In an uncertain world, many organizations have incorporated strategic foresight and futures design into their work to support operational functions such as innovation, R&D, marketing, M&A, and strategy. Foresight and futures thinking looks at what is happening today and how trends may develop in future years in order not only to shape operations and strategy in the present, but also to future-proof the organization in a systematic, logical way.
Design combined with foresight and futures thinking—bundled into McKinsey’s Design x Foresight approach—can help organizations develop a view that goes beyond major trends and reaches for new thinking and solutions. Foresight and futures thinking has created significant value for organizations as they seek to future-proof their businesses. In one longitudinal study, “future-prepared” firms, defined as those with a corporate foresight practice, posted 33 percent higher profitability than the average company and 200 percent higher growth.
A new report uses McKinsey’s Design x Foresight to envision the Asian consumer in 2030 (see Sidebar, “Design x Foresight: Methodology”). Among many insights surfaced were the potential of a dual identity that is both physical and digital, the notion of a “social credit” based on personal skills emerging as a new form of currency, and the cascading consequences of advanced mobility. Using this approach can help us to address areas that may be overlooked by a more general “major trends view” and to be pioneers in new thinking and solutions that can help organizations navigate the future and its uncertainties.
Spotting and tracking peripheral changes and signals can focus attention on possible innovations before they become obvious trends. We identified six clusters of signals and trends and key findings for each:
- Commerce and economics. Consumers develop clear intentions around where and from whom they buy products and services.
- Consumer values. Asian consumers are becoming more comfortable seeking digital solutions for maintaining and establishing relationships with their relatives and others.
- Platform landscape. Consumers trust data and technology on platforms to give them a seamless flow of experience and support their decisions.
- New lifestyle levers. Consumers are becoming more adaptive, diversifying their daily routines in response to demographic and economic shifts.
- Macro-level levers. Large-scale change can occur with a push from local authorities and pull from shifts in the international layer.
- Accessibility and labor. Consumers can overcome physical distance and difficulties with technology. Meanwhile, a lack of labor in certain types of jobs has not intensified.
This work builds on a recent McKinsey Global Institute report that highlighted a sharp upward shift in income pyramids, demographic trends that were shifting sources of consumption, and a diversification in consumer behaviors, often related to the spread of digital consumption channels and models.
Two key cohorts that could be considerable sources of consumption in Asia are Generation Z (people born roughly between the late 1990s and the early 2010s) and seniors. To highlight possible futures for Gen Z, we chose to focus on Indonesia, which is notable for its young population. Its young people are critical for Indonesia’s prosperity now and in the future, and they have the potential to offer significant returns for the country’s social and economic development. Our study of seniors turns to Japan, which is the world’s most distinctly “super aged” society. By 2036, people aged 65 and over will represent a third of the population.
For each cohort, we developed four scenarios along two axes identified in workshops and discussions with McKinsey experts: community versus individual values and physical versus digital purchases and ownership:
- Community values vs. individual values. In scenarios characterized by community values, individuals have a tendency to be conscious of their place in broader society and to be mindful of how they are seen by the world around them. They tend to be more connected to elders and children and to prefer established borders, institutions, and traditions. They can also be bound to their social class and prefer to stick with what is tried and true. In scenarios more characterized by individual values, individuals put more emphasis on self-fulfillment (not out of selfishness but with appreciation that every individual has a right to be happy), and they are more open to change and less worried about what others think. These individuals like to stand out, are proactive about change, and tend to see themselves as global citizens rather than belonging to a particular community.
- Importance of physical vs. importance of digital. Digitization is irreversible, and the future will be more digital overall than it is today. However, even in this digitized future, there is a scenario in which consumers emphasize the physical world—for instance, where there are earned skills that machines cannot replace and where there are great benefits from using physical means to connect and interact with the world. In contrast, there is an “uber-digital” scenario in which consumers embrace technological progression and development to discover new opportunities for growth and gain a sense of belonging. In this scenario, the digital world may be where they primarily operate and feel at home, and the physical world is secondary.
Generation Z will change consumption patterns
Three themes are particularly prominent in our study of Gen Z in Indonesia. The first is new forms of ownership: many Asian consumers seek to fulfill their needs within their given budget by considering alternatives to traditional ownership of goods, such as rental, subscription, and secondhand goods. Second, consumption is shifting from physical to digital goods, and dual physical-digital identities are emerging. Finally, systemic shifts are expected in how people work, views of government, and new societal rules and systems supporting such change.
These changes will open up new opportunities for companies—for instance, scope to develop new retail experiences blending the engagement stimulated by physical shopping with the huge range of choice offered by e-commerce. Another opportunity appealing to Gen Z is for insurance companies and financial services players to develop products that support shared ownership of property.
We developed four scenarios for Gen Z in Indonesia.
In the metaverse scenario, younger generations spend most of their time online in a virtual shared space that is a global community. They put on their visual aids and sounds and connect to various “verses” where they work together, take classes, socially interact, and furnish with virtual products. Among the many new opportunities enabled by the metaverse is a new retail experience that blends the engagement of physical shopping with the huge range of choice offered by e-commerce. Retailers and e-commerce platforms can leverage their networks of vendors and management experience to develop the capabilities needed to run metaverse shopping platforms, including tools that enable consumers to try out and test products. Consumer companies can create virtual versions of their current products that are enhanced for metaverse life, as well as variants and upgrades of those current products. Manufacturers can release conceptual products and prototypes in the metaverse to test-market reactions and collect feedback before putting into production, thereby reducing R&D cost and market uncertainty. Consumer products and service providers can create digital-only versions of goods and services that cater to the personalized virtual experience, including personalized games and furniture in virtual homes. New platforms integrating digital DIY products can spread as the metaverse lowers the barriers against amateurs producing content themselves.
People want physical goods not only to make their lives more meaningful but also to show others what they value—vacation houses, luxury cars, high-quality fashion items, or well-designed home furnishings—and even make them envious. Social media is a way to show off what they want and what they have. In the accessible gratification economy, people can own high-end global brands and enjoy high-end services even at middle incomes. Rules-based sharing matters because access to goods and services is about choice as well as cost-effectiveness. Even exclusive products are offered only on a sharing basis. Overall, consumers can manage their budgets, exercise choice, and at the same time avoid building up debt. Companies that are successful in diversifying services and products and adapting prices to individual consumers will be able to expand their customer base. For companies to use their resources and succeed in this way, they must be flexible and open to new business models. Luxury and high-brand companies can consider fractional ownership programs of their products to increase the chance of their brands being adopted; at the same time, they strengthen brand value with the authenticity that only physical experiences can provide. Companies that provide spaces such as hotels, restaurants, or transportation can offer their spaces in smaller pieces with dynamic pricing. As shared ownership takes a larger part of the market and is supported by systemic change, insurance companies consider developing new products that support the modernized ownership of individual properties that are shared among not only family members but also friends and acquaintances who hold the same beliefs and interests. Financial institutions deploy and offer a new type of mortgage program for a group of people for one property or an individual for shared ownership in a property.
Even in an increasingly digitized world, people have a strong appreciation of the physical world, which continues to offer attributes that are elusive online—human authenticity, emotion, and importantly, actual physical human contact. Physical goods can be touched, felt, smelled, and tasted. Local culture, art, daily rituals, and community ties are still strong elements of what defines an individual life. Digital tools will continue to be ubiquitous, but they will be used to fulfill physical desires and needs. The talent-sourcing industry can consider building job marketplace services based on the interpersonal skills required by, for instance, nurses, educators, and personal assistants, ensuring improved matching of skills to employment and oiling the wheels of the gig economy. The services, healthcare, and education industries might consider developing premium service add-ons based on high-quality human intervention to raise perceived quality of service and increase customer satisfaction. Given a shift in consumer preference toward products built to last (rather than inbuilt obsolescence) argues for a new business model if companies are to maintain their profits. Makers of luxury goods from fashion items to musical instruments may require systems and platforms to make profit from reselling. Consumer goods companies may need to build services around products to maintain revenue streams and customer touchpoints as they sell fewer products in the future.
Our digital world opens up broad and diverse educational and training opportunities to those with low incomes, enabling them to gain skills they could not have learned before so they can transition into higher-paying work that will boost their incomes—so long as they have the literacy to explore the opportunities that are increasingly on offer. As automation spreads, positive outcomes result when people have the right education and skills. Automation will replace many low-paid and often dangerous physical jobs, freeing the people who performed them to develop themselves. Armed with the right education and skills, people will not only see their incomes rise, but also will begin to redefine how to be happy. Access to education and job opportunities is fueling the expansion of the middle class—and in the process boosting consumption. Purchasing power that once resided largely in Indonesia’s largest cities is spreading to smaller cities and even rural areas as incomes rise and digital technologies open up opportunities and the ability to buy at lower price points. Consumer product companies and brands need to find new ways to serve new markets and consumers with a combination of an expanded physical footprint and digital channels. Financial institutions and insurance companies also need to identify new customer customers and serve them at lower income levels than they did before.
Seniors will become a major market in Asia, especially Japan
The population of Asian seniors, defined as individuals aged 60 and over, is expected to grow by more than 40 percent between 2020 and 2030, according to the United Nations. MGI finds that their consumption could potentially increase twice as fast as the consumption of the rest of the population in the period to 2030. In Japan, seniors could contribute to more than 60 percent of overall consumption growth. Three themes stand out. First, exponential growth in spending on the self will occur, as seniors desire to remain healthy and therefore independent. Second, seniors are increasingly using technology to enjoy improved connectivity—think senior-friendly interfaces and autonomous transportation. The final theme is hyperlocal buying. Seniors are increasingly engaging in grow-your-own projects, enrolling in group buying, and exercising their bartering skills. These trends are opening opportunities for companies—for instance, preventive medicine and digital health monitoring, as well as a range of technologies that support independent living in the home, from AI-powered companions to crypto-based digital payment systems for use by communities.
The following are the four scenarios for seniors in Japan.
Garden of Eden
This scenario is characterized by the many ways people use a new abundance of free time courtesy of reduced working hours or retirement, the absence of duties such as laundry and cooking, and improved longevity and health, thanks to healthcare that prolongs life expectancy and medicines that cure or more easily treat disease. Consumer data are monitored and used autonomously to improve the health, safety, and quality of people’s lives. Because people are healthier and live longer, they have more space to explore options for how they want to spend their time. Companies have a range of opportunities. One is providing the systems and infrastructure to support preventive medicine, which is becoming mainstream. Consumer goods companies that provide interfaces to monitor and track consumer vitals and activities can enter different markets and find new partnerships. Pharmaceutical companies and the food industry can provide new products for prevention. Consumers are more open and interested in new vaccines or supplements that delay or prevent certain diseases to extend a healthy life span. The education system can develop programs for educating professionals specializing in or dedicated to preventive medicine, and the insurance industry might reconsider the eligibility criteria for purchasing their products. Seniors who have money need insurance protection but may not fit today’s assessment criteria. Health indexes can be used as references to personalize the products. With seniors living longer, many services can be tailored to them. Personal trainers and physical therapists, especially specialists with knowledge of senior physical health, are in high demand to keep the elderly healthy and in good physical condition.
This describes an intensified home environment where consumers are equipped to conduct many activities that assist the self-governance of their lives. Consumers allocate their resources to home Internet of Things devices that monitor their environment and health. Seniors can engage in physical activities with support from augmentation technology. The motivation to use such technologies is not only to have a good quality of life as an elderly person, but also to maintain connections with children. One major area for potential growth is all the components of an on-demand home environment for seniors that enables them to maintain their physical well-being and remain safe. Real estate companies and developers can increase the value of property by installing central care systems for seniors and marketing to them and their caregivers (where they have them). Home appliance companies can design add-on at-home care support systems. With money to spend and good health, many seniors are highly sociable. This is an opportunity for the entertainment, hospitality, retail, and travel industries. Travel companies can design packages that offer seniors caregivers and mobility equipment to make trips viable and enjoyable.
Security through sharing
In this scenario, many seniors are economically insecure. They may have been displaced by automation and AI technologies or left high and dry because pension systems have been suspended and they lack sufficient savings to feel comfortable for their retirement. They respond to this through extreme measures to lower the cost of living by embedding sharing into many aspects of their lives, including community subscriptions (shampoos or vehicles, for instance) and even living spaces. They maximize consumption efficiency to sustain constrained household budgets. Digital tools help; increasingly tech savvy seniors use digital information and education to equip themselves with skills that can provide an income where necessary. As the sharing economy matures and diversifies, more platforms or services will bundle consumers with the same needs or preferences to maximize the use of the sharing services. There has been a shift from individual and family consumption to group or organizational use. Owners of facilities such as a nursing home or even a shopping complex can consider the use of sharing services to lower their operational costs even while improving the satisfaction of their users. Consumer products companies can consider ways to sell their products to consumers through corporations or nongovernmental organizations running the communities. Offerings better suited for B2B2C must be in place. Community owners are the interfaces of consumers and can sometimes work as small retailers to distribute products. Community consumption becomes a new business model.
In this scenario, seniors develop mutual-support networks. Even as the digital world spreads, they are seeking community and connection to rediscover and redefine who they are and their values. The barter economy of centuries ago undergoes a revival for building infrastructure. Seniors build up credit by offering skills, services, or goods (like fresh produce), exchanging what they offer for what they need from others in their network. For companies, seniors’ skills can be deployed in the workforce. Financial institutions can rediscover customers from their existing customer pool based on their social credit values. Some people with niche expertise can be quite affluent and afford services they couldn’t afford to pay for with their salaries before retirement. Advertisement and marketing companies and departments might reconsider their strategies to identify and target customers by taking account of their skills as a form of wealth. Social platforms and C2C service providers can identify new influencers on social credit platforms to establish new social commerce opportunities. The return to community changes patterns of consumption. Communities now produce everything from local produce to artisanal brands, creating demand for new marketplaces that enable the exchange of goods and services. Digital currency systems used by communities are another area of potential growth.