Challenge FutureGlobal mega trends

John GreggPrincipal

Navigate Consulting

April, 2013

2

1. Random events that have a low probability of occurrence and a major impact on the mega trendsSource: Navigate Consulting

Resources &Environment

Governance &Activism

DemographicsConsumption

Patterns

Technology &Innovation

Wildcards1

5

Global economics is being influenced by 6 mega trends

Megatrends

1Globalization

2

6

4 3

Globalizarion

1. Globalization is shaking the foundations of the world as weknow it and shifting economic power from „North“ to „South“

3

1. The term South was first coined by the UN in the 1960s to refer to those countries that were not part of the 1st World (i.e. NATO) r the 2nd World (i.e. the Soviet Union); with the collapse of the Soviet Union, the term is usually used to refer to all emerging markets

North

South1

Consumption

Patterns

Regulation &Activism

4

The old rules of sale no longer apply, as the new consumer isfully mobile, and could be anywhere at anytime

72.6% mobilepenetration globally

28%

16%

smartphonepenetration expected by2014

of US smartphoneusers makemobilepurchases

• 47% of mobile users are in Asia

• 130% penetration in Western Europe –meaning that there are more phones thanusers

2

5

… and consumers areincreasingly choosing text as acommunications medium

6.1 Trillion

64%

Text messages sent globallyin 2010

Increase expected by 2013

Social media is emerging as a bourgeoning marketplace

Social Media is mobile andprolific …

800,000,000

200,000,000

130

Active Facebook users

Users accessing Facebookthrough their mobile devices

Friends per user

Source: Media reports, Mobithinking global statistics

2

6

Nike ID has captured the market for personalized athletic footwear Burberry launched an online service for bespoke trench coats

in 2011 New sites like Threadless.com and FashionStake.com rely on

crowd-sourcing to determine assortment

Adidas established a Design Center in Shanghai in 2008 tocreate closer connection to Chinese consumer

Marc Jacobs launched a collection of sari-inspired dresses tocourt the Indian consumer and Louis Vuitton celebrated Diwali instore windows

Consumers asCo-creators

LocalizedDesign

Prada is launching a “Made in…” series, to create localizeddesigns by collaborating with artisans and using traditionalmaterials and techniques of a region

Customized offerings require a nimble supply chain to meet demand

And is giving consumers a say in developing their ownproducts and services

Goyard, Louis Vuitton and Coach allow customers to stampmonograms on their bags for a personal touch

Consumption

Patterns

Regulation &Activism

Globalization

Demographics

Technology &Innovation

Resources &Environment

Wildcards1

2

7

On the commodities market, easy access to information isallowing consumers to put great pressure on suppliers

….andenables

convenientcomparison

shopping

Consumers have a variety of new waysto search for the lowest price

Example: the mobile consumer

Ubiquitousaccess to

informationfacilitatesconsumer

pricediscovery….

-4

-6

-8

-10

-12

-2 2004 2006 2008 2010 2012 2014 2016

China

France

India

Japan

Mexico

United Kingdom

United States

While they are forced to do so by falling orslowing income growth

Real Personal Disposable Income(% change p.a.)

14

12

10

8

6

4

2

0

Source: Economist Intelligence Unit, Navigate Consulting

2

8

We are at a unique historical moment when every majorglobal power is redefining itself

The US faces a formidable arrayof challenges to its leadership

“Perhaps the greatest danger to asustainable future . . . is ourseeming inability to balance theneeds of the present with therequirements of years yet tocome.”

Center for the Study of thePresidency

With remarkable economicdynamism, China still facessignificant challenges• Stratification a major concern-

income, use of resources,environment

• How to incorporate the 900million in the interior in the otherChina

• Uncertainty about how Beijingwill reconcile its political systemwith its market capitalism

Europe’s historical experimentwith unity is being put to thetest

•Where is the EU moving post-Lisbon? Will it widen and deepen,or has it reached the limits ofintegration? Unification orfederation?

•Financial crisis in Greece hasshown cracks in the broader EUarchitecture

Delineating the boundaries ofthe next Russia•Evolving legitimacy role in

Federation and in relations withNear Abroad countries

•Raises overarching questionsabout what kind of Russia itwants to be—democratic or lessthan democratic—and where itwants to be (i.e., oriented towardEurope or Asia?)

3

9

We are entering an era of heightened global demand for

Source: Energy Information Agency, Food and Agriculture Organization

200

100

0

2000

Oil Price

Food Price

2010

Volatile and rising natural resourceprices• The FAO warns that there are permanent factors

underpinning prices that will work to keep them at bothhigher average levels than in the past and reduce thelong-term price decline in real times

FAO Food and Oil Price Indices, 2000-2010(Base=2002-2004)

300

food, water and energy

Strong demand pressures

• We will see a doubling of demand for food, water andenergy by 2050

• Energy demand continues to grow with non-OECDcountries driving the bulk of the growth

• Unsustainable water use has already led to aquifer andgreat lake depletion

World Marketed Energy Demand: OECD and Non-OECD, 1990-2035(quadrillion btus)500

Non-OECD

400

300

200

100

01990

OECD

2035

4

10

Only sustainability will allow 8 billion people in 2040 to live athigh standards on our planet2040: 8 billion people striving to …

… consume

We will need 5 planets …… be mobile

… communicate

… use energy

… or become “sustainable”… be healthy

Source: Navigate Consulting

4

Contribution of knowledge industries to GDPin selected high-performing OECD countries

Knowledge work is an increasingly important component ofthe global economyRatio of intangible to tangible investments1,US companies

136

110

82

606254

40

20

0

60

100

80

140

120

1950s 2000s1990s1980s1970s1960s

394040

414242

4343

0

10

5

25

20

15

30

35

45

40

KoreaNetherlandsFranceUKGermany Sweden BelgiumUS

5

Investment priorities bycorporations show a shift towards

knowledge activities

1. Intangible investments are R&D, software, design and new product development; tangibles are machines and buildings Source: US Federal Reserve, OECD, Navigate

The supply of educated workers is increasingly coming from

445542

425605

416

1034

467621651

EgyptChina

7071

12001000

2000

South IndonesiaThailand TurkeyFrance Germany JapanUKUS

800600400

Tertiary Graduates, 2010 (000s)

7200

2782

2600240022002000180016001400

= Established market

= Emerging market

Korea

68% of US engineering doctorates in 2007 were awarded to foreign students,three-quarters of whom are from Asia, up from 51% in 1999

Source: UNESCO, National Science Foundation, Navigate Consulting

5

the developing worldEmerging markets such as China, Egypt, South Korea, Indonesia, Thailand and Turkey are producingas many or more university graduates as established markets

Developed countries are investing heavily in R&D to stay

Japan 3.4

Finland 3.5

Mexico 0.5

Russia

South Africa

1.1

0.9

China 1.5

France 2.1

Germany 2.5

Switzerland 2.9

Source: OECD Science and Technology Industry Outlook , Navigate analysis

Mexico 1.2

China

South Africa

1.6

1.5

Switzerland 7.0

Russia 7.2

Germany 7.5

France 8.2

Japan 11.1

Finland 16.6

…and have a large pool of knowledgeworkers

R&D Personnel per 1,000 total employment, Selectedcountries

6

competitive in global economy

Knowledge centers like Finland, andJapan spend large percentages of theirGDP on R&D…

Gross Expenditure on R&D as a % of GDP, Selectedcountries

however their number is enormous

Iran closes theStraits of Hormuz

Global Pandemic

Power Strugglein Beijing Currency Collapse

Nuclear Detonation Confrontation withNorth Korea

NaturalDisaster

BioterrorAttack

Viruses Disable GPSSatellites

Carbon SequestrationBreakthrough

CropPandemic

QuantumLeap

What if two of these wildcards would happen by 2025?

Source: Navigate

Wildcards are random events with low probability to happen,

Wildcards