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ey.com/megatrends
EYQ
What’s after
what’s next?
The upside of disruption
Megatrends shaping 2018 and beyond
The better the question. The better the answer.
The better the world works.
1
Foreword
Welcome to EY’s new The upside times, and with different levels of
of disruption report. When we uncertainty and scales of impact.
launched the previous report in Most meaningfully for corporate
2016, those considering disruption decision-makers, they demand
as a top business challenge were different kinds of responses.
in the minority. Today, corporate
leaders almost universally see In distinguishing between causes
disruption as both an opportunity and effects, our framework can help
and an existential threat. Responding organizations prioritize among a
necessitates a view that is both seemingly endless set of disruptive
wider and more narrowly focused. forces.
Generated by the EY global think Organizations need to be ready to
tank, EYQ, the latest issue of EY’s seize the upside of disruption. They
Megatrends report helps to resolve need to know where disruption is
this apparent duality by exploring the coming from, where it’s headed
key disruptive trends of the future and what it means. EY’s 2018
while explaining where disruption Megatrends report, and our
comes from and where it’s headed. framework for change, can help
organizations establish the right
We take a look at how human baseline for a strategy that can turn
augmentation technologies (artificial downsides into upsides, and threats
intelligence, robotics, AR/VR, into opportunities.
blockchain, autonomous vehicles)
will reinvent the future of work,
consumer engagement, behavioral
design and regulation. We explore
how technology will reinvent the
production of food and enable
manufacturing at the molecular
scale. And we delve into the changing Uschi Schreiber
future of urbanization, health and EY Global Vice Chair — Markets and
sector convergence. Chair, Global Accounts Committee
@uschischreiber
The report also looks at disruption uschi.schreiber@eyop.ey.com
through a framework that highlights
four distinct kinds of change:
primary forces, megatrends, future
working worlds and weak signals.
These elements occur at different
2
Contents
Introduction 4
Primary forces: The next waves 11
Technology: Human augmentation 12
Globalization: Populism 16
Demographics: Engaged aging 21
Megatrends 24
Industry redefined 25
Future of work 27
Super consumer 29
Behavioral design 34
Adaptive regulation 39
Remapping urbanization 44
Innovating communities 49
Health reimagined 54
Food by design 56
Molecular economy 61
Future working worlds 66
Rebalanced global system 67
Renewed social contracts 72
Superfluid markets 77
Weak signals 81
Acknowledgments 83
Your contacts for this report 85
3
Introduction
The intersections between new waves of primary forces — and between megatrends
themselves — creates new megatrends and future working worlds. Understanding
this connectivity is key to responding to disruption. For this reason, we have
highlighted these interconnections using yellow text. Follow these yellow
hyperlinks to see how different elements connect with each other.
4
We live in interesting times. Or, consider the extreme climate
events that have struck so much of
We are surrounded by the everyday the world. In 2017, Hurricane Harvey
miracles of smartphones and sensors. hit Houston with more than 60 inches
We see retailers swept away by the of rain in just five days — the most
relentless tide of e-commerce. extreme rainfall event in US history.
We are so inundated by stories about Meanwhile, Mumbai and other cities
driverless cars that they seem like old across south Asia were paralyzed by
news — years before anybody in the floods caused by one of the heaviest
world has even owned one. Change is monsoons on record. As this report is
constant, and we are inured to it. being released, Cape Town may soon
become the world’s first major city to
run out of water.
So, it should not be surprising that
much has changed since we launched
our last Megatrends report in April Now, consider something that
2016. Yet, even against the backdrop is further in the future but truly
of constant change, much of what unprecedented and revolutionary.
is unfolding before our eyes is truly We are entering the era of human
astonishing — even unprecedented. augmentation. While technology
has always augmented human
capabilities, the technologies that
Consider the political earthquakes are now coming into their own,
of 2016 and the aftershocks that including artificial intelligence (AI),
followed. In rapid succession, voters robotics, autonomous vehicles
in the UK voted to leave the European (AVs) and blockchain, promise to go
Union, while citizens of the US further. For the first time in human
elected to the most powerful office in history, technologies will be able
the world a political neophyte whose to act autonomously on our behalf
electoral prospects had been roundly with far-reaching consequences for
dismissed by pundits and pollsters everything, from work to marketing
alike. In the months that followed, to regulation.
populists and nationalists were newly
energized, giving mainstream parties
a run for their money.
5
Disruption requires a wider — but more focused —
point of view
Corporate leaders have not always But, the events we’ve described
viewed disruption as a top business here suggest the need for an even
challenge. That has now clearly wider view. Disruption does not
changed. Executives and board stem solely from innovative startups
members are focused on disruptive and technologies. Political events
innovation as never before, and climate change can create
recognizing it as both an opportunity disruption as well. Regardless of the
for differentiation and an existential source, these trends are disruptive
threat. Companies have stopped for businesses and governments.
wondering whether it merits serious They shift market power among
attention and are focusing instead competitors, challenge existing
on how to best respond. Business business models and approaches,
transformation has become the new realign trade patterns, reorient
mantra as companies adapt to the era supply chains, drive business
of disruption with digital strategies, relocations, and more.
new business models and more.
Even as disruption demands a
Responding requires a view that broader perspective, it calls for
is simultaneously wider and more a narrower focus. It necessitates
narrowly focused. prioritizing and emphasizing the
most important challenges in an
Consider how disruption is already ever-expanding universe of
widening the playing field. A decade potentially disruptive trends.
ago, financial services companies
looked primarily within their peer How do you resolve this apparent
group for competitive threats. duality — and where do you start?
Today, they are focused more broadly,
including on disruptive financial
and regulatory technology entrants
and cryptocurrencies. Similar shifts
have occurred across practically
every sector, from automotive to
telecommunications.
6
The upside of disruption
A framework for understanding where disruption comes from,
where it’s headed - and what it means for you
7
The answer is a framework for disruption
We propose that harnessing these include primary forces,
disruption requires a framework future working worlds and weak
for bringing order to the chaos signals. We explain these four forces
— distinguishing between causes in detail here and explore them in
and effects, and prioritizing the rest of this report.
among a seemingly endless set
of disruptive forces. The four elements of our framework
occur in different time frames with
EY’s framework accomplishes this different levels of uncertainty
by highlighting how the shifts often and different scales of impact.
loosely called “megatrends” are, Most significantly for decision
in fact, four distinct kinds of change. makers, they call for different
In addition to megatrends, kinds of responses.
Primary forces
Primary forces are the root causes they have been around for centuries
of disruption. or millennia. But, they evolve in waves
and each new wave is disruptive in
different ways. For instance, while
We identified these through a root- technological disruption goes back to
cause analysis, similar to Toyota’s at least the first Industrial Revolution,
legendary “5 whys” process. We it has disrupted business in distinct
listed every disruptive trend we could waves; recent waves include mobile,
identify and asked ourselves what social and sensors.
was causing it. We then identified
the causes behind those causative
factors, and so on, until we could In this year’s Megatrends report,
go no further. we highlight three examples of the
latest waves occurring in each of the
primary forces: human augmentation
At the end of this process, we found (technology), populism (globalization)
that the vast majority of disruption and aging (demographics). These
originates in some combination of topics form core themes for this
three primary forces: technology, report, which we explore through
globalization and demographics. several megatrends.
These forces aren’t themselves new;
8
Megatrends
The interaction among the new
waves of primary forces engenders The report also highlights three
new megatrends. For instance, megatrends carried forward from
the Health reimagined megatrend is our previous report: Future of work,
driven by digital health (technology), Industry redefined and Health
aging populations (demographics) reimagined. While they remain
and the sedentary lifestyles relevant, we’ve analyzed them here
brought by emerging market in less detail because they have
growth (globalization). now become the subject of much
mainstream analysis.
This report includes seven new
megatrends. Some of these are Our list of megatrends is not
entirely new topics. Others are new exhaustive. Disruption continually
aspects of prior megatrends brought spawns new ones at an ever faster
to the forefront by the continuing rate as the primary forces evolve.
evolution of the primary forces.
Future working worlds
Where are the megatrends headed? 3. Superfluid markets: the rules
We argue that their combined effect that will organize future firms and
leads to a broader reshaping of the markets as disruption eliminates
political and economic landscape, market frictions
which we analyze through three
“future working worlds.” The future The future working worlds are broader
working worlds describe the new in scope and occur on a longer time
rules by which various systems frame than the megatrends. While the
will be organized: megatrends disrupt large sectors (e.g.
health and energy) or domains (e.g.
1. Rebalanced global system: consumers, cities and behavior), the
the rules that govern the global future working worlds fundamentally
order, driven by trends such as the reshape the entire political and
rise of China economic landscape.
2. Renewed social contracts:
the rules that societies and
economies need to create a
sustainable balance among
the interests of citizens, workers,
governments and companies
9
Weak signals
Our analysis focuses mostly on the that remain to be addressed.
disruptions unleashed by the next To address this uncertainty and
waves of the primary forces prioritize among the weak signals,
(e.g. human augmentation, populism we sometimes follow the money.
and aging). This is for good reason: A weak signal may have tremendous
it is these imminent disruptions that scientific uncertainty; but, if it is
require the prime attention of leaders attracting a good deal of
in the private and public sectors. “smart money,” we prioritize it
for analysis.
The weak signals, on the other
hand, are waves of primary forces Lastly, while weak signals may largely
whose biggest impact is farther in be driven by technology, they don’t
the future. Their likelihood and the have to be exclusively so. They could
scale and nature of their impact are, emerge in the other primary forces
therefore, subject to a greater degree as well.
of uncertainty.
We explore the weak signals in the
For technology-driven weak signals, online edition of our report. We will
there is still considerable uncertainty, continue adding more in the months
including basic scientific questions ahead.
The upside of disruption
Disruption is not just a potential the potential upside in this strategy.
threat, it’s also a latent opportunity. Rethinking your geographic footprint
Indeed, we now see more companies could yield huge savings as cities are
looking for the upside of disruption reshaped by climate and technology.
— the all-important first step for
transforming your business. Our framework provides an
instrument for making such
This raises an important question: comparisons. It explicates where
what is the upside relative to? disruption is coming from, where it’s
Planning for an uncertain future is headed and what it means for you.
all about picking the right baseline It can help you distinguish between
— which can recast an apparent the various kinds of forces at play
downside as an upside. and prioritize the ones that most
require your focus. In doing so,
For instance, relocating your plants it gives you the toolkit for developing
and offices based on the trends the most relevant baseline for your
discussed in Remapping urbanization future strategy.
may increase expenses and squeeze
margins — an apparent downside. In the months ahead, we will continue
But, changing your baseline this discussion online with deeper
— to compare with the world that will dives into the megatrends. We invite
exist in the future rather than the you to join the conversation.
world as it exists today — illuminates
10Primary
forces:
The next waves
11The three primary forces In this section, we focus on one
— technology, globalization and example of an emerging wave
demographics — that are the root for each primary force:
causes of disruption, have existed
for millennia. While they are not • The set of technologies that are
new, they evolve in waves and the collectively enabling the era of
interaction among these new waves human augmentation
gives rise to new megatrends.
• The upsurge in populism that
is fueling a backlash against
globalization
• Aging populations that promise
to reshape demographics
across the world
Technology: The next wave
Human augmentation
Technology has always augmented navigating driving routes. Human
human capabilities. So far, this has augmentation technologies will soon
been relatively passive: assisting assume even more agency as they
humans in performing tasks. drive cars, automate jobs and make
We are now on the cusp of human retail purchases. In doing so, they
augmentation that is qualitatively will blur the line between humans
different. For the first time, and machines, realigning societal
technology will take an active role, norms and challenging entrenched
working alongside us and directly perceptions of ourselves.
on our behalf.
Besides freeing us from mundane
The next wave of disruptive technologies, work, the combination of artificial
which are rapidly coming of age, are and human intelligence could drive
driving this change. They include AI, breakthrough discoveries.
augmented reality (AR), virtual reality Human creativity and judgment
(VR), sensors and blockchain. These augmented by the brute
breakthroughs are in turn generating computational power of AI has
new products and services, such as already led to breakthroughs in
AVs, drones, robots and wearables. energy generation and storage,
drug therapies for genetically caused
We are bombarded daily with more diseases and space exploration. Next,
data than our brains can process. it could yield solutions to some of
AI already acts as an intelligent humanity’s most intractable problems.
consultant, helping us make sense
of this cognitive burden,
from curating reading lists to
12But, to get these individual and What lies beyond could be even
societal benefits, we will not only more transformative: a convergence
need to broadly share our behaviors of information technology,
and data, but also reframe our biotechnology and nanotechnology
relationship with technology. that promises to overhaul the very
This raises difficult questions about definition of what it means to be
autonomy, identity and privacy. human. Neuroprosthetics,
Companies will need to carefully brain-machine interfaces, DNA
craft behavioral design of these editing, ingestible nanobots and
systems to build customer adoption embeddable radio-frequency
and loyalty. Governments will need identification (RFID) chips are still
new approaches to regulation to in labs. But, in the not-too-distant
address issues such as algorithmic future, they may become tools that
bias, transparency, consumer safety, upgrade us from organic to bionic.
inequality impacts and privacy. We could find ourselves on an
entirely new evolutionary path.
The era of human augmentation
is just beginning.
1314
15
Globalization: The next wave
Populism
For the last seven decades, To better understand what’s at
globalization has marched forward play, we analyze the primary forces
uninterrupted. The Bretton Woods driving populism. Globalization and
Institutions and multiple subsequent technology have collectively been
free trade agreements ushered in an disrupting jobs for decades. In the
era of trade liberalization and global absence of adequate corrective
supply chains, trends that helped lift measures from companies or
more than one billion people out governments, this has strained
of poverty. social contracts and deepened
economic inequality.
In 2016, that inexorable
forward-march hit a major roadblock While globalization is a convenient
when back-to-back election results scapegoat, technology is a bigger
gave us Brexit and President source of job disruption and
Trump, bringing populism and inequality. This trend will only
anti-globalization to the forefront. accelerate: automation and the
While populism had been ascendant future of work could lead to much
in numerous countries before greater job displacement and income
this — from Poland and Hungary to inequality ahead.
Bolivia and the Philippines — these
elections brought such political For companies and governments,
philosophies to two of the world’s that should be a sobering outlook.
largest economies. So far, voters’ displeasure has been
directed at trade and immigration.
After the US vote, major elections If it turns next to automation and
across Europe were nervously technology, most corporations would
watched as populist parties gained find themselves in the crosshairs.
new momentum. The results For leaders, a better path would be
were mixed, with populists often to proactively and collaboratively
performing better than they had address the underlying sources
historically, but failing to score of discontent.
outright victories.
These setbacks led some to predict
that we are past “peak populism”,
and that protectionist and nationalist
forces are waning. But, it’s too soon
to draw broad conclusions from a few
recent elections. Local parliamentary
mechanics determine how populist
parties play out from country to
country, obscuring the overall trend.
Electoral success may depend on
whether victory requires majority or
plurality, or whether power-sharing is
winner-takes-all or proportional.
16Source: World Bank, World Development Indicators.
Source: EY calculations based on data from UN, Human Development Reports, extracted from EY’s Growing Beyond Borders tool.
17Source: EY index calculated using media reports about select major elections in 2016 and 2017. The index is based on several factors,
including whether the populist movement won or lost, its reshaping of the traditional (left vs. right) political landscape, and its electoral
performance relative to expectations and prior performances.
Source: Citi, Technology at Work, v. 2.0 and World Bank, World Development Report (2016). Chart shows selected emerging markets
with jobs potentially at risk from automation.
18Source: EY calculations based on data from Oxford Economics, extracted from EY’s Growing Beyond Borders tool. Chart shows
continents/regions with the highest share of populations younger than 25.
Source: EY calculations based on data from Oxford Economics, extracted from EY’s Growing Beyond Borders tool. Chart shows
continents/regions with the highest share of populations younger than 25.
19Source: EY calculations based on data from United Nations High Commissioner for Refugees, extracted from EY’s Growing Beyond
Borders tool. Chart shows selected regions in which countries have taken in large numbers of refugees or displaced persons.
Source: EY calculations based on data from United Nations High Commissioner for Refugees, extracted from EY’s Growing Beyond
Borders tool. Chart shows regions with lowest scores for tolerance toward immigrants.
20Demographics: The next wave
Engaged aging
The world is getting older. Life The future of aging is one in which
expectancy has gone from 34 in 1913 technologies — sensors and apps now
to 67 at the turn of the millennium. and, soon, algorithms, autonomous
By 2020, for the first time in human vehicles and robotic assistants
history, the world’s population of — enable seniors to age independently.
people aged 65 and older will exceed Urban planners, policymakers,
the number of children under the health care providers and technology
age of five. And, the World Economic companies will need to team together
Forum estimates that the global cost to develop innovative solutions that
of chronic diseases — driven largely by allow people to age in place. Societies
aging populations — will total US$47 and individuals would benefit from
trillion between 2010 and 2030. reframing health not merely as the
absence of disease, but as an asset
If demographics are destiny, it’s not that requires lifelong investment.
hard to read what those numbers Every individual could have a unique
imply for our collective future. healthy aging profile that tracks
Forget the millennials for a moment. physical, cognitive, social and
The much bigger disruption is what’s material wellness.
about to happen at the other end of
the demographic distribution: aging With a shift this big, getting there
populations across much of the world. is never easy — all the more so
These trends threaten to overwhelm in a space as complex as this.
health care and pension systems, Policymakers should align incentives
draining public coffers and crowding to encourage disparate stakeholders
out other societal priorities, from to collaborate and accelerate the
education to defense. pace of innovation.
The good news is that while aging is
inevitable, how we age is not.
Tackling the aging challenge
— and seizing the latent opportunity
it presents — will compel a fundamental
change in societal attitudes, public
policy and industry innovation. This is
a shift that is already underway.
2122
23
Megatrends
24Disruption
Industry redefined
Is every industry now your industry?
Industry — the concept and the ecosystems. Each company brings
reality — is being redefined and distinctive perspectives, experiences
reinvented. In the pre-internet and competencies to the ecosystem
era, the competencies, assets and and what it is attempting to
knowledge necessary to participate in accomplish on the node. When new
any given industry sector were unique value is created, it benefits individual
and varied significantly from industry companies and the ecosystem as
to industry. Hard and fast industry a whole. But, most importantly,
boundaries (and high barriers to entirely new fields of play emerge.
entry) arose as a result. With digital And, these new fields of play do not
innovation and other forces acting fit neatly into any of the old industry
as solvents, industry boundaries are categories. For example, automotive
melting and disappearing. manufacturing, energy, technology,
media and consumer products
We see multiple ways in which the companies are coming together not
industry landscape is being redefined. just to reimagine the car as a product,
Companies are accelerating their but also to reimagine how we will
acquisitions of companies in other move goods and people in the future.
industries to enter different markets, What was once narrowly thought of
develop new business models and as the automotive industry is being
expand their capabilities. redefined in the context of a much
Cross-industry alliances are forming. larger mobility opportunity.
New value is being created at
the intersection of old industry As companies explore new
boundaries. Today’s convergence opportunity nodes, they become
themes include companies from harder to categorize from a traditional
different sectors coming together industry perspective. For example,
to deliver smarter cities, is Amazon a retail, technology,
lifestyle-as-a-service and logistics or a grocery company? It is
precision health. all of them and perhaps more. But,
does it matter? What’s important
What’s happening here? Traditional is that digital innovation has
industry hierarchies, once tidily leveled many of the old constraints
codified in industry classification associated with discrete and
codes, are giving way to something hierarchical industry categories.
more akin to “nodes” on an open With digital fluency, good strategies
industry network. Rather than and new business models as tickets
discouraging new entrants, to participation, today’s companies
these nodes offer opportunities for can play anywhere and everywhere,
companies from different industries redefining industries in the process.
to come together, forming
25Questions
As industry walls dissolve, what are the new barriers to entry?
As others converge on your industry, what new ecosystems will emerge?
When industry walls collapse, will you play offense or defense?
How does competition change when your rivals become your collaborators?
How are you exploring new business models in light of competitive
changes to your industry?
How is your organization preparing to engage in more alliances and partnerships?
26Work
Future of work
When machines become workers, what is the human role?
When EY first wrote about the future • Learning and education: Preparing
of work in our 2016 Megatrends workers for the future of work will
report, the topic was just starting to take a very different approach to
attract attention. Skeptics doubted education, emphasizing skills over
predictions about massive disruptions knowledge and lifelong learning
of labor by AI and robots. over front-loaded educational
systems.
Now, we are overwhelmed with
analyses of the future of work from • Leadership response: Perhaps the
the mainstream press, business biggest shift over the last couple
literature and consultants. Predictions of years has been how leaders in
that seemed distant two years ago the private and public sector are
are entering the real world — from taking active measures to prepare
the live-testing of autonomous ride- for the future of work. Companies
sharing in key cities to the opening are revamping their approaches
of the world’s first fully automated to human resources and talent,
retail outlet, the Amazon Go store employee motivation, recruiting,
in Seattle. training and skills development.
Policymakers are exploring
Our analysis of the future of work now new solutions, from regulatory
spans these aspects: responses to new safety net
solution, such as a universal
• More than technology: We are basic income.
exploring how work is being
re-invented, not just by technology, Much of the content in the other
but also by demographic factors sections of this report flows from
(e.g., millennial workers) and the “future of work” megatrend.
cultural drivers. What we were talking about when
we began this analysis — though
• Social contracts and public policy: we didn’t yet have a name for it —
The changing nature of work is was human augmentation. Since
upending social contracts, for we were examining technologies
example, by widening inequality that could autonomously perform
and undermining aspects of social human work, it was only natural
contracts tied to the employer- to start by considering their
employee relationship, from most immediate impact: work.
retirement savings to workplace Two years later, a fuller range of
protections. This will require new implications is coming into view,
public policy solutions. from the impact on consumers to
human behavior to regulation.
The future of work is really about
the future of humankind — and we
are just starting to understand the
breadth of its impact.
27Questions
How will machines and humans partner to do what each of them does best?
What can business and governmental leaders do to enable this?
How do we teach people to learn how to learn?
Do your people have the skills they need to work alongside robots and algorithms?
What responsibility do businesses and governments have for preparing workers
for the era of automation?
What is the future of retirement?
28Consumer
Super consumer
When humans are augmented by AI, who gains the most — consumers or brands?
Technology will assist future We expect the evolution and
consumers across all aspects of their interplay of AI, machine learning,
lives. Here’s a plausible scenario: ever-present sensors, smart devices
and new computing interfaces to
Pari awakens in London to the smell take consumer empowerment to
of waffles hot from the kitchen a whole new level — giving rise to
3-D printer. Her virtual personal tomorrow’s super consumer.
assistant, Martin, says good morning A little like the fictional superheroes
and mentions that it’s cold outside. of comic books, super consumers
He tells her that he’s purchased the can be defined as those who
sweater she’s been admiring and it embrace new technologies,
has just been drone-delivered. such as AI, VR, wearables and
After Pari gets dressed, her driverless robotics, to create smarter and more
taxi arrives. During the commute, Pari powerful extensions of themselves.
enjoys a VR call with her husband, Whether working, playing, eating,
who is traveling overseas. When Pari shopping, learning or pursuing
arrives at her shared office space, healthier lifestyles, tomorrow’s
she is notified that three different super consumers will be augmented
companies have requisitioned the by technology in the service of
services of the freelance collective achieving more informed and rich
to which she belongs. One request experiences across these different
originated in China and has already categories of living.
been translated. On her way home
after work, Pari’s implanted microchip
alerts Martin to a high cholesterol
reading. Martin announces that he
has booked an appointment with a
virtual doctor and has preemptively
revised her menu plan. That evening
at home, Martin ports Pari into her
favorite VR video game. Later,
as she goes to bed, Martin plays a
soothing soundtrack. The songs have
been composed by an agent that
understands Pari’s musical tastes
and current emotional state. As Pari
sleeps, Martin plans her next vacation.
29We can now discern a vision of tomorrow’s super consumer
Super consumers will communicate with markets, companies, governments and
each other in a very different environment than exists today.
• Voice will drive interactions. • Access to technology will be
Super consumers will be largely ever-present. Enabled by an
liberated from keyboards, screens, invisible and unobtrusive internet
taps and swipes. While text will of things (IoT), consumers will
still have a place, voice will be be surrounded by intelligent
the predominant means of future physical environments that are
interaction among consumers and sensitive and responsive to their
companies, given that it is a natural needs and desires. Wherever
and faster communication mode for consumers happen to be, they
human beings. will have access to the technology
required to execute their demands.
• Machines will augment human Disparate environments (homes,
decision-making. Virtual digital cars, stores and work spaces) and
assistants will play multiple roles in operating systems will be bound
people’s personal and professional together in seamless fashion. As
lives as concierges, executive consumers crisscross and inhabit
assistants, coaches and the like. various spaces, these spaces will
Imbued with emotional awareness, recognize and interact with them in
these assistants will know their personalized and contextual ways,
human owners profoundly as sometimes assisted by
individuals and will make decisions AR capabilities.
on behalf of those they serve.
Today’s consumers are steeped in the art of the possible
Today’s consumers are daily highly personalized products and
overwhelmed with the vision services. They expect technology
of this more frictionless future. to help, not hinder, their quest to
Their expectations are already high get what they want, and where and
and rising. Today’s empowered when they want it. And, the price of a
customers already expect their brand mistake is high. Forrester reports that
experiences to be unified and elegant consumers who experience disgust,
across all touch-points. They want anger or a feeling of neglect during
to be recognized as individuals, have negative brand interactions are eight
their likes and dislikes understood and times more likely not to forgive that
remembered, receive advice perfectly company than those who experience
aligned to their interests, and receive other forms of poor interaction.
30There are challenges and complexities to realizing
the super consumer vision
While consumers’ expectations are In Europe and the US, concerns about
high, reality lags behind. Some of privacy and the ownership of one’s
the mismatch is technology-related. personal data are more than just a
Today’s AI is good at performing rumble, especially amid stories about
narrowly defined tasks but less high-profile data breaches, fears
adept at completing generalized of government abuse of personal
intelligence tasks that require data and tales of personal virtual
human-like reasoning. The multitude assistants spying on their owners.
of “smart” devices and systems on Will consumers continue to relinquish
the market cannot interoperate. control of their data to providers in
Quantum computing is immature and exchange for free services? Or,
cannot, at present, meet the massive will part of becoming a super
demand for additional processing consumer involve monetizing
power that increased data flows and one’s own personal information?
sophisticated algorithms will require. Generational differences may blunt
some of these concerns. After all,
The fast pace of change creates other digital natives have grown up in an
challenges. Consumer interfaces and environment where personal data
channels are proliferating. Companies is readily exchanged for convenient
struggle with where to make their services and unique experiences.
investments for the future while
executing on the basics today. And, empowerment may not look as
it does now. With the arrival of the
The rise of the super consumer will Internet, consumers became directors
be a worldwide phenomenon, but of their own lives while sitting at
could play out at different speeds and keyboards and tapping on phones.
levels of complexity across the world. It’s a different kind of empowerment
AI investment and adoption has when people opt to become passive as
increased dramatically in both China computers make decisions for them.
and India over the past few years, Some consumers may resist becoming
suggesting that Asia might well lead “owned” by one of the emerging AI
the way in terms of generating new ecosystems or delegating decisions
super consumers. At the same time, to these ecosystems. (For more on
persistent economic inequality and these behavioral challenges, see
infrastructure disparities across the “Behavioral design”.)
globe, and within nations themselves,
could lead to a class of disempowered
consumers who fail to benefit from
the AI revolution.
31Companies must do the work now to close the
expectation gap
Rising expectations put the onus But, ultimately, companies that
on companies to innovate now with thoughtfully consider what it means
tomorrow’s super consumer in to be human in an intelligent machine
mind. Seamless delivery of pleasing era will create the brands that
experiences across physical and attract super consumers. Humans
digital realms, as well as disparate are verbal and conversational, as
channels and devices, is the goal. well as emotionally driven. From
Reaching the goal will require their providers, they want relevant
the right mix of new technology and trusted interactions, frictionless
investments, especially those that transactions and rich experiences.
will yield valuable data on current The companies that can leverage
and prospective consumers. technology and design experiences
to meet these criteria will be best
Beyond determining the right mix of positioned to serve tomorrow’s
technology investments, companies super consumer.
must also re-engineer business
processes and operations to achieve
a holistic view of the consumer
across the entire brand journey.
Companies must connect fragmented
technologies and data silos as part
of this effort. The ecosystem of data
providers and agencies that support
marketing should also be integrated.
32Questions
What will it take for intelligent machines to gain the full trust of consumers?
Can intelligent machines help consumers make more intelligent decisions?
Does trading data for services have to be a zero-sum game?
When AI makes the buying decisions, how will you get your brand noticed?
What steps will you take today to deliver optimal consumer experiences tomorrow?
Do you have a dual strategy — one for today’s customers and one
for tomorrow’s customers?
33Behavior
Behavioral design
How will insights from psychology improve the partnership between humans
and new technologies?
The relationship between design Understanding how design motivates
and behavior has never been behavior will become even more
more important than in the era important with human augmentation.
of human augmentation. As AI, robots and other technologies
become increasingly lifelike and
This link has been increasingly visible enter spaces that have so far been
in recent years. The launch of Google exclusively in the human domain,
Glass fizzled partly because of they will trigger deep-seated human
people’s fears of being surreptitiously biases. Leaders must attend to the
recorded. Smartphone and social implications of behavioral design
media addictions are rising because for everything, from customer
manufacturers have designed engagement to fears about automation
for irresistibility. to the outcome of elections.
Social and mobile are driving a behavioral revolution
In recent years, two trends have Firstly, many societal challenges
moved the discipline of behavioral aggravated by behavior — climate
economics, which identifies behavioral change, chronic diseases and
biases in human economic behavior, excessive debt — are becoming
from the corridors of academia to increasingly urgent and expensive.
mainstream market application. Secondly, mobile and social platforms
are making it possible to measure
and guide behaviors in real-world,
real-time conditions like never before.
(For more, see “Behavioral revolution”
in our 2016 Megatrends report.)
34Human augmentation will supercharge the
behavioral revolution
The next wave of technological motivational “nudges” based
disruption, human augmentation, on more accurate and complete
will raise this challenge to a whole real-world information. AI could
new level. While mobile and social enable personalization to a degree
platforms have been transformative never before possible. AVs and future
in changing behavior in real-time and mobility options could drive more
real-world conditions, they still rely efficient use of natural resources.
on human intervention. “Digital twin” avatars could show
individuals the long-term consequences
Human augmentation technologies of their health decisions.
promise to change that. Today,
individuals managing their diet may Achieving this vision would deliver
need to constantly remember to enter significant benefits to society by
meal details and calories in an app. addressing expensive societal
In the future, AR could eliminate this challenges. It would also profit
step as smart eyeglasses and smart companies by boosting customer
dishes automatically identify and engagement and loyalty.
capture meal data, enabling
Behavioral design will become a key focus
Getting to this optimistic future biases that human augmentation
will require tremendous focus on technologies are likely to trigger.
behavioral design: designing products, Behavioral economics offers some
features, interfaces and messaging insights for companies.
that account for the cognitive
We are predisposed to fear new technologies
Human augmentation is sparking statistically safer than human
fears about everything, from job drivers). To the extent we process
losses to AV safety to the prospect probabilities, we tend to overestimate
of self-aware AI that threatens small chances.
humanity. While every new technology
creates some risks, several cognitive The availability heuristic leads
biases predispose humans to people to focus on and exaggerate
overestimate such threats. the importance of readily available
information. So, the barrage of news
Probability neglect leads us to focus coverage about a single Tesla crash
on the magnitude of outcomes while in automated mode drowns
(e.g. dying in a car crash) rather than out a sea of underlying data about
their associated probabilities AV safety.
(e.g. automated vehicles are
35AI and AVs are already triggering
such fears. We expect more as
technologies such as passenger
drones and brain-machine interfaces
come into their own.
Control is important
The illusion of control bias predisposes For instance, AVs could, in theory,
us to want to feel that we have control enable a complete redesign of
even in situations where we don’t. automotive cabins to look more
The “door close” button in many like living rooms, but the need
elevators, for instance, does not affect for control might instead dictate
how soon elevator doors shut; it merely retaining steering wheels and brake
gives users a sense of control. pedals. Similarly, virtual shopping
assistants could reinvent the
This aspect of human psychology shopping experience, but it’s not
will become increasingly relevant as yet clear whether consumers will be
human augmentation technologies comfortable with surrendering control
start acting on our behalf. over their purchasing decisions.
Lifelike interfaces trigger human psychology
As AI assistants, robots and VR Another bias, the uncanny valley,
become increasingly lifelike, they leads people to feel repulsed by
could trigger cognitive biases. robots or VR implementations that
Designers will need to keep this appear almost, but not quite, human.
in mind. This suggests that developers might
keep products from becoming too
We have a deep-seated tendency lifelike in the short run. (The repulsion
to anthropomorphize (attribute effect may disappear once designs
human-like qualities to) inanimate become indistinguishably lifelike).
objects. Designers have long used this
tendency, for example, with car grills Our tendency to anthropomorphize
that subtly evoke a human mouth. also raises concerns that our
Robots and AI assistants will take behaviors with lifelike machines might
anthropomorphism bias to a whole influence how we behave with other
new level, with implications for user humans. Will the license to behave
adoption and engagement. cruelly toward a robot desensitize us
in the way we treat each other?
Anthropomorphic design insights On issues like this, design may need
are already emerging. For instance, to be augmented by regulation.
studies find that digital assistants
are more likeable if they make small
mistakes instead of operating
flawlessly — a result known as the
pratfall effect.
36Behavioral design principles for the human
augmentation era
We expect these behavioral design principles to become commonplace:
1. Designing for cognitive biases: 3. Learning based on the stages
Behavioral economics will inform of adoption: Since human
successful design for human augmentation technologies are
augmentation technologies. a new space, companies will
Designers may need to include continuously adapt designs and
design elements that provide incorporate the lessons they learn.
choice and user control, for Indeed, user biases themselves will
example. Marketers could frame change at different stages of the
these designs by emphasizing what adoption curve. Fears of technology
users lose by failing to adopt new and the need for human control
technologies (leveraging the bias of could dissipate with time; designs
loss aversion). Similarly, they could will adapt. On the other hand, other
incorporate messaging on adoption cognitive biases will become more
rates by others in the community to important with time. One example
encourage uptake (social norms). is automation bias, which is the
tendency to rely excessively on
2. Differentiating for social contexts: automation over human judgment.
Since users endow anthropomorphic
products with human-like attributes,
these products exist in specific
social contexts. Developers will
need to design differently for each
context. For instance, users might
prefer that home care robots
assisting them with bathing be less
lifelike than those helping them with
financial planning. Chinese users
view privacy and control differently
from those in Europe. Different
generations will bring different
levels of acceptance to their
adoption of new technologies.
37Questions
Do you understand your customers’ behavioral barriers to adopting innovation?
How are you incorporating behavioral design in products, services, interfaces
and messaging?
How could we design technology to be less addictive and polarizing?
Would you trust an autonomous vehicle with no steering wheel or brake pedal?
How could augmented and virtual reality nudge our real-world behaviors?
38Government
Adaptive regulation
How could regulation be responsive to rapid change and an unknowable future?
Regulation can be a contentious issue. The reason for this shift is disruptive
Critics argue — often justifiably innovation. On one hand, disruptive
so — that it is onerous, inefficient technologies and business models
and an impediment to innovation. But, are straining existing regulatory
imagine an entirely different approach. approaches and making them
Imagine a future in which consumer unsustainable. On the other,
safety is protected not by monitoring these technologies are creating
regulatory compliance and penalizing opportunities to conduct regulation
infractions, but by using big data in an entirely new way.
and algorithms to prevent breaches
before they can even occur. Imagine
regulations that rewrite themselves
to keep up with ever-changing market
conditions. Imagine regulation
conducted jointly by industry and
regulators — a collaborative, rather
than contentious, exercise. This is
where things are headed. The future
of regulation is adaptive.
Regulation is a vital part of social contracts
Regulation serves a vital purpose, Disruptive innovation challenges
making it a key part of any social regulatory frameworks. It forces
contract. It ostensibly seeks to regulators to reconsider and
protect the interests of less powerful recalibrate the delicate balance
constituents (e.g., consumers, that regulations strike between
workers and small businesses) from the competing interests of different
the excesses of more powerful constituents. And, it creates entirely
institutions. new entities and business models that
existing regulations — often written
decades earlier — could never have
foreseen.
39Sharing economy platforms are already
challenging regulators
So far, these tensions have been Since sharing platforms provide
most visible in the sharing economy, services with a strong local
where regulators are confronting component, these issues are being
unprecedented questions. Are addressed primarily by city and
drivers on a ride-sharing platform state regulators. So far, we’ve seen
contractors or employees? Are they conflicts, fought one jurisdiction at
subject to the scores of rights and a time, along with a wide variance in
protections — from minimum wages regulatory approaches.
to retirement savings — that have
traditionally been built around the But, authorities are also starting to
employer-employee relationship? address these issues at a broader
What responsibility do platform level. In November 2017, for instance,
companies have for ensuring tax the European Court of Justice
compliance? How do regulators apply ruled that Uber is a taxi company,
hotel safety regulations to a shared rather than just an online platform
lodging platform on which everyday for connecting riders and drivers, a
citizens with spare bedrooms are finding with EU-wide implications.
part-time hoteliers? Next, human augmentation
technologies will raise bigger and
more fundamental regulatory issues,
bringing them to the national and
international stages.
Human augmentation will bring these strains to a
breaking point
The era of human augmentation from ethical issues to the certification
will raise unprecedented regulatory of transparency and lack of bias in
challenges, necessitating skills algorithms. Ever-present sensors and
well outside regulators’ traditional digital assistants will make privacy
competencies. and data security concerns even
more pressing.
Instead of licensing human drivers,
regulators may need to certify and And, these are just the issues we
monitor algorithms — a task that can foresee. If regulators must
demands a completely different set of fundamentally retool to adapt to AVs,
capabilities. AVs will require new rules just imagine the regulatory challenges
and infrastructure, from air lanes for that a more profoundly disruptive
drones to sensor-embedded highways technology, such as brain-machine
for driverless trucks. AI will raise an interfaces, might raise.
array of regulatory challenges,
40The answer is adaptive regulation
So far, we’ve discussed how regulations traditionally delivered. For instance,
need to adapt to changing market Rentlogic provides renters with letter
realities. But, trying to keep up is grades on New York City landlords
ultimately a losing game. As the using open government data on
pace of disruption keeps increasing, building code violations.
regulators at some point may find
themselves creating new regulations Open regulation would expand these
that become obsolete almost as soon approaches. One could imagine
as they are passed. supplementing the growing pool of
open government data, with open data
We will, therefore, need to move from reported by companies and open data
adapting regulations to adaptive from the IoT. This would provide a solid
regulation — a fundamentally different foundation for more real-time, dynamic
approach that is more nimble and regulation built using technology
responsive to changing market and crowdsourcing.
realities. What if we could turn the
approach on its head: not regulation Real-time: Recent years have seen
of disruptive technologies, but an explosion of regulatory technology
regulation by disruptive technologies? (RegTech) companies that apply
technology to automate regulatory
This move to adaptive regulation is reporting and compliance. These
already underway, albeit still in its approaches have emerged primarily in
early days. It involves developing financial services where compliance
approaches that are open, real-time costs skyrocketed in the aftermath of
and dynamic. the global financial crisis.
Open: To appreciate the potential of While RegTech may have emerged to
open regulation, consider the open cut costs, its marriage of technology
data and open government and regulation also paves the way for
movements. Inspired by open-source real-time approaches to regulation.
software, these movements argue For instance, numerous firms are
that government data, created using applying sentiment analysis algorithms
taxpayer money, is a public good that to a wide range of data — voice mails,
belongs in the public domain. emails, chat messages, expense
A growing number of governments, reports, Global Positioning System
from Singapore to Boston, are (GPS) data and the like — to identify
now sharing data with the public fraud, corruption, insider trading and
in machine-readable formats. This other violations. Meanwhile, companies
has increased transparency and in the oil and rail transportation sectors
accountability — while enabling an are using sensor data for preventive
ecosystem of creative third-party apps maintenance, flagging and proactively
and websites that provide services fixing potential safety issues.
well beyond what governments had
41Such methods could be applied more to change. Applying open data on a
broadly as AI grows increasingly large scale must still allow companies
sophisticated and the volume of open, to protect proprietary or competitive
real-time data explodes. This would information. Regulators will need to
be a fundamentally different approach develop safeguards to mitigate the
to regulation. The slow, sequential risk of unforeseen outcomes from
process of collecting data, reporting, algorithms that behave and evolve in
monitoring compliance and penalizing unpredictable ways.
infractions would be replaced by
techniques that are real-time and But, the potential benefits are
preventive. This would have significant tremendous. Regulation imposes
implications for corporate functions, significant costs on businesses and
processes and competencies, society. Approaches that are both
and will disrupt the armies of more effective and less expensive
middlemen, from lawyers to auditors, should be welcome news for
who owe their existence to traditional businesses and taxpayers alike.
ways of conducting regulation.
Dynamic: In addition to being open
and real-time, a truly adaptive
regulatory approach would also
respond dynamically to changing
market conditions. We will probably
never reach a point where AI will
write or rework regulations on its
own — as with automation in every
other sphere, humans’ ability to
apply context and nuance will remain
pivotal. But, it is not too far-fetched
to imagine algorithms analyzing data
and identifying gaps where existing
approaches are not keeping up with
market realities.
Getting there will not be easy.
While some regulators are
encouraging experimentation
through “sandboxes,” regulators (and
corporate compliance departments)
are generally risk averse and slow
42Questions
In a world of AI and crowdsourcing, should regulation only be done by regulators?
Could regulation become predictive instead of prescriptive?
When algorithms manage our lives, who will manage the algorithms?
How aligned is regulation in your sector for the disruptions that lie ahead?
What new competencies will regulators need to respond to disruption
in your sector?
How are you engaging in the conversation to develop new regulatory approaches?
43Cities
Remapping urbanization
How will cities be reshaped by technology and our greatest challenges?
The urbanization of the future could 2. How disruptive technologies that
look fundamentally different. Two sets are transforming transportation and
of forces will converge to alter where reinventing work reshape urban centers
we build and how we build:
1. How cities respond to sustainability
challenges, such as climate change,
chronic diseases, aging and
affordability
Sustainability challenges will remake the urban landscape
Climate change and evolving
population demographics will create
major shifts, much as mass transit
and cars did in an earlier era.
Climate change and sea-level rise will transform the shape of cities
We often think of climate change in first major city to run out of water.
terms of long-term effects: warming Climate change is increasing the
temperatures and rising sea levels destructiveness of extreme weather
that will alter the environment and events: hurricanes (or typhoons),
reshape civilization. The urban rainstorms, blizzards, forest fires
environment is particularly vulnerable and droughts.
because half of humanity lives on 1%
of the land and cities grew up near These contingencies have profound
waterways and oceans. While areas implications for urbanization patterns.
threatened by sea-level rise represent Urban planners are fundamentally
only 2% of the world’s land, they cover rethinking their traditional approaches
13% of the world’s urban population because they aggravate flooding. The
— and 21% of the urban population vast majority of the urban footprint —
of developing countries. buildings, roads, driveways and parking
lots — uses impermeable materials that
Climate change is already having prevent water from being absorbed.
very real effects that are challenging The problem has compounded as
the direction of urban planning. cities, from Houston to Kolkata, have
Jakarta is sinking rapidly and could expanded into neighboring plains and
be underwater within a decade. wetlands to house soaring populations.
Cape Town is about to become the
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