The Stealth Disruption

A few months ago a young adult approached me who said that he was working on a research paper for a graduate course. He asked what my opinion was on the most disruptive forces affecting businesses around the world. I assumed, and I was right, that he expected me to talk about advances in technology in the years to come. Instead, I threw him a curve ball that, as an American, he did not expect.

The big disruption that I mentioned to him was the shifting center of economic growth. The significant changes are going to be in emerging markets and, more subtly, to new cities within those countries with likely explosive growth.

Where did this concept come to me? Over 15 years ago, I woke up ready to go to work. A snowstorm was in progress. Not severe as the ones that plagued my native New England but one which paralyzed the southern city that I was working in at that time. So, I poured another cup of coffee and decided to wait a couple of hours before trying to  head to the office. As I relaxed, I picked up a neglected copy of FORTUNE magazine that had hanging around for several months. It was their annual issue highlighting the Fortune Global 500 and, with time on my hands, I studied the membership roster carefully. The list showed that well over 90% of the world’s largest companies were domiciled in developed countries dominated by the U.S., Japan, and Western Europe. Since then, I have tracked the list each year with a bit more caution. Dozens of newcomers have joined the international 500 as is typical of the creative destruction present in our 21st century world. Last year, I read a report from the McKinsey Global Institute that projected by 2025 China will have more billion dollar revenue companies that either the United States or Europe and that more than half of the 2025 large players will call an emerging market home. So, economic power is going to shift and perhaps faster than we can imagine to selected countries in Asia, Latin America and the Middle East.

There is a real sleeper in all of this and I tried very hard to articulate to the earnest young graduate student. It is not just that countries are seeing explosive growth relative to the developed nations of the West. A key issue is that entire new cities are emerging in these fast growing markets. On 5/22/12 I put up an MR post entitled URBANIZATION, GLOBALIZATION, AND MEDIA. A key take away from that post was that, amazingly, EVERY DAY, some 180,000 PEOPLE around the world moved from a rural area to a city. McKinsey has estimated that some 65 million people get urbanized annually. To put it in to perspective for American marketers, that is the equivalent of seven new Chicago DMA’s being formed annually. Marketers and reasonably informed citizens have all heard of Hong Kong, Shanghai, Dubai and probably Mumbai. Yet, the real dynamic growth will come from cities that most of us have never heard of ever. Again, quoting McKinsey, they are forecasting that 46 of the top 200 cities in the world will be in China by 2024. Can you name 46 Chinese cities? How about 10? I know that I could not prior to attacking this issue.  Soon Tianjin, Shenyang, Harbin, Chengdu, Taiyuan and a host of others will hit the radar screens of astute marketers.

Think of the possibilities of this growth. The UN has projected that between 1990 and 2025, some three billion people have or will become members of what has been dubbed “the consuming class,” meaning that they will have $10 of disposable income per day. A large proportion of these new consumers will be living in the cities of emerging economies. By 2030, they will account for half of the world’s spending!

All this will impact media as well. How will you reach all these new consumers? Within large countries, everyone will not be speaking the same language. An acquaintance told me to forget about it--advertise on You Tube and other global properties as everyone speaks English. He is clearly not a seasoned traveler as people everywhere, especially this new breed of consumers who are newly arrived urbanites, likely speak only their native tongue. Mobile advertising has to be a huge beneficiary of this rapidly growing trend.

So, quietly and steadily, these new cities will emerge and join the million population club. Perhaps, more importantly, they will have many newly minted members of the consumer class.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com