Asia is on track to top 50 percent of global GDP by 2040, a statistic that represents a real shift in the world’s economic center of gravity. In this video, Kevin Sneader, global managing partner of McKinsey, explores the ways in which digital disruption has—and will continue to—transform Asia and its place in the world. An edited version of his remarks follows. The conversation is part of our series on the future of Asia.
How Asia’s rise is reshaping the world
What are the top three most disruptive, powerful forces shaping the world today?
When I think about the way in which disruptions are occurring across the globe, Asia’s been at the heart of that. And in many respects, the shift in economic activity is the most disruptive force the world is seeing.
That shift has been occurring for quite some time now. In fact, if you look over the past 50 years, and you look at the economies that have outperformed the United States over that period of time, most of them are in Asia. If you roll forward and think about what’s going to happen, that trend is just going to continue. I think the rate at which it will continue is going to differ. It may be the case that China, which has been the horsepower of most of this change, will give way to India playing an increasingly important role. But nevertheless, this shift in economic activity toward Asia: it’s going to continue.
I think the second thing that we should reflect on when we think about disruptive forces ten years from now is the way in which globalization—and the impact of data and the way in which data have started to flow—ensures that service-based flows, as opposed to just goods-based flows, become increasingly important. And that’s one of the reasons why, if you look at trade South–South versus North–South, South–South—in other words, trade within Asia—has gone from being about 8 percent of the trade in that part of the world in 1995 to 20 percent now. Twenty percent. That’s a huge increase. And it’s only going to gather steam.
And the third thing, of course, as we look ten years out, is technology—and technology development. How is AI [artificial intelligence] going to play out? How is Asia, in particular, going to play into that? I think what we’re seeing—yes, largely out of China but also out of India—is Asia disruptors that are coming in and making sure that this is going to be a change that sees Asian players having a really important voice in the way in which technology will disrupt. So the way in which technology developments are going to continue to impact this region, and then the world, is only going to gain force.
How should CEOs respond to these forces as they think about their business strategies for the next decade?
It’s very tempting to think you can future-proof. What I think you can do is actually prepare for different outcomes and be ready to recognize that some of the forces that are happening are going to play out in a very different way than we may expect.
If I had to pick a few areas in which CEOs should really be focused, the first is the impact of AI and automation. The net effect of that is a fundamental change in what it means to lead. And why is that true? It’s true because the way in which business will be conducted is going to change. If you think about the jobs we have today, 60 percent of those jobs will see more than 30 percent of the tasks fundamentally transformed. If those tasks are transformed, it means the way in which your labor force, if you’re a CEO, conducts itself has to change.
We often talk about reskilling. It’s a fancy word for saying that the way we do things has to change. And that means we need to learn from some of the ways in which companies are seeking to handle workers in retail, for example, who have been at the checkouts—which will no longer exist, because people won’t need them—and how they’re going to operate if those workers are now in warehouses.
Figuring out which products go where, working with machinery to do that: automation’s going to fundamentally transform the role of service and how service plays through because the easy tasks will be automated. The tasks of care and giving care, those are harder to automate. Those are going to need more people. So shifts within jobs and shifts across jobs: fundamentally different challenges for CEOs to think about to ensure their labor forces are equipped for this challenge.
I think one of the other things CEOs are going to have to really think hard about is the form of their supply chains. Where are they located? How are they organized? In this world, Asia, of course, will continue to be the economic power for growth, but there’s going to be differential performance within Asia. We are going to see the geopolitical boundaries that determine global supply—and the notion of a global supply chain—give way to a supply chain that is optimized regardless of what happens on the political front. And that means more local development, more local capability. That’s a big shift. That’s a very big shift.
A third challenge, if Asia and the world are really going to be able to continue to grow at a time when demography is actually leading to populations contracting and working populations contracting, is to think about the whole labor force.
Gender parity isn’t just a nice thing to do, it’s at the heart of the growth debate. It’s what’s going to allow economies to regain their growth trajectories. Japan will not grow if more women do not come into the workforce. China has obviously got a declining labor population within the next five or so years. That means even more women need to enter the workforce. And you can go right across Asia and find that gender parity becomes a necessity for economic growth, which leads me to the last point.
I’ve talked about technology—automation. That could be a great force for good. Or it could be a source of reinforcing some of the differences that exist, some of the inequalities that exist. If the digital divide grows even further, that’s going to mean the gap between the digital haves and the digital have-nots is going to be the defining issue of our time. I think that’s a massively important topic that CEOs have a role to play in: to ensure that technology is accessible to all. Regulators have a role to play: to ensure that there’s a playing field that allows technology to be distributed and for people to have access. And, of course, the public sector needs to help ensure that people are literate, educated—able to use the technology tools that are out there.
So there’s a lot for CEOs to do in a time of great change.