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Ten IT-enabled business trends for the decade ahead

Ten IT

As technological change accelerates and adoption rates soar, ten pivotal trends loom large on the top-management agenda. Here is a brief excerpt from an article written by Jacques Bughin, Michael Chui, and James Manyika for the McKinsey Quarterly, published by McKinsey & Company. To read the complete article, check out other resources, learn more about the firm, obtain subscription information, and register to receive email alerts, please click here.

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Three years ago, we described ten information technology–enabled business trends that were profoundly altering the business landscape. The pace of technology change, innovation, and business adoption since then has been stunning. Consider that the world’s stock of data is now doubling every 20 months; the number of Internet-connected devices has reached 12 billion; and payments by mobile phone are hurtling toward the $1 trillion mark.

This progress both reflects the trends we described three years ago and is influencing their shape. The article that follows updates our 2010 list. (For a more detailed treatment, download the related white paper PDF–1MB] from the McKinsey Global Institute.) In addition to describing how several trends have grown in importance, we have added a few that are rapidly gathering momentum, while removing those that have entered the mainstream.

The dramatic pace at which two trends have been advancing is transforming them into 21st-century business “antes”: competitive necessities for most if not all companies. Big data and advanced analytics have swiftly moved from the frontier of our trends to a set of capabilities that need to be deeply embedded across functions and operations, enabling managers to have a better basis for understanding markets and making business decisions. Meanwhile, social technologies are becoming a powerful social matrix—a key piece of organizational infrastructure that links and engages employees, customers, and suppliers as never before.

Implicit in our earlier work, and explicit in this update, is a focus on information and communication technologies. Other forms of technology are changing, too, of course, and as we’ve been updating this list, we’ve also been conducting new research on the most disruptive technologies of all types. Four of the trends described here reflect IT disruptions elaborated in that separate but related research, which encompasses fields as wide-ranging as genomics and energy and materials science. The Internet of All Things, the linking of physical objects with embedded sensors, is being exploited at breakneck pace, simultaneously creating massive network effects and opportunities. “The cloud,” with its ability to deliver digital power at low cost and in small increments, is not only changing the profile of corporate IT departments but also helping to spawn a range of new business models by shifting the economics of “rent versus buy” trade-offs for companies and consumers. The result is an acceleration of a trend we identified in 2010: the delivery of anything as a service. The creeping automation of knowledge work, which affects the fastest-growing employee segment worldwide, promises a new phase of corporate productivity. Finally, up to three billion new consumers, mostly in emerging markets, could soon become fully digital players, thanks chiefly to mobile technologies. Our research suggests that the collective economic impact (in the applications that we examined) of information technologies underlying these four trends could range from $10 trillion to $20 trillion annually in 2025.3

The next three trends will be most familiar to digital marketers, but their relevance is expanding across the enterprise, starting with customer-experience, product, and channel management. The integration of digital and physical experiences is creating new ways for businesses to interact with customers, by using digital information to augment individual experiences with products and services. Consumer demand is rising for products that are free, intuitive, and radically user oriented. And the rapid evolution of IT-enabled commerce is reducing entry barriers and opening new revenue streams to a range of individuals and companies.

Finally, consider the extent to which government, education, and health care—which often seem outside the purview of business leaders—could benefit from adopting digital technologies at the same level as many industries have. Productivity gains could help address the imperative (created by aging populations) to do more with less, while technological innovation could improve the quality and reach of many services. The embrace of digital technologies by these sectors is thus a trend of immense importance to business, which indirectly finances many services and would benefit greatly from the rising skills and improved health of citizens everywhere.

[Here’s the first of there ten.]\

1. Joining the social matrix

Social technologies are much more than a consumer phenomenon: they connect many organizations internally and increasingly reach outside their borders. The social matrix also extends beyond the cocreation of products and the organizational networks we examined in our 2010 article. Now it has become the environment in which more and more business is conducted. Many organizations rely on distributed problem solving, tapping the brain power of customers and experts from within and outside the company for breakthrough thinking. Pharmaceutical player Boehringer Ingelheim sponsored a competition on Kaggle (a platform for data-analysis contests) to predict the likelihood that a new drug molecule would cause genetic mutations. The winning team, from among nearly 9,000 competitors, combined experience in insurance, physics, and neuroscience, and its analysis beat existing predictive methods by more than 25 percent.

In other research, we have described how searching for information, reading and responding to e-mails, and collaborating with colleagues take up about 60 percent of typical knowledge workers’ time—and how they could become up to 25 percent more productive through the use of social technologies. Global IT-services supplier Atos has pledged to become a “zero e-mail” company by 2014, aiming to boost employee productivity by replacing internal e-mail with a collaborative social-networking platform.

Companies also are becoming more porous, able to reach across units speedily and to assemble teams with specialized knowledge. Kraft Foods, for example, has invested in a more powerful social-technology platform that supports microblogging, content tagging, and the creation and maintenance of communities of practice (such as pricing experts). Benefits include accelerated knowledge sharing, shorter product-development cycles, and faster competitive response times. Companies still have ample running room, though: just 10 percent of the executives we surveyed last year said their organizations were realizing substantial value from the use of social technologies to connect all stakeholders: customers, employees, and business partners.

Social features, meanwhile, can become part of any digital communication or transaction—embedded in products, markets, and business systems. Users can “like” things and may soon be able to register what they “want,” facilitating new levels of commercial engagement. Department-store chain Macy’s has used Facebook likes to decide on colors for upcoming apparel lines, while Wal-Mart Stores chooses its weekly toy specials through input from user panels. In broadcasting, Europe’s RTL Group is using social media to create viewer feedback loops for popular shows such as the X Factor. A steady stream of reactions from avid fans allows RTL to fine-tune episode plots.

Indeed, our research suggests that when social perceptions and user experiences (both individual and collective) matter in product selection and satisfaction, the potential impact of social technologies on revenue streams can be pronounced. We are starting to see these effects in sectors ranging from automobiles to retailing as innovative companies mine social experiences to shape their products and services.

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Here is a direct link to the complete article.

Jacques Bughin is a director in McKinsey’s Brussels office; Michael Chui is a principal with the McKinsey Global Institute (MGI) and is based in the San Francisco office; James Manyika is a director of MGI and is also based in the San Francisco office.

The authors would like to acknowledge the contributions of Brad Brown, Joi Danielson, Richard Dobbs, Shalabh Gupta, Alex Marrs, and Roger Roberts to the development of this article.

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