with business as usual. But as capitalism depends on consuming the natural environment to ensure continual economic growth, how can business and governments respond to the challenge of our time? These are the University of Sydney Business School's six megatrends. They help us think about the future for more informed decisions in the present..

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