Supertrends. Driving forces. Millennials’ values
The Millennials have become a force to be reckoned with – politically and economically. Today corporations not only cater to the 20-35-year-olds, known as Generation Y, but increasingly also to Generation Z, the under 20-year-olds, which we jointly refer to as Millennials. Generation Z is at the forefront of a global climate change movement, driving a heightened focus among companies on environmental responsibility and sustainability. Their influence also extends to education, with technology becoming more and more important as a new way to deliver education and develop skills. As for leisure, they are driving the popularity of social gaming and eSports.
5.1 Sustainable business and investments
Push for real change
Generation Z’s key priorities include environmental conservation and pollution reduction. After all, it is this cohort that stands to bear the brunt of the impact from climate change. They are pushing governments and companies to cut greenhouse gas emissions, as well as reduce plastic waste. About 50% of global packaging materials today are made of plastic, but only 14%-18% of plastics are recycled at the global level, according to a 2018 paper by the Organisation for Economic Co-operation and Development (OECD).
Unless drastic change is brought about, there will be more plastic than fish in the ocean by 2050, states a report by the Ellen MacArthur Foundation. Companies in the food, beverage and cosmetics industries as well as restaurant or supermarket chains are already pledging to reduce the use of plastic and have announced targets for recyclable packaging. Producers of plastic substitutes should benefit from this development. But the plastics industry itself is not standing idle, adopting more environmentally conscious strategies, developing lightweight products or improving recycling systems.
Sustainable industrialization, in other words running factories at zero waste, reduced emissions and water pollution, is increasingly moving into the focus of companies. In response, industrial companies are launching innovative clean-tech solutions such as energy management and automation – so-called smart technologies – that can be used in energy efficient buildings, for example. Cloud computing is also seen as a solution to reduce consumers’ environmental footprint.
5.2 Clean energy and smart mobility
Not your parents' car
According to the 2018 Global Energy & CO2 Status Report from the International Energy Agency (IEA), global CO2 emissions rose by 1.7% to reach a historic high of 33.1 gigatonnes in 2018. The 1.7% increase was the highest annual emissions growth rate since 2013 and 70% higher than the average increase since 2010. However, the IEA also showed that without any emission savings from policy measures, such as switching from coal to gas, the use of more renewable energy sources and improvements in energy efficiency, CO2 emissions would have increased by an even stronger 3.8% in 2018.
Cars remain responsible for a large part of carbon emissions today. In a world where the majority of cars sit idle 95% of the time and, if they are used, it is mostly by one occupant, cars are likely to become increasingly autonomous and car sharing offerings more popular. To cater to tech-savvy generations like the Millennials, cars are also becoming more and more connected. Over the next decade, we are therefore likely to move from an autocentric world to a mobility-centric world.
As concerns about the environment increase, the development of electric cars continues to move ahead, with the timeline for the adoption of electric vehicles accelerating. In 2019, numerous electric vehicles are expected to be launched, offering improved driving ranges and new features. Original equipment manufacturers (OEM) target an average electrification of powertrains of 25% by 2025. Battery costs are rapidly falling, making vehicle prices more affordable for consumers. The entire battery supply chain for electric vehicles is set to benefit from these developments, hence a rapid expansion of capacity should not be a concern. Neither should falling prices of commodities used in batteries, as expected battery demand outstrips projected supply.
The road to autonomous vehicles will develop in stages from partial automation to full automation. Increasing safety standards are going to require technology hardware such as Lidar, a type of sensor that combines light and radar, and HD map-based systems to be included in vehicles. Moreover, technological disruptors are going to create software utilizing significant advances in artificial intelligence. Credit Suisse expects 20% of cars to include level-3 and above autonomous functions, in other words conditional, high or full automation, by 2030. Premium OEMs are set to launch cars with level-3 features as early as 2020. Despite serious incidents involving autonomous vehicles in test runs last year, we expect “robotaxis” to be introduced in a limited number of areas in 2019 and further launches to accelerate in the years to come.
Ride-hailing or ride-sharing companies are expected to be early adopters of autonomous driving, as owning and managing a fleet of autonomous vehicles appears to be an attractive business model. Such fleets will require financial services for asset ownership, cleaning and charging, maintenance and repair, as well as an app provider. Monetizing time spent in autonomous vehicles by selling ads or services represents another significant opportunity. In this context, we expect current ride-on-demand platforms, hardware/software integrators and potentially social media businesses to partner up.
5.3 Digital natives
Technology as a teacher
In our era of digitalization, artificial intelligence and automation, Generation Z is demanding new forms of education delivery. We call it an education technology revolution in the making.
Technology-savvy individuals who know their way around social gaming, this young generation is used to simulated experiences and stimulation. Education technology caters to these preferences with an innovative game-like approach that facilitates the learning process. For instance, animated curricula provide scope for customization or augmented reality books seek to improve engagement. Automation and artificial intelligence are already leading to change in job profiles, and the best way to respond is by developing skills that cannot be automated, such as critical thinking, problem solving, emotional intelligence and creativity. Education technology seeks to address these increasingly vital skills.
Given the rise of smart phone addiction and its impact on health, education technology may also encourage the use of technology in a beneficial way. It may also make education less expensive and accessible to more students, promoting lifelong learning. HolonIQ, a global education market intelligence platform, expects education technology expenditure to grow strongly, reaching USD 340 billion by 2025. Venture capitalists are already investing in start-up projects in the USA and Asia, and are forecast to have invested close to USD 8 billion in 2018, double the amount invested in 2017, according to HolonIQ. There have already been initial public offerings in this space, or large internet companies are looking to acquire such start-up businesses.
5.4 Fun, health and leisure
Gaming goes social
The growing popularity of eSports is testament to the fact that the gaming industry is rapidly shifting from traditional consoles and paid games to mobile and social gaming, thanks in particular to the influence of Generation Z. The mobile market targets a larger user base by distributing free games via large internet platforms. The way these games are monetized is through in-game micro transactions, advertising and the sale of licensing rights to eSports broadcasters. Furthermore, integrating social aspects in the gaming experience is becoming increasingly important. We believe that the gaming market and eSports continue to offer attractive development potential.
Despite its growing popularity, social gaming does come with the downside of addiction and its adverse impact on health. In this context, we expect gaming companies to be increasingly scrutinized for their efforts to mitigate addiction-related risks. We are already seeing the rise of timekeeping tools, but technology companies will also face pressure to embrace ethical design, in other words limit the use of psychological persuasion technology for apps used by children.
- Education technology: This is a new approach to delivering education using digitalization and enabling personalization, gamification and simulation to develop skills that cannot be automated.
- Social gaming refers to online games that allow social interaction among players.
- Smart mobility: Smart mobility refers to modes of transportation that are clean and autonomous, encompassing hardware/software providers and integrators, fleet managers and ride hailing/sharing platforms.