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Revving up Europe’s innovation engine. Photo by chuttersnap on Unsplash

The continent can achieve the scale it needs to close the innovation gap by defining its own innovation model rather than by playing by everyone else’s rules, writes Jacques Bughin.

Europe has a wealth of research talent including 5.7 million software developers, more than in the United States, yet the world’s leading digital platforms are US and Chinese, not European.

It has pockets of strength in industrial R&D, especially in the automotive industry, yet it risks falling behind in frontier technologies including artificial intelligence and synthetic biology, which look set to power the next wave of economic growth.

The continent has some impressive digital leaders including Spotify, yet its share of superstar firms globally-that is, companies in the top 10 percent of economic profit globally, has fallen by half over the past two decades (Exhibit 1). …


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Photo by RAFAEL MIRANDA on Unsplash

by Pal Erik Sjatil, Managing Partner of McKinsey & Company in Europe

German chemists invented aspirin. One of my Norwegian compatriots invented aerosols. Russian and Spanish inventors independently developed the first pressured space suits. Two Swedes founded Spotify. Europe has a long history of innovations that have changed the world, but it cannot rest on its laurels.

In recent years, Europe has started lagging behind the United States and, increasingly, China in areas such as disruptive innovation (see exhibit below), digital platforms, tech giants, and some of the most promising “frontier” technologies, including artificial intelligence and synthetic biology.

Europe still has great success stories and a lot of depth in its research talent. For example, the continent has 5.7 million software developers versus 4.4 million in the United States. But it has a harder time translating promising ideas into billion-dollar “unicorns.” Above all, it is held back by fragmentation and a lack of scale. …


An increasing number of governments and businesses are implementing digital identification programs. What makes a digital ID beneficial to both the user and the institution?

Good digital ID is identification that is verified and authenticated to a high degree of assurance over digital channels, unique, established with individual consent, and protects user privacy and ensures control over personal data.

Research by the McKinsey Global Institute finds that countries implementing good digital ID could unlock economic value equivalent to 3–6 percent of GDP on average by 2030, making digital ID a potential force for inclusive growth, especially in emerging economies.

But how does this technology work? And how can privacy and security risks be minimized so that individuals receive the maximum benefit?

Learn more about the opportunities, risks, and potential value for individuals and institutions using good digital ID in this infographic.

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Learn more: mckinsey.com/digitalid

Download a PDF version of this infographic.


Why digital identification could be a key to inclusive growth

Digital identification, or “digital ID,” can be authenticated unambiguously through a digital channel, unlocking access to banking, government benefits, education, and many other critical services. Programs employing this relatively new technology have had mixed success to date — many have
failed to attain even modest levels of usage, while a few have achieved large-scale implementation.

Yet well-designed digital ID not only enables civic and social empowerment, but also makes possible real and inclusive economic gains — a less well understood aspect of the technology. …


Digital ID can form the foundation of a host of applications in many aspects of an individual’s life, work, and social interactions.

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Unlike a paper-based ID such as most driver’s licenses and passports, a digital ID is a form of identification that can be authenticated remotely over digital channels. A digital ID could be issued by a national or local government, by a consortium of private or nonprofit organizations, or by an individual entity. What’s more, a digital ID can use a variety of technologies to perform digital authentication, ranging from the use of biometric data to passwords, PINs, or smart devices and security tokens.

Video: What is digital ID?

Our new report takes a close look at the opportunity of digital ID for individuals and institutions, specifically examining how “good” digital ID can be a key to inclusive growth. …


By Susan Lund

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Photo by Campaign Creators on Unsplash

There’s a lot more going on with global trade than what you see in the headlines. The McKinsey Global Institute’s recent report takes an in-depth look at 23 different industry value chains spanning 43 countries — and it finds some trends that might surprise you:

  • A smaller share of goods is now being traded across borders as China and other emerging markets consume more of what they make and develop their own domestic supply chains.
  • Less than 20% of goods trade today is based on companies seeking the lowest wages around the world.
  • Goods trade is becoming more intraregional as companies build regional supply chains near their key consumer markets. …


By Jacques Bughin

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Photo by Ines Álvarez Fdez on Unsplash

Global value chains as we know them today could not exist without instant communications and supply chain management software. By reducing transaction costs, digital technologies enabled trade in goods and services to soar.

Now the next generation of technologies is here: advanced robotics, AI, the Internet of Things, 3-D printing, and blockchain. They are already influencing global trade, and their impact will grow in the years ahead. Some of them, including digital platforms and logistics applications, will continue to reduce transaction costs and fuel trade growth.

Automation technologies in manufacturing will change the way goods are made and the relative cost of different inputs, including labor, opening the door to more localized production near key consumer markets. Other technology-enabled innovations such as renewable energy, electric vehicles, and augmented and virtual reality can change the content and patterns of trade flows. …


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Global value chains are being reshaped by rising demand and new industry capabilities in the developing world as well as a wave of new technologies. Labor-cost arbitrage is on the wane in most value chains, while services, intangibles, and knowledge intensity are on the rise.

A recent report from the McKinsey Global Institute takes an in-depth look at 23 different industry value chains around the world — and it also steps back to consider what this means for individual countries and workers. These shifts may favor some advanced economies, while posing steeper challenges for countries that missed out on the last wave of supply chain expansion.

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The next phase of globalization demands more attention to digital infrastructure, service capabilities, and workforce skills. Take a look at the full report, “Globalization in transition: The future of trade and value chains.”


By Jacques Bughin

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Photo by Franck V. on Unsplash

Europe should have been in the vanguard of the artificial intelligence (AI) revolution starting to transform business. After all, the world’s first autonomous car was a German Mercedes, 35 percent of the deep-learning models running in the world were invented in Europe, and Europe is home to more software developers than the United States. However, Europe is falling behind in the AI race — just as it did in the race to digital.

New McKinsey Global Institute (MGI) research finds that, on average, the 28 member states of the European Union (EU-28) could potentially add some €2.7 trillion, or 19 percent, to GDP by 2030, if they absorb AI according to their current competencies and assets. If they were to accelerate and catch up with the United States as a group, the potential could be as high as €3.6 …


by James Manyika, Chairman of the McKinsey Global Institute

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At this year’s World Economic Forum in Davos, many of the conversations I had focused on artificial intelligence (AI)and automation. Recent research at the McKinsey Global Institute (MGI) has touched on the economic benefits that can come from AI and automation adoption, particularly given weak recent productivity growth. Other MGI research shows some of the promising ways that AI, while not a silver bullet, can contribute to efforts to tackle the world’s biggest challenges including the United Nations’ Sustainable Development Goals. …

About

McKinsey Global Inst

The business & economics research arm of McKinsey & Company, covering topics like economics, capital markets, tech trends, & urbanization. mckinsey.com/mgi

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