Pixels of Progress: How a microregional perspective can inform your strategy

| Article

My colleagues Chris Bradley, Sven Smit, Jonathan Woetzel, and Marc Canal provide just such a view in a new McKinsey Global Institute report, Pixels of Progress: A granular look at human development around the world, which offers a look at the evolution of GDP, population, and life expectancy from 2000 to 2019 at a level 230 times more precise and revealing than any view from the country level. Using night-time luminosity and other measures, we’ve created a database that goes from 178 countries, each averaging 40 million people, 700,000 square kilometers, and $700 billion of GDP in 2019 to more than 40,000 microregions averaging 180,000 people, 3,000 square kilometers and $3 billion of GDP. And the granular view is much more accurate and differentiated.

In this pixelated perspective, one clearly sees that differences are often larger inside a country than between countries. For instance, we typically speak of “Spain’s GDP”, but more than a third of it in 2019 came from Madrid and Barcelona provinces—19.5 and 14.1 percent, respectively. Nevertheless, progress in these two provinces diverged. While Madrid’s share of Spain’s economy increased by almost two percentage points between 2000 and 2019, Barcelona’s share remained flat.

This illustrates the importance of a microregional perspective to business decision making—the view from the country level is blurry at best and misleading at worst.

Take a consumer goods company in Germany, a country whose population is aging, and most of the eastern and central parts of the country are losing population. Are there nonetheless pockets of growth ripe for new business? Oberhavel, a microregion next to Berlin, grew its population by 11 percent, and GDP there increased by an average of 2.1 percent annually between 2000 and 2019. Mecklenburg Lakeland, another microregion in the area, lost 15 percent of its population over the same period, and its GDP only grew by 0.4 percent per year. Here as well, the granular view enables much more effective decision making.

How many multinational companies would have Medellín, Colombia, on their list of places to expand their business? Thanks to the hit TV show, “Narcos,” the city’s history of drug-related violence that all but brought normal economic function to a halt is well known. And yet violence and mayhem petered out in the early 2000s and the municipal government there made major investments in transportation infrastructure, schools, healthcare, and commercial real estate. Between 2000 and 2019, Medellín’s GDP per capita rose by an average of 2.9 percent per year to $14,000, and life expectancy increased by 7.9 years to 76.2.

Globally, microregions home to 2 billion people on every subcontinent had by 2019 attained the life expectancy and GDP per capita of those living in the top 30 percent 20 years earlier, the 1.3 billion who resided primarily in OECD countries. This means that by 2019 their GDP per capita was above $8,300 and their life expectancy was greater than 72.5 years. Many of those places offer business opportunities that may not be apparent in a country-level view. Among those 2 billion were 1.1 billion Chinese. But like those in Medellín, Colombia, there were another 920 million people living in 8,000 microregions spread across 75 nations outside China that crossed the income and health thresholds.

Recent research from MGI suggests we are on the cusp of a new era that is changing the competitive environment and creating new opportunities for sustainable, inclusive growth. Looking at the world in a more granular way can assist companies as they work to locate operations, provide services, enhance supply chains, identify new pools of human capital, increase resilience, and serve a broader set of customers across the economic spectrum. In a world that is increasingly global and local at the same time, a better and more granular understanding of the extent of the progress the world has achieved is critical information for companies to better compete in the future.

This article originally appeared in Forbes.

Explore a career with us