McKinsey’s 2024 Insights: The 18 Industries Set to Transform the World
In its 2024 report, The Next Big Arenas of Competition, McKinsey Global Institute identifies 18 transformative industries—referred to as “arenas”—that are poised to drive the next wave of global economic growth. These arenas are expected to generate between $29 trillion and $48 trillion in revenues by 2040, with their collective share of global GDP rising from 4% to as much as 16%. The report lays out a vision for industries that will shape not just economic trajectories but also societal structures, with impacts felt across business, innovation, and daily life.
What Defines an "Arena"?
Arenas are more than just fast-growing sectors; they exhibit unique traits that set them apart from conventional industries. They are highly dynamic, with frequent shifts in market share, and they tend to attract outsize levels of investment, giving rise to new global giants and providing opportunities for disruption by smaller entrants. Unlike static sectors, where market leadership changes gradually, arenas are constantly reshuffling their competitive order, often triggered by breakthroughs in technology or business models. The report defines these arenas by two major characteristics:
High Growth: Arenas capture a disproportionate share of economic value, growing much faster than the broader economy.
High Dynamism: Market shares in arenas shift frequently, making room for new entrants and forcing incumbents to continually innovate.
These traits are present in both today's thriving arenas—like e-commerce and cloud services—and in the emerging industries that will become the arenas of tomorrow. Understanding these dynamics is key to positioning businesses and policymakers to capitalize on this shift.
The Arenas of Today
The report identifies 12 arenas that have already shaped the global economy between 2005 and 2020, growing from nascent sectors into major drivers of economic profit. These include:
E-commerce: The rapid rise of online marketplaces like Amazon and Alibaba has transformed retail, making digital sales a global phenomenon.
Cloud Services: Providers such as Amazon Web Services (AWS), Microsoft Azure, and Google Cloud have turned cloud computing into an essential infrastructure for businesses worldwide.
Electric Vehicles (EVs): Companies like Tesla, BYD, and the EV divisions of traditional automakers have redefined transportation, pushing the automotive industry into a future powered by renewable energy.
Biopharmaceuticals: The biopharma industry, including players like Moderna and Pfizer, has rapidly evolved through innovations in mRNA technology and biologics, driving advances in healthcare.
Semiconductors: The backbone of modern technology, semiconductors power everything from smartphones to cloud computing, with industry giants like Nvidia and TSMC leading the way.
These arenas saw substantial growth in revenue, market capitalization, and profit from 2005 to 2020, vastly outpacing the rest of the economy. E-commerce alone grew its revenue share from $15 billion in 2005 to $890 billion in 2020, while cloud services expanded from $54 billion to over $1 trillion during the same period.
The "Arena-Creation Potion"
To identify the arenas of tomorrow, McKinsey analyzed the ingredients that lead to arena formation. They call this the “arena-creation potion,” a combination of three factors that together foster high growth and dynamism:
Step Changes in Business Models or Technology: Advances that dramatically improve performance or disrupt existing markets create fertile ground for new arenas. For example, breakthroughs in lithium-ion battery technology enabled EVs to scale, while cloud services transformed IT infrastructure.
Escalatory Investments: Once an arena begins to form, companies make escalating investments in innovation, marketing, and capabilities to capture market share and increase their competitive advantage. This leads to a “race to the top,” where early movers have the potential to gain massive scale.
Large or Growing Addressable Market: Arenas typically target large markets with potential for sustained growth. Companies entering these markets either disrupt existing industries or create entirely new demand.
Understanding this formula helps identify where the next arenas may emerge and how companies can position themselves to take advantage of these shifts.
The Arenas of Tomorrow: 18 Emerging Industries
Looking ahead, McKinsey identifies 18 industries that could become the arenas of tomorrow, driving the next phase of economic and technological growth. These industries span a range of sectors, from healthcare and mobility to energy and digital services:
AI Software and Services: Artificial intelligence (AI) is expected to drive the next revolution in software, with AI-powered tools transforming industries from healthcare to finance. The sector could reach $920 billion in revenues by 2040, with AI becoming a ubiquitous element of business operations.
Cybersecurity: As digital infrastructure grows, so does the need to protect it. Cybersecurity could see exponential growth, with demand for solutions to prevent data breaches and cyberattacks skyrocketing in the face of growing digital threats.
Cloud Services: The cloud will continue to evolve, with more businesses migrating their operations to scalable, on-demand cloud platforms. This sector could grow to generate between $1.6 trillion and $4.6 trillion in revenues by 2040.
Electric Vehicles (EVs): EVs will not only become more common but also more affordable, driven by advances in battery technology. This market is expected to hit $2.5 trillion to $3.2 trillion in revenues by 2040 as automakers shift away from internal combustion engines.
Space: The commercial space industry is still in its infancy, but by 2040 it could be worth up to $1.6 trillion. This includes satellite-based services, space tourism, and lunar or Martian exploration.
Shared Autonomous Vehicles (SAVs): Autonomous driving technology, coupled with the rise of ride-hailing services, is creating a new market for shared autonomous vehicles. By 2040, this could be a $2.3 trillion industry, transforming urban mobility and logistics.
Batteries: Batteries, especially for EVs and energy storage, will play a critical role in the green transition. The battery industry is projected to grow to over $1 trillion by 2040, spurred by the increasing demand for renewable energy and electrification.
Digital Advertising: As traditional media continues to decline, digital advertising is expected to capture the lion’s share of marketing dollars. Companies like Google, Meta, and new platforms could see this industry reach $2.9 trillion by 2040.
Streaming Video: The shift from traditional television to streaming platforms will continue, with revenues potentially reaching $1 trillion by 2040. New players and niche platforms will compete with established giants like Netflix and Disney.
Robotics: Advances in robotics for industrial and consumer applications could turn this sector into a major arena, with applications in manufacturing, healthcare, and personal services. The robotics market could grow to $910 billion by 2040.
Industrial and Consumer Biotechnology: Innovations in biotechnology will go beyond healthcare, transforming agriculture, food production, and materials science. This sector could become a $900 billion market by 2040.
Video Games: The gaming industry, already a major arena, is expected to continue its rapid expansion, driven by new technologies such as virtual reality (VR) and cloud gaming. Revenues could grow to $910 billion by 2040.
Modular Construction: The construction industry is being transformed by modular, prefabricated solutions that reduce costs and increase efficiency. This could become a $1.1 trillion market by 2040 as cities grow and demand for affordable housing increases.
Future Air Mobility: Electric vertical take-off and landing vehicles (eVTOLs) and drones could revolutionize personal and commercial transportation, creating a new market worth up to $340 billion by 2040.
Drugs for Obesity and Related Conditions: The pharmaceutical industry is developing new treatments for obesity, diabetes, and other related conditions, with potential revenues of $280 billion by 2040.
Nuclear Fission Power Plants: Nuclear energy could see a resurgence as a low-carbon energy source, with new technologies making it safer and more efficient. This industry could reach $150 billion by 2040, driven by the global push for clean energy.
Semiconductors: The semiconductor industry will continue to grow as demand for advanced microchips accelerates, particularly for AI and Internet of Things (IoT) devices. By 2040, this could be a $2.4 trillion market.
Non-Medical Biotechnology: Beyond traditional biotech, non-medical applications such as biomaterials and biofuels will create new opportunities, potentially becoming a $900 billion market by 2040.
The Implications for Business and Society
The rise of these 18 arenas will reshape not only the business landscape but also the way we live, work, and interact. AI, robotics, and biotechnology will change industries, transforming everything from healthcare to logistics. Meanwhile, advances in mobility and energy will lead to more sustainable, efficient systems for transportation and power generation.
For businesses, understanding the dynamics of these arenas is crucial for staying ahead of the curve. Early movers that capitalize on these trends can position themselves as leaders in high-growth industries. Policymakers will also need to adapt, ensuring that regulations keep pace with technological advancements and that new industries are inclusive and sustainable.
Conclusion: The New Frontiers of Competition
The 18 emerging arenas identified by McKinsey represent the next wave of economic growth and innovation. As these industries evolve, they will create new opportunities for businesses, disrupt traditional sectors, and pose new challenges for society. For those who can navigate these shifts, the rewards will be immense, both in terms of financial returns and the ability to shape the future of the global economy.
By understanding the dynamics that drive these arenas—technological breakthroughs, escalatory investments, and growing markets—businesses and investors can position themselves to succeed in the next big arenas of competition. The future of global competition has never been more dynamic, and the next decade will determine who thrives in this new economic landscape.
Reference
McKinsey Global Institute. (2024). The Next Big Arenas of Competition. McKinsey & Company
