team finland future watch: russia mega trends
TRANSCRIPT
1
Russia Mega Trends: Macro to Micro Implications for 2020
May 2012
2
Introduction to Mega Trends
3
Impact of Mega Trends on Key
Organizational Functions
Mega Trends are global, sustained and macro economic forces of
development that impact business, economy, society, cultures and
personal lives thereby defining our future world and its increasing pace of
change
What is a Mega Trend?
Definition of a Mega Trend
4
Mega Trends in Russia
5
Economy: Russia Beyond Moscow – The Next Game Changers
6
Moscow – Emerging Mega City
Fast Forward Moscow City Facts: Did You Know?..
� 25-30% of Russia’s GDP will be produced in Moscow (2025)
� 20% of Russian population will live in Moscow agglomeration
� The city will grow 2.5 times (Big Moscow)
� 150km of new tracks and 70 stations will be opened in Moscow Metro
What Are The Implications?
� Global economic force on its own
� Hub and spoke business model
� Diverse and dynamic socio-economic mix
� Tech-savvy citizens connected 24/7
� Mega-corridors: Moscow – St. Petersburg, Moscow – Nizhniy Novgorod
7
Russia Beyond Moscow – The Next Game Changers
Moscow
Yekaterinburg
Novosibirsk Krasnoyarsk Khabarovsk
Vladivostok
Krasnodar
Saint Petersburg
South: Sochi, Krasnodar, RostovDevelopment of tourism and agricultural business
Far East: Vladivostok, Nakhodka, KhabarovskModern infrastructure and logistics facilities
Siberia: Krasnoyarsk, Novosibirsk, TomskOil and gas, healthcare, energy, innovation
Ural: Yekaterinburg, PermLogistics, finance, machine building
1/3 of the population will live in the Eastern part of Russia in 2025
5 to 7 cities will emerge as alternative growth centres by 2020,bridging the welfare gap between Moscow and the regions
8
The New Locomotives of Growth
Vladivostok – “San-Francisco” in the Far East
� “Open sky” status – transit between China and US
� Modernization of Vladivostok Marine Trade Port
� Educational, scientific, travel and business centre linking Europe, Asia and America
“Tomsk 3.0 – Cognitive City of the Future
� Post-industrial, innovative economic development
� Strong scientific and educational complex
� Comfortable living environment and social infrastructure
Yekaterinburg – “The City” of Ural
� Economic and financial centre
� Important transportation hub – multi-modal logistics, the fastest growing airport
� Solid industrial base attracting investments
9
Social Trends: Prosperity, Education and Social Mobility
10
Wellness and wellbeing
•Healthy nutrition
•Healthier lifestyle – sport and fitness
Education
•RUB 140.5 billion investment
•From quantity to quality
•Corporate and federal universities, national research centres
Middle Class
•Boom in consumer expenditure, stimulating the overall economy growth
•The largest consumer markets in Europe
•Higher demand for intangible products –services, leisure and entertainment, etc.
2020201520102005
Annual Disposable Income* (Russia), USD per capita
Source: Frost and Sullivan, Euromonitor International, Rosstat
Social mobility
•She-economy
•Small and medium businesses
•Reverse brain-drain
* Current prices, year-on-year exchange rates
The Middle Bulge
11
Small and Medium Business – Engine for Innovative Growth
Restraints
� Only 5% have international contacts
� Only 2% - innovative SME
� US – 40% of GDP, Europe – 60% of GDP
� Barriers – tax system, lack of available financing, corruption, red tape
Positive trends� 1.7 m SMEs, 4 m individual entrepreneurs
� 17 m employed, 22% of working-age population
� 21% of GDP
� 2000-2005 growth – 7%, 2005-2009 – 40%
What kind of support measures for SMES would be most effective?% of responses
Source: Chamber of Commerce of Russia and the Ministry of Economy – “Monitoring of SME
sector”(June 2011), Opora.
12
Healthcare as a National Security Doctrine
13
Sourc
e: W
HO
, U
N, R
ossta
t, F
rost and S
ulli
van
Nation’s healthcare becomes THE most urgent problem in Russia
Facing Demographic Crisis
� Life expectancy among the lowest in the developed world
� Unhealthy lifestyle and inefficient healthcare system
� Number of population decreased by 7 million in 1991-2009.
� 2025 forecast: optimistic/pessimistic scenarios ~139/131 million
Fast Forward Facts:Demographics
14
Sourc
e: IM
S H
ealth
, F
rost and S
ulli
van
Pharma 2020
Manufacturing of pharmaceuticals in Russia
Foreign Russian
2010 2020
Today
� Low per capita consumption of drugs
� High dependency on imports
Tomorrow
� One of the fastest and most attractive pharmaceutical markets
� Locally-produced drugs, including innovative and biopharmaceuticals
Pharma
Pharmerging Economy
CAGR 2011-2016:
11-14%
15
Source: Frost and Sullivan
Equipping the Healthcare System
Today
� Installed base – 4 MRI and 9 CT scanners per 1 million population Estimate in order to meet the diagnostic needs – 14 and 25
� Lack of qualified personnel (e.g. radiologists)
� Dependency on imports
Tomorrow
� Steady market growth
� Localization of production and technology transfer
Medical Equipment
CT – computer tomography
MRI – magnetic resonance imaging
CAGR: 7-8%
16
Infrastructure Development
17
The most ambitious infrastructure development programme in the world
� New and improved business opportunities
� Population mobility
� Economic development of the Eastern part of Russia
18
Source: Rosstat, IATA, Frost and Sullivan
Today:
� 63% of the Russia’s territory has no alternative to air transport.
� 80% of airport infrastructure is outdated and requires modernization
� 70% of runways were built over 20 years ago.
Tomorrow:
� Tourism in the North Caucasus– 4 new and modernization of 6 existing airports
� Vladivostok – air hub in the Far East
Investment 2012-2019: RUB 107 ($ 3.55)
billion
Up in the Air
19
Source: Ministry of Transportation, Frost and Sullivan
Automotive IndustryOver 4 mln new car sales in Russia by 2020
Logistics IndustryTo reach over $100 bn by 2020
Fools and Roads
Today:
� 29% of federal roads are overloaded, in Moscow – 60%
� 46,000 settlements (2.7 m citizens) do not have access to hard-surfaced roads
� 23.5 deaths per 100,000 people caused by road accidents (Europe – 9.5)
Tomorrow:
� Construction/modernization of ~20,000 km of roads, including toll highways
� Trans-Siberian route development and emergence of multi-modal hubs
� The Silk Road of Modern Age: Europe to China highway via Kazakhstan
Investment 2012-2019RUB 1.71 trillion
($ 57 billion)
20
SiemensDesiro trains to be manufactured in Russia
TalgoSpanish manufacturer to supply variable gauge trains for Moscow-Berlin and Moscow-Kiev routes
AlstomSupplier of Allegro train on St.Petersburg-Helsinki direction, is eyeing further expansion in Russia
Back on Track
Today:
� Low railway network density
� Low cargo delivery reliability – 88-90%
Tomorrow:
� 20,000 km of new railway links by 2030, +24% in railway network density
� The dawn of high-speed railway era – 1,500 km with speeds up to 350 km/h (St-Petersburg – Moscow – Yekaterinburg)
� Modernization of rolling-stock (passenger and cargo)
Investment 2012-2019RUB 407 ($ 13.5)
billion
Railway modernization in Russia attracts
foreign players
Source: Ministry of Transportation, Frost and Sullivan
21
e-Russia
22
Modern Russia
Implications for Government, Business and Society:
� Accountable and transparent government
� Transparency for stakeholders in G2G and G2B transactions, bidding process
� Improved city planning process
� Cut red tape and save time: on-line G2C services (taxes, utility bills)
� Reduce operational costs for businesses
� Efficient delivery of a long range of public services 24/7 – education and healthcare
� New business models
23
E-Government
UN e-Government index 2012
� www.government.ru – solid and representative, rich technical features
� www.gosuslugi.ru portal – One Stop Shop for e-services, ~500,000 monthly visitors
� 27th spot in the world
� The leader in Eastern Europe, only behind Japan and US among the largest populated countries
� RUR 80 ($2.7) billion investment for government informatization
� 60% of the population to use e-government services in 2020, up from ~11% presently
+32 positions in global ranking in
2 years (!)
Note: * - with a population over 100 million peopleSource: United Nations
24
e-Society
e-Learning
� Legal status of e-learning approved by the new Law on Education (2012)
� 20-25% growth of e-learning services in the coming years
� ~ 40% annual growth
� Overcoming general distrust, expansion in the regions and all age-groups
� Solving logistics and payment issues
� New business models (private shopping clubs, group purchasing, penny auctions)
e-Commerce
e-Healthcare
� RUR 24 ($ 0.8) billion investment
� Electronic health records system roll-out in pilot regions
� Telemedicine and m-healthcare – remote patient diagnosis, monitoring and treatment
25
Made in Russia
26
Made in Russia 2.0
Innovative production in Russia, % of GDP
Innovative products in Russian exports, %
Before After
“REBRANDING”
27
Localization of foreign
manufacturers
Strong dependence
on hydrocarbon
exports
Export of innovative goods and services
R&D funding
Technology transfer
Before After
Localization of manufacturing in Russia will trigger its innovative growth
From Raw Materials Supplier to Innovative Exporter
28
Back to Russia
Healthcare
�CT scanners – Philips Healthcare and Elektron, GE Healthcare and Rostekhnologii
�Big Pharma
ICT
�Mobile base stations for LTE networks – NSN, Rosnano and Mikran
�IPTV set-top boxes –Cisco Systems (manufactured by Jabil)
Energy
�Energy efficient power generation turbines –General Electric and Rostekhnologii
�High performance gas turbines – Siemens AG and Silovye Mashiny
Automotive
�Localization of automotive plants
�Railway cars – Alstom and Siemens AG
�Automotive components – Valeo, Robert Bosch
29
Technology Leapfrogging
30
Automotive & Logistics:
•Navigation assistance
•Traffic management
•Usage-based insurance
•In-vehicle infotainment
•Asset tracking
•Real-time stock management
•Air-traffic control
•Automated guidance of machines
ERA GLONASS is to become fully operational by 2014-2016 and create multiple innovative applications
Space Jam
Other:
•Tracking (personnel, children, criminals)
•Remote patient monitoring
•Improvement in weather prediction
•Mobile satellite services
•Increase in broadband speed
31
RFID / NFC
•Potential economic benefits to outweigh implementation costs
•Multiple applications – retail, logistics, toll collection, fare payment
4G Mobile Technology
•High rates of data transmission
•Enabling integration into any wireless platform
•Russia at the forefront of LTE deployments globally
202020152010
Broadband Internet Access, % of Households
Security
•Transportation and critical infrastructure protection
•CCTV surveillance integrated into the wireless platform
•Market growth of IP-based solutions
Wireless World
Wireless intelligence – IT infrastructure to be around 80% wireless
32
Biopharmaceuticals and Beyond
Biotechnology-2020
RUB 1,163 ($38.6) billion
Today�0.1% of the global biotechnology market�80% import dependence�Focus on pharmaceutical biotechnology
Tomorrow�5% market share in the global biotech market�Two-fold reduction of imports�Red, White and Green biotech
� Fast-growing, attractive for investment
� Large-scale projects –Generium, Bioprocess, Chemrar, Biocad
� Opportunities – import substitution of generics, innovative drugs
Red Biotech - Pharma White Biotech – Industry
� Virtually non-existent
� “Third wave of biotech”
� Opportunities – biofuels (agricultural and forestry waste), chemical industry (biopolymers), food and feed (ingredients, supplements)
Green Biotech - Agriculture
� Legal uncertainty – barrier for growth
� Opportunities – increase yields of agricultural crops, reduce their vulnerability to diseases, improve nutritional quality of food (amino acids)
33
2018201520122009
Source: Frost and Sullivan, NT-MDT, Rosnano
Global Scanning Probe Microscopes Market,$ million
CAGR 15%
NANOMATERIALS
�Large scale production of silicate nanocomposites (Bryansk, February 2012) – Rosnano
�Large number of innovative SMEs, e.g. Novosibirsk Nanomaterials – metal nanopowders.
NANOMATERIALS
�Large scale production of silicate nanocomposites (Bryansk, February 2012) – Rosnano
�Large number of innovative SMEs, e.g. Novosibirsk Nanomaterials – metal nanopowders.
NANOINSTRUMENTATION
�Worldwide spending on nanotechnology will lead to sustained growth in demand
�NT-MDT (Zelenograd) –manufacturer of world-class scanning probe microscopes (SPM) since 1989
�Advanced Technologies Centre –manufacturing of SPMs (Moscow, December 2011) – Rosnano.
NANOINSTRUMENTATION
�Worldwide spending on nanotechnology will lead to sustained growth in demand
�NT-MDT (Zelenograd) –manufacturer of world-class scanning probe microscopes (SPM) since 1989
�Advanced Technologies Centre –manufacturing of SPMs (Moscow, December 2011) – Rosnano.
Nano-Russia
34
Smart is the New Green
35
“Smart” is the New Green
Smart Cities Smart Technology
Smart Infrastructure
Smart Energy
Smart Mobility
Smart Buildings
Smart Grids Smart Clouds
Smart Materials
Smart Bandages
Smart Phones Smart Meters
36
Sourc
e: F
rost &
Sulli
van
Russia is to leapfrog from incandescent light bulbs to intelligent LED lighting systems
The Lighting Revolution
LED-pioneers in Russia
LED Lighting – Market Revenue, World
CAGR 20%
Smart Lighting
Today� LED – 3-5% of the market due to high cost
Tomorrow� LED prices are to decrease 30% by 2015
� Russia is to phase-out inefficient light bulbs: 2011 – 100W, 2013 – 75W
� LED vs. Incandescent bulbs – potential energy saving of 80%
� Intelligent lighting systems – wireless networks to remotely monitor and control street lighting, motion controls, dimming sensors, on/off scheduling.
37
Sourc
e: F
edera
l Grid C
om
pany, F
rost
& S
ulli
van
Price Projection, $Installed Base, million units
Saving the Energy
Intelligent grid implementation could result in RUB 50 million annual savings
Smart Grid projects in Tomsk, Sochi, Perm, Belgorod
European Smart Meters Market
Today� 13-15%energy loss during electricity transmission
� 70% of installed equipment – import
Tomorrow� 40% energy efficiency increase by 2020 (Federal Law #261)
� Incentives for localization of production – to reduce share of imports to 40%
� Beyond electricity – pilot installations of water smart meters (Mosvodokanal)
Smart Meters and Grids
38
• E-government• E-healthcare
• Smart buildings• Smart grid
• Traffic management• Public transport
• Entertainment• Culture and sport
Smart governance
Smart environment
Smart living
Smart mobility
Smart City – interconnected urban environment where citizens lead a fully digitalized lifestyles
From Concept to Reality
Today� Citizens demanding a modern living environment
� Energy efficiency and environmental concerns
� Rapid growth and penetration of ICT
Tomorrow� Smart city projects in Belgorod and Skolkovo – a model for
modernisation of smaller Russian cities
SMART CITY
Belgorod
� Maiden smart city project in Russia
� Smart lighting system� 59,000 smart meters� Smart grid.
39
Mega Events
40
Mega Events
Sochi 2014 Winter Olympics
� $ 10 billion investment
� Development of tourism in the Caucasus
F1 Grand Prix
� $ 200 million investment
� Recurring annual revenue
FIFA World Cup 2018
� ~ $ 22 billion investment
� Infrastructure, tourism, global marketing campaign
APEC Summit 2012
� $ 9 billion investment
� Modernization of Vladivostok – hub in the Far East
A string of large-scale events that will open up Russia to the world
41
Macro to Micro Analysis
42
Key Strategic Conclusions
1. Mega Trends are connected and intertwined which suggests “synergetic” opportunities
between them
2. It is important to understand the eco-system of the Mega Trend and the elements of the
value chain which have most profitability
3. All these trends have global ramifications thereby offering scalable opportunities
4. These forces are changing rapidly and bringing new competencies into play at half the
life-cycle speed of the past decade
5. Organisations’ need “Mega Trend” champions and teams within their organisation
structure to best exploit the opportunities
6. It is important to build a healthy eco-system around your opportunity related to a mega
trend as it can be a source of competitive advantage and raise barriers to entry
43
From Macro to Micro: Taking Mega Trends from Information to Strategy Implementation
Sub TrendA sub-layer of trends that has a wide ranging impact
Mega TrendSelected trends that impact your business
and markets
Analysis of Opportunities
and Unmet Needs
Impact on Future Product/
Technology
Impact to Your Industry
Visualising the roadmap of these critical forces through scenario-building and macro
economic forecasts
Macro Micro