Table of Contents
Subtitle: McKinsey Technology Trends Outlook 2023 (81 pages)
Introduction
After a challenging year in 2022 for technology investment and talent, the first half of 2023 has brought renewed enthusiasm about the potential of technology to drive progress in business and society. One of the key contributors to this revival is generative AI, which has sparked interest and excitement. However, generative AI is just one of many advances on the horizon that have the potential to fuel sustainable growth and solve complex global challenges.
The McKinsey Technology Council has identified and interpreted the most significant technology trends currently unfolding to help executives stay informed. While many of these trends are still in the early stages of adoption, executives can use this research to plan ahead by understanding potential use cases and identifying the critical skills required to bring these opportunities to fruition.
Analysis of Technology Trends
The analysis of technology trends is based on quantitative measures of interest, innovation, and investment to assess the momentum of each trend. The research examines search engine queries, news publications, patents, research publications, and investment to gauge the level of activity. The report also considers underlying technologies, uncertainties, and questions associated with each trend. In this year’s analysis, talent dynamics have been added as an important dimension, providing data on talent supply and demand for roles relevant to each trend.
New and Notable Trends
All 14 trends from the previous year remain on the list, with some experiencing increased momentum and investment, while others have seen a decline. One new trend, generative AI, has made a significant impact and has the potential to transform businesses.
Generative AI – Transformative Business Impact
Generative AI is the next frontier of AI, building upon existing technologies such as applied AI and industrializing machine learning. It has high potential and applicability across various industries. Interest in generative AI has tripled from 2021 to 2022, indicating its growing significance. Generative AI has the potential to add $4.4 trillion in economic value through specific use cases and productivity-enhancing applications. However, it is crucial for firms to recognize the economic significance and growth potential of underlying AI technologies and industrializing machine learning.
Investment Trends
Although investment in most tech trends tightened in the past year, the potential for future growth remains high, as indicated by the rebound in tech valuations. Absolute investments in 2022 exceeded $1 trillion, demonstrating confidence in the value potential of these trends. Trust architectures and digital identity experienced the most significant growth, increasing by nearly 50 percent, reflecting the growing importance of security, privacy, and resilience across industries. Investment in other trends, such as applied AI, advanced connectivity, and cloud and edge computing, declined, likely due to their maturity. However, mature technologies can still drive mainstream adoption and profitability.
Portfolio-Oriented Investment
Companies should not solely focus on the trends that receive the most attention but instead adopt a portfolio-oriented investment strategy. This approach allows businesses to capitalize on both established and emerging technologies relevant to their industry. Technologies like cloud and edge computing and the future of bioengineering have shown steady increases in innovation and expanded use cases across industries. Edge computing, in particular, is projected to experience double-digit growth globally over the next five years. Nascent technologies like quantum computing also offer significant potential for value creation. By carefully assessing the evolving landscape and adopting a balanced approach, businesses can drive innovation and achieve sustainable growth.
Tech Talent Dynamics
Talent is a crucial factor in gaining a competitive edge in the digital software industry. The demand for skilled professionals in tech-related roles often exceeds the available talent pool. According to a survey of 3.5 million job postings, many of the skills in high demand have a shortage of qualified practitioners. To address this talent gap, companies must stay on top of the talent market, adapt to shifts, and offer attractive value propositions to prospective technologists. Recent layoffs in the tech sector may present opportunities for other industries struggling to attract and retain senior tech talent. Additionally, automation technologies are expected to transform a significant portion of the workforce, requiring companies to adjust roles and upskill employees accordingly.
Job Postings and Growth
Despite a decrease in overall global job postings, tech-related fields experienced healthy growth, with a 15 percent increase between 2021 and 2022. Fields like applied AI and next-generation software development saw substantial growth in the number of job postings. Next-generation software development had the highest growth rate, indicating its growing importance. The shortage of qualified talent poses a significant challenge for employers, particularly in high-tech fields like AI, quantum technologies, space technologies, and electrification and renewables.
Importance of Talent in High-Tech Fields
The shortage of talent is particularly pronounced in high-tech fields like cloud computing and industrializing machine learning, which are essential across various industries. It also affects areas that require specialized professionals, such as the future of mobility and quantum computing. Employers must address the talent crunch by implementing strategies to attract and retain skilled professionals.
Conclusion
In the rapidly evolving digital software landscape, staying informed about the latest technology trends is crucial for executives. The McKinsey Technology Trends Outlook 2023 provides valuable insights into the momentum, investment, and talent dynamics of these trends. By adopting a portfolio-oriented investment strategy and addressing talent shortages, businesses can drive innovation, achieve sustainable growth, and gain a competitive edge in the digital software industry.
Note: The content of this article is based on the McKinsey Technology Trends Outlook 2023 report. For the full report, please visit https://www.scrollreads.com/.
