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Dr. James Manyika is a director of the McKinsey Global Institute (MGI), McKinsey & Company’s business and economics research arm, and one of its three global co-leaders. He is a member[…]

James Manyika, director at the McKinsey Global Institute, explains that technology isn’t just for rich countries anymore. Smartphones, Internet connections, and other forms of exponential technology have become pervasive at an absolutely unprecedented rate. While mostly a positive change, with this transition comes the possibility of unforeseen economic consequences, in particular with regard to how difficult it will be for local companies to compete with international juggernauts. Dr. Manyika’s latest book is No Ordinary Disruption: The Four Global Forces Breaking All the Trends..

James Manyika: Technology is no longer something that’s just restricted to large companies or large countries or even rich countries. So everywhere on the planet now has access, you know, at least it has the potential to have access to technology. People in developing economies often own smartphones and technologies at equivalent rates to people in the developed world. In fact, quite often they’ll have that before they even have sanitation in some cases. So the pervasive nature of technology is one of the most important features of it. The other important feature is just the rate and pace at which adoption is actually occurring. Just to put some comparative numbers on this: If you think about television, it took something like 38 years before television penetration got to the first 50 million people. It took Twitter nine months. So just the rate in acceleration in which adoption occurs is pretty phenomenal. And then the other feature that becomes very interesting about technology is not just its pace and scale and the rate of innovation, but the economic aspects of technology.

So when you have things in digital form, that actually has a profound impact on how it affects the economics of things. So digital technologies have this feature that economists think of it as the non-rivalry, non-excludability of it. And what that means is that my use of something that’s a digital form doesn’t necessarily as a physical technological matter preclude your use of it. The good news about that is that from a user standpoint, this is all good because that’s what economists talk about is consumer surplus. So the fact that it doesn’t cost us that much more to get access to information whether it’s educational material, entertainment material, that’s all good for us as consumers. I think it puts new challenges for companies because now you have to think about how do you generate revenues and monetize this. We’ve seen how technology has caused, you know, with these marginal cost economics, disruptions in many, many, many, many industries whether it’s the needier worlds, the entertainment world. So it has these disruptive effects. But for users, it’s generally good in the sense that it’s all useful information that you get. The investments in technology infrastructure and technology assets is now pervasive across every sector whether it's — we’re talking health care or we’re talking the public sector or we’re talking about education or we’re talking about industrial. In fact, one of the more exciting things about in the industrial arena is what everybody now refers to as the Internet of Things.

That for the first time, we’re now going to be connecting machines, sensors, physical things of any sort that we like. That’s going to have a huge and profound impact. So think about all the machine-to-machine communications, interactions. Think about the possibility for how we manage our use of energy, how we manage our homes, how we manage these settings — whether it’s the workspace, the home, the car — when machines and things get connected. What I find interesting about that in particular is what that does to questions about industry’s trend competition. I think we always used to imagine that, you know, companies would compete within their sectors. So this idea is, you know, sectors, made sense at some point. But when you have technology and technology-based assets, I think it becomes possible to enter many, many sectors on the base of the technology platforms. Think about the fact that now we’re talking about Amazon as a computing company through their Cloud services. Think about the fact that you now have Alibaba applying for banking licenses. Think about the fact that some of the most profound innovations and transportations are being done by technology Internet companies — Google and others. So I think when one of the things that happens in technology makes it possible for participants and competition to come from often outside the sector. So that’s one big change to industry structure. Another big change to industry structure is on the question of what it takes to compete. So you’re now going to see many, many small companies be able to have kind of the power, the access, and the potential to disrupt sectors that historically you’d have associated with just large companies. So this idea of competition coming from outside the sector, outside the geography, and very often from much smaller companies. I think it’s going to have a profound impact on the structure of industries and the economy.