Discussion paper Connected world An evolution in connectivity beyond the 5G revolution May 2019 February 2020 McKinsey Global Institute Since its founding in 1990, the McKinsey the economic impact of technology and offices around the world. These teams Global Institute (MGI) has sought to innovation, and urbanization. Recent draw on McKinsey’s global network of develop a deeper understanding of the reports have assessed the digital partners and industry and management evolving global economy. As the business economy, the impact of AI and automation experts. 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The Center brings together practice helps clients create value in knowledge, industry experts, and McKinsey’s experts in connectivity with rapidly changing markets. Companies new research to helps clients across the firm’s knowledge within individual across these industries generate more industries capture the opportunity sectors to help clients overcome these economic profit than any other sector presented by advanced connectivity. hurdles and capture the opportunity of a of the global economy, yet they are not The world’s digital connections are more connected world: www.mckinsey. shielded from the disruptions that they about to become broader and faster, com/Industries/Technology-Media-and- themselves create. We help clients creating a platform for every industry to Telecommunications/How-We-Help- build internal capabilities, integrate innovate and boost productivity. While Clients/McKinsey-Center-for-Advanced- digital and analytics tools into their 5G networks promise ultra-high speeds, Connectivity. organizations, and transform the ways low latency, and greater reliability, the 5G in which they work to improve their revolution is only one part of the story. business in substantial, sustainable There’s also an evolution in existing ways: https://www.mckinsey.com/ technologies, with new generations industries/technology-media-and- of fiber, cable, Wi-Fi, and short-range telecommunications/. technologies. Yet to realize the full value Discussion paper Connected world: An evolution in connectivity beyond the 5G revolution February 2020 Authors Ferry Grijpink Eric Kutcher Alexandre Ménard Sree Ramaswamy Davide Schiavotto James Manyika Michael Chui Rob Hamill Emir Okan ii Contents In brief page iv Executive summary page iii1 1. Changing how the world connects page 16 2. The value at stake page 24 3. Connectivity at work: Use cases in select domains page 33 Mobility page 33 Healthcare page 40 Manufacturing page 45 Retail page 49 4. Overcoming the hurdles page 56 5. The connectivity gap across countries page 61 6. Questions for the future page 73 Technical appendix page 76 Acknowledgments page 87 iii In brief Connected world: An evolution in connectivity beyond the 5G revolution The world’s digital connections are about to become – While consumer demand for entertainment broader and faster, providing a platform for every and internet applications will continue to industry to boost productivity and innovation. We drive most network usage, connectivity have identified hundreds of use cases across more enables new capabilities across the than 17 commercial domains that can run on an economy. To illustrate the range of what enhanced digital backbone. This research focuses is possible, we highlight a number of on four of them: mobility, healthcare, manufacturing, promising use cases in four commercial and retail. domains. In mobility, vehicles will communicate with infrastructure, other We find that implementing the most promising use vehicles, and networks, improving cases we identified in these four areas alone could safety and traffic flow. In healthcare, increase global GDP by $1.2 trillion to $2 trillion by connectivity-enabled innovations can 2030, with the countries that are most connected make it possible to monitor patients today capturing much of the value. These four remotely, use AI-powered tools for more domains represent roughly one-third of global accurate diagnoses, and automate many GDP, implying that there are opportunities to tasks so that caregivers can spend create trillions of dollars in additional value across more time with patients. Manufacturers other sectors. On top of this, some two billion new and other industrial companies can run users are set to come online worldwide, generating highly precise, high-output, and largely another $1.5 trillion to $2 trillion in GDP impact, automated operations using low-latency mostly in the developing world. commercial and private 5G networks. Retailers can offer a more seamless However, although most of the needed technologies and personalized in-store experience are already available and the opportunities have while making inventory management and existed for some time, progress has yet to take off warehouse operations more efficient. in many areas. Questions about who makes the required investments, who benefits, and how to – Out of the $1.2 trillion to $2 trillion coordinate multiple players still must be solved. potential in these four domains, 70 to 80 percent can be achieved with existing — The future of the connected world is not just advanced connectivity technologies. With about the newest frontier technologies, such its improved speed, efficiency, latency, as high-band 5G and low-earth orbit satellite and coverage, frontier connectivity can constellations. Much of it will be defined by the produce the remainder by taking many expansion and evolution of existing advanced existing use cases to the next level—and connectivity technologies, like fiber, low- to mid- paving the way for entirely new ones that band 5G, Wi-Fi 6, and various other long- and we cannot foresee today. However, most short-range solutions. The new architecture providers and industry players are not of connectivity also features cloud and edge bolting out of the starting gate. In many computing that can be accessed with cheaper places, investment has yet to materialize at and more efficient “thin” devices. Computing the scale of the opportunity. power, storage, and sensors are all growing more powerful and more affordable. As these – For this to happen, several issues trends converge, the connectivity ecosystem will clouding the market will need to be be populated with more technologies, services, solved in each of the four domains. For and providers than ever before. one, coordination across value chains is a iv McKinsey Global Institute critical challenge. Second, the potential value – Despite the promise of a more inclusive is fragmented across many use cases but connected world, disparities between lacking a clear aggregator to provide scale. countries could persist. Analyzing revenue In addition, incentives are often misaligned. potential, cost factors, and market dynamics, The entity doing most of the heavy lifting of we see four country archetypes progressing investment and implementation may not be along the connectivity continuum at varying the one who stands to benefit financially. speeds, as well as two countries that stand Furthermore, many use cases introduce data apart. Pioneer countries (including