The world is changing and fast. That much we all know. But are we aware of just how quickly and in what radical ways? Clients obviously need to know this stuff. But advisors to clients need to know it too.

PwC has spotted five economic and social megatrends and here’s a summary of their report:

1. Demographic and Social Change.

Within the next 10 years, we’ll have added another billion people to reach about 8 billion, with the over-65s the fastest-growing group. But there will be sharp regional variations: Africa’s population is projected to double by 2050, while Europe’s is expected to shrink.

These demographic changes bring risks or big opportunities for businesses, depending on whether they’re forward-thinking or not. PwC is finding that their clients are targeting two core sources of growth:

• the consumption power of growing population segments; and
• the innovative potential of a diverse workforce.

For example, Nigeria’s population should exceed America’s by 2045. And with an estimated 865 million women set to enter the economic mainstream in the coming decade, women’s purchasing power will continue to rise.

Another opportunity is global mobility. The number of people being assigned by their employers to roles outside their home country has increased by 25% over the past decade – and PwC projects a further 50% rise by 2020. Put simply, people are planning to move, so there’s an opportunity for companies to make their employment offers more attractive.

The common thread is the move to a more diverse world. And there’s growing evidence that workplace diversity is linked to improved performance by businesses and economies. Innovative companies are already tapping into rising workforce diversity – and it’s a resource that’s set to become ever richer.

These demographic changes also bring challenges. The biggest of which is the combination of rising life expectancy and – in some parts of the world – declining birth rates. In 2050, the average age in Japan is set to be 53, against 21 in Nigeria.

Countries have to respond quickly. Europe, Asia and Latin America will need more women and elderly people in their workforces, together with higher immigration. Africa’s younger population offers a demographic dividend – but only given the right policy responses. And the timeframe is tight. France took a century to double the share of over-60s in its workforce from 7% to 14%. China, India and Brazil face doing it within three decades.

In regions with ageing populations, such as Europe, a further challenge is soaring healthcare costs related to chronic diseases and caring for the elderly. According to the EU, 30% to 40% of healthcare expenses are already being spent on people aged 65 or above. As the share of this group in the overall population continues to rise, the costs of caring for them will also increase – putting social and healthcare systems under intensifying pressure.

2. Shift in Global Economic Power

On current trends, the aggregate purchasing power of the ‘E7’ emerging economies – Brazil, China, India, Indonesia, Mexico, Russia and Turkey – will overtake that of the G7 by 2030. By 2015, Asia Pacific will have a larger middle class than Europe and North America combined. And the global emerging middle class will represent an annual market of some US$6 trillion by 2021. Such trends and tipping-points mean the traditional way of classifying economies is becoming increasingly irrelevant.

This change is underlined by widening divergences within these groupings. Italy’s economy has not grown in real terms since 2000, while Canada’s has expanded by over 30%. China’s economy has tripled in size while Mexico’s has ‘only’ grown by a third.

These huge economic shifts between countries are resulting in momentous changes in consumption patterns – which in turn are creating and amplifying key challenges for businesses worldwide. They have to chase a moving target, as consumers evolve differently in various markets faster than ever before. They have to address the needs of ever more diverse – and more demanding – customer segments. And they have to fight off increasingly intense and new competition.

The ongoing rebalancing of global economic power also brings major implications for investments in infrastructure. Worldwide, PwC estimates that annual spending on infrastructure will grow from US$4 trillion in 2012 to more than US$9 trillion by 2025 – with a total of US$78 trillion expected to be spent globally between 2014 and 2025. The Asia Pacific market, driven by China’s growth, will represent nearly 60% of global infrastructure spending by 2025. In contrast, Western Europe’s share will shrink to less than 10% from twice as much just a few years ago.

Such global shifts are remarkable not only for their scale, but also for their sheer speed. As a result, the global economic landscape in a decade’s time will be vastly different from that of today.

Here are four features that PwC thinks will become more prominent in the global economy:

• Emerging markets will challenge developed economies in the production of high-end consumer durables.
• Today’s ‘F7’ frontier markets – Bangladesh, Colombia, Morocco, Nigeria, Peru, Philippines and Vietnam – will become tomorrow’s growth markets.
• An expanding pool of highly skilled talent will fuel this emergence, with people from emerging markets increasingly leading global multinationals.
• Developed countries will benefit from ‘re-shoring’ as wage differentials close.

To prepare for this new landscape and succeed in tomorrow’s changed environment, today’s business leaders need to identify which markets hold the greatest growth potential

3. Rapid Urbanisation

The global rise of cities has been unprecedented. 50% of the world’s population live in cities. Every week, some 1.5 million people join the urban population, through a combination of migration and childbirth.

Inevitably, this rapid expansion is putting cities’ infrastructure, environment and social fabric under pressure. Over the next decade, New York, Beijing, Shanghai and London alone will need to invest US$8 trillion in infrastructure. The numbers living in urban slums have risen by a third since 1990.

Businesses will refocus their offerings, marketing and distribution towards an increasingly urban customer base with distinct needs and consumption habits. And they must be alert to new opportunities arising from lifestyles shaped by rising population density and readier access to resources.

For city leaders, the implications are also significant as they work to ensure that cities grow in a sustainable way. Leaders face tough choices trying to keep their cities liveable. Options being examined include floating cities – especially relevant for low-lying regions threatened by rising sea levels – and revitalising ‘ghost’ cities or failing economies through crowdfunding. A further approach is to build a new city around the latest technologies: the ‘smart city’. From Masdar City in Abu Dhabi to Migaa near Nairobi, spending on smart cities will hit US$1 trillion within two years.

However, for these manufactured cities, the financial, environmental and social costs can outweigh the benefits from technology. So another approach has emerged: harnessing citizens’ own ‘smartness’ by deploying the technology directly to them in order to keep cities growing and liveable. Examples range from developing an energy self-sufficient street in Austin, Texas, to pioneering groups of small production units in Barcelona.

Rapid urbanisation brings challenges and wider opportunities. One key opportunity is that it can provide part of the solution to another of the megatrends – demographic shifts – as the challenge of the ‘greying planet’ grows. In the future, the majority of the world’s ageing population will probably live in cities. And as people remain healthier for longer, their continuing contribution to social and economic value – for example, by working beyond traditional retirement ages, helped by advancing technology – may produce a ‘longevity dividend’ rather than a burden.

As all these initiatives and opportunities demonstrate, technology is changing the reason why cities exist. Their main attraction used to be jobs. Now people come seeking a better quality of life – at any age.

4. Climate Change and Resource Scarcity

As the world becomes more populous, urbanised and prosperous, demand for energy, food and water will rise. But our planet’s natural resources to satisfy this demand are finite.

At current rates of consumption, we may have just half a century’s worth of oil and gas left. Yet to meet our development needs, we’re highly dependent on fossil fuels which in turn drive carbon emissions. That’s why we look set to miss the carbon target to keep temperature rises to 2°C by 2034.

The impact of our economic development model is amplified by the linkage between climate change and resource scarcity. Our resulting projection could lead to either of two extreme outcomes: a policy shock, with a global agreement that severely penalises carbon emissions; or a climate or resource shock, where a natural event causes massive environmental and economic damage.

Faced with these risks, many people are looking to governments for solutions. However, in practice, policy actions will remain unpredictable, inconsistent and reactive. So businesses must take the lead in mitigating environmental damage and tackling climate and resource challenges, while simultaneously striving to make their organisations more agile and resilient.

If businesses are to rise to these challenges, sustainability will be vital. Corporate responsibility has evolved from a ‘luxury’ to a business imperative. Ultimately, sustainability is the lens through which every business will be judged by its consumers, workforce, society and even investors. And as businesses move to embrace sustainability, they also need to be able to report on it in a credible and trustworthy way.

As a result, an increasingly important area of focus for businesses worldwide is understanding, measuring and reporting on the environmental and social impacts of the decisions and actions they take. This need is driving the development of innovative ways of measuring and reporting more transparently and holistically on companies’ overall impacts. Over time, progress in this area will help businesses understand and explain their impacts more fully, make better-informed decisions, and rebuild public trust by providing wider and more credible insights.

5. Technology Breakthroughs

Technology is one of the biggest disrupting forces in organisations. One aspect is that the time it takes to go from breakthrough technology to mass-market application is collapsing. In the US, it took the telephone 76 years to reach half the population. The smartphone did it in less than 10 years.

The price of new technologies is falling equally rapidly: since 2001, the cost of DNA sequencing per genome has plunged from US$96m to less than US$6,000. At the same time, digitisation via the internet has created extraordinary value, as exemplified by Google. And social media is steadily strengthening its position as a dominant force in the day-to-day lives of people across the globe, enabling many of the world’s top brands to capitalise on it to deepen their relationships with customers.

Indeed, the impacts of digital disruption are now so pervasive that no business in any sector – from the smallest family business to the largest multinational – is immune from them. And the pace of technological advances hasn’t slackened at all during the past year. Far from it. According to MIT Technology Review, in 2014 alone we’ve seen breakthroughs in technologies ranging from agricultural drones that enable higher crop yields, to ‘neuromorphic’ chips configured like human brains; from microscale 3D printing of an ever wider range of products, to agile robots that can walk or even run across uneven terrain; and from ultra-accurate, big data-enabled weather forecasts that will boost the contribution from renewable energy, to genome editing that will help tackle previously baffling brain disorders.

All of these advances either help to solve complex problems or open up new ways of using technology – or both. And in each field the progress to date is just the start.

So, what’s next? Companies will find value by uniting four aspects of digital: Social, Mobile, Analytics and Cloud. For businesses, having a digital strategy will no longer be enough. Instead, they’ll need a business strategy fit for the digital age.

For more details, see: http://www.pwc.com/gx/en/issues/megatrends/index.jhtml

Implication of these Megatrends to Advisors to Companies

For you to be a trusted advisor to your clients, you’ll need to have a grip on these developments and know how best to advise your clients. If you can’t, you’ll risk losing them to another firm.

Why not innovate to develop some useful knowhow to help clients? Consider collaborating with other advisors to provide a bigger range of insights and offerings.

Some companies aren’t going to get their strategies right. Professional firms could go the same way if they don’t adapt!