digital europe: pushing the frontier, capturing the benefits

28
Copyright © 2016 McKinsey & Company. All rights reserved. June 30, 2016 Digital Europe: Pushing the frontier, capturing the benefits

Upload: mckinsey-company

Post on 21-Apr-2017

4.595 views

Category:

Leadership & Management


1 download

TRANSCRIPT

Page 1: Digital Europe: Pushing the frontier, capturing the benefits

Copyright © 2016 McKinsey & Company. All rights reserved.

June 30, 2016

Digital Europe: Pushing the frontier, capturing the benefits

Page 2: Digital Europe: Pushing the frontier, capturing the benefits

2McKinsey & Company

Change is accelerating exponentially Europe must capture the momentum

Europe’s digitisation lags behind the USAnd varies between countries and sectors

Adapt and winA united Europe can grab these opportunities

A new digital divide is opening upBetween the ‘haves’ and the ‘have-mores’

Page 3: Digital Europe: Pushing the frontier, capturing the benefits

3McKinsey & Company

Waves of digital innovation are accelerating

1960s 1970s 1980s 1990s 2000s 2010s

~3 years

15 years

Desktopsand PCs

Basic office software

Games and visual graphics

Enterprise software

Internet technologies

Personal computing

GPS

Wi-Fi, 2G/3G

Laptops

Mobile phones

Social media

Smartphones and apps

Smart devices and sensors

Predictive algorithms, machine learning, robotics

Modern programming languages

Algorithmic advancement

Mainframes and databases

Desktop and personal computing

Business software

Internet and e-commerce

Mobile broadband

Social media

Big data

Page 4: Digital Europe: Pushing the frontier, capturing the benefits

4McKinsey & Company

Used cross-border bandwidth Size of bubble representsintraregional used bandwidth

Data flows are surging, redrawing the world’s borders

45xcross border bandwidth

between 2005-2014

EUROPE

ASIA

LATINAMERICA

NORTH AMERICA

AFRICA

MIDDLEEAST

OCEANIA

Bandwidth (gigabits per second (Gbps)

>20,000

20,000-5,000

5,000-1,000

1,000–500

<500

Page 5: Digital Europe: Pushing the frontier, capturing the benefits

5McKinsey & Company5McKinsey & Company

Connectedness scoreData flows

7

10

15

19

21

25

35

43

56

100

8 of the 10 most connected countries are in Europe

Page 6: Digital Europe: Pushing the frontier, capturing the benefits

6McKinsey & Company6McKinsey & Company

The European startup ecosystem is developing at a rapid pace

Number of unicorns in Europe

Number of accelerators and incubators between 2008 and 2013

x3

Growth in venture capital funding between 2013 and 2015

x2

Of European unicorns are profitable

60%47

2016

30

2014

Page 7: Digital Europe: Pushing the frontier, capturing the benefits

7McKinsey & Company

Change is accelerating exponentially Europe must capture the momentum

Europe’s digitisation lags behind the USAnd varies between countries and sectors

Adapt and winA united Europe can grab these opportunities

A new digital divide is opening upBetween the ‘haves’ and the ‘have-mores’

Page 8: Digital Europe: Pushing the frontier, capturing the benefits

8McKinsey & Company8McKinsey & Company

Today the contribution of digital to European GDP lags behind the US…

Share of digital contribution to GDP, %

4.0%

5.4%5.5%

6.6%6.9%

8.0%

10.0%

5.0%

Page 9: Digital Europe: Pushing the frontier, capturing the benefits

9McKinsey & Company9McKinsey & Company

21%

74%5%

60%

8%

32%

…reflected in a low presence of European internet companies compared to the US…

IOT compani

esBig data

companies1

1 Top 10 companies

Europe

US

Asia

Market capitalisationTop 20 companies, Percent, 2015

RevenueTop 20 companies, Percent, 2015

55%

5%

40%64%36%Internet compani

esUnicorns

Page 10: Digital Europe: Pushing the frontier, capturing the benefits

10McKinsey & Company

…partly because Europe is still reliant on US digital imports…

Digital trade balance with the USPercent

-4.2% -11.4%-3.8% -5.6%-5.2%-3.6%-2.8%

0%1.0%

-0.2%

1.3%0.2%

-0.4%

1.6%Digital trade balance with EU28 Percent

Page 11: Digital Europe: Pushing the frontier, capturing the benefits

11McKinsey & Company

MGI Sector Digitization Index, 2015 or latest available Europe data

…and partly because companies across sectors have not taken the digital turn yet

Low HighRelative digitisation

ICTMediaFinance and insuranceProfessional servicesWholesale trade

Entertainment and recreation

Personal and local services

Advanced manufacturing

Transportation and warehousing

Utilities

Retail trade

Education

Chemicals and pharmaceuticals

Hospitality

Real estate

Government

Health care

Basic goods manufacturing

ConstructionAgriculture

Selected sectors

Knowledge-intensive sectors that are highly digitised across most dimensions

1

Capital-intensivesectors with the potential to further digitise their physical assets

2

Highly localisedsectors that lag across most dimensions

3

Assets Labour

Usage

Page 12: Digital Europe: Pushing the frontier, capturing the benefits

12McKinsey & Company

Country effects explain one-third of the variation in digital capability across Europe, sector effects the other two-thirdsMGI Sector Digitization Index, 2015 or latest available Europe data Low High

Relative digitisation

ICTMediaFinance and insuranceProfessional servicesWholesale trade

Entertainment and recreation

Personal and local services

Advanced manufacturing

Transportation and warehousing

Utilities

Retail trade

Education

Chemicals and pharmaceuticals

Hospitality

Real estate

Government

Health care

Basic goods manufacturing

ConstructionAgriculture

Selected sectors

Page 13: Digital Europe: Pushing the frontier, capturing the benefits

13McKinsey & Company

Captured digital potential by countryPercent

Tremendous upside remains to be captured

18%

10%

12%

15%

17%

10%

15%

12%

Page 14: Digital Europe: Pushing the frontier, capturing the benefits

14McKinsey & Company

€2.5 trillion

Page 15: Digital Europe: Pushing the frontier, capturing the benefits

15McKinsey & Company

Change is accelerating exponentially Europe must capture the momentum

Europe’s digitisation lags behind the USAnd varies between countries and sectors

Adapt and winA united Europe can grab these opportunities

A new digital divide is opening upBetween the ‘haves’ and the ‘have-mores’

Page 16: Digital Europe: Pushing the frontier, capturing the benefits

16McKinsey & Company

ConsumersMore consumer surplus

CompaniesFaster revenue growth

WorkersMore automation

Digitisation creates a divide between ‘haves’ and ‘have mores’

Page 17: Digital Europe: Pushing the frontier, capturing the benefits

17McKinsey & Company

2000 2014

Annual Google searches

178 mn unique monthly US visitors in 2014

International call volumes with Skype

$37 bn savings for consumers just in 2013

Consumer surplus through free internet search has accumulated rapidly in the past decade…

74% of online US adults are on social mediain 2014

Social media usage

100 mn unique monthly US visitors in 2014

Wikipedia article count

Page 18: Digital Europe: Pushing the frontier, capturing the benefits

18McKinsey & Company

…though the ‘have more’ minority captures most of the surplus

80%

Have mores

Captured value from Web services

Haves

40%

Internet users

20%

60%

Page 19: Digital Europe: Pushing the frontier, capturing the benefits

19McKinsey & Company19McKinsey & Company

More highly digitised companies perform better financially…

Digitisation score

4%

10%

18%

5 year revenue growth, CAGRPercent

+14pp15%

18%

42%

+27pp

3-year Total Return to Shareholders Percent

High

Low

Medium

Page 20: Digital Europe: Pushing the frontier, capturing the benefits

20McKinsey & Company

…and more digitised sectors experience faster productivity growth Germany

Netherlands

Italy

Sweden

France

0.900.70 0.800.600.400.30 0.500.200.10

ProductivityCompound annual growth rate, %

Digitisation indexComposite score measuring digitsation level across sectors

Page 21: Digital Europe: Pushing the frontier, capturing the benefits

21McKinsey & Company

Ability to technically automatePercentage of time on activities that can be automated

Hourly wage, $ per hour

No activity is immune to automation, but some jobs are more impacted than others…

0 20 40 60 80 100 120

File clerks

Landscaping workers

Chief executives

0%

100%

Page 22: Digital Europe: Pushing the frontier, capturing the benefits

22McKinsey & Company

…and the phenomenon could accelerate in the coming years

44% of all activities likely to be automated in the next 10 years

Displacement of middle-skill jobs dueto automation could accelerate from

8% today to 15% in the next decade

Advanced robotics

Artificial intelligence

Page 23: Digital Europe: Pushing the frontier, capturing the benefits

23McKinsey & Company

Change is accelerating exponentially Europe must capture the momentum

Europe’s digitisation lags behind the USAnd varies between countries and sectors

Adapt and winA united Europe can grab these opportunities

A new digital divide is opening upBetween the ‘haves’ and the ‘have-mores’

Page 24: Digital Europe: Pushing the frontier, capturing the benefits

24McKinsey & Company24McKinsey & Company

VivaTechnology’s Partners are already grappling with the toughest digital challenges

Big DataHow to manage the public data generated by individuals on smartphones?

Artificial IntelligenceHow to leverage AI to improve in-store operations (inventory, replenishment)?

Environmental footprintHow to reduce the environmental impact in train stations?

PersonalisationHow can customer data enrich personalisation features?

Customer experienceHow to improve guest experience by digitally empowering hotel employees?

Themes Technologies

Internet of ThingsHow to effectively analyse and process sensor data collected in-store?

Open innovation

BlockchainWhat services and value proposition can be added to the blockchain ecosystem?

EfficiencyHow to improve the generation of distributed energy?

Page 25: Digital Europe: Pushing the frontier, capturing the benefits

25McKinsey & Company25McKinsey & Company

For companies, digital transformations should be performed along 6 strategic priorities

2 Become agile and learning-focused

1 Evolve existing business models

3 Take advantage of new innovation models4 Bring the customer along

5 Build ─ or buy ─ the right digital capabilities6 Adapt your workforce

Company digitisatio

n

Page 26: Digital Europe: Pushing the frontier, capturing the benefits

26McKinsey & Company26McKinsey & Company

Policymakers must act to create a more dynamic digital ecosystem

3Deepen Europe’s partici-pation in global dataflows

France launched the etalab program to open public data

4Unlock R&D investment and access to capital for entrepreneursThe UK offers up to 50% in tax benefits for investors in early stage digital businesses

2Create a more seamless digital market

The EU will invest more than €50B by 2020 in digital initiatives

5 Address issues surrounding skills in the labour marketGermany developed an app to support citizens looking for a job

1Digitise government operations

Estonia's eID scheme allows online authentication

Facilitating the

transition

Page 27: Digital Europe: Pushing the frontier, capturing the benefits

27McKinsey & Company

The best time to plant a tree was 20 years

ago.The second best time is

now.

Page 28: Digital Europe: Pushing the frontier, capturing the benefits