s t r at e g y

march 2008

Dissecting global trends:

An example from Italy
Executives should examine the impact of trends on subindustries, segments,
categories, and micromarkets before placing their bets.

Stefano Proverbio, Sven Smit, and S. Patrick Viguerie

Article To ride the waves of change successfully, executives must apply a fine-grained approach
at a when they act on megatrends.
glance
To show what that approach looks like in practice, we analyzed the market impact that one
important trend—aging populations in developed economies—will have in Italy. We found
that health care and some other industries will grow more quickly than they did before, while
the impact on others will be negative. The growth prospects for subindustries and product
categories within the health care sector vary a good deal.

Capturing the opportunities to capitalize on aging and other megatrends will therefore force
companies to develop specific insights into microtrends before making strategic growth
decisions and allocating resources.
Executives know they must incorporate social and environmental trends into their
strategies,1 but few act on trends in ways that would allow them to ride the waves
successfully. Our experience, backed by recent research, suggests that companies
should navigate important trends by first studying their impact on subindustries,
segments, categories, and micromarkets. That kind of analysis breaks down
megatrends into microtrends that companies can invest in with confidence. When
they do, they are applying an approach similar to the one they should use when
targeting growth opportunities in any market.2

Indeed, we find that the importance of taking a granular view of where to compete
can hardly be overestimated. We compared the global growth rates of industries
with those of an international sample of 416 large companies, from 1999 to 2005.
We found that we could explain why some companies grew faster than others only
by measuring their exposure to subindustries and product categories.

To show what that approach looks like in practice, we analyzed the market impact
that an important trend—aging populations in developed economies—will have in
Italy, which has one of the world’s most rapidly aging populations, because of low
birth rates and a high life expectancy. The starting point for a granular growth and
trend analysis is to break down market information into increasingly fine-grained
levels (Exhibit 1)—from the world market (which we call G0); to 24 broad industry
groups,3 such as health care equipment and services (G1); to 151 individual
industries (G2). These, in turn, can be divided both by subindustry and by country
or region (G3) into product categories such as antihypertensive drugs (G4).

EX HI B IT 1
Levels of granularity

1
G0. At the world-market level, we estimate that aging populations will
reduce global GDP by 0.1 percent a year until 2020. In Italy, the impact
will be virtually neutral—lowering GDP by just 0.03 percent a year. This
gap offers no useful information for an executive considering whether
to ride Italy’s trend to aging.

G1 and G2. At the level of industry groups and individual industries, the
impact of aging clearly varies across the Italian economy (Exhibit 2). We
estimate that changes in the age mix will increase demand for health care,
housing, energy, and food and beverages by 0.15 percent (food and
beverages) to 0.30 percent (health care) between now and 2020.
Conversely, industries such as apparel, furniture, and automobiles are
all likely to suffer a drop in demand of around 0.15 percent a year over
that period. Games, toys, and sports will likely be hardest hit, with an
annual decline of 0.4 percent. Aging will therefore have a positive
impact on some Italian industries and a negative one on others. But
industry averages don’t tell executives enough to make specific decisions
about where to compete.

E XH IB I T 2
Scrutinizing a megatrend

2
 G3. At the subindustry level, we find that the impact of aging varies
widely. Many subindustries in Italian health care, for example, are likely
to grow faster as a result of aging, but often at significantly different
speeds. We estimate, for instance, that changes in the age mix will
probably allow the pharmacy subindustry to grow by an additional
0.43 percent a year from now to 2020, compared with 0.22 percent for
health-related goods and services.

G4. The product category level provides the most fine-grained view of
the differences in the impact of aging. It is at this level that executives
should make most of their detailed decisions about allocating resources.
Within the pharmaceutical industry, for instance, we expect aging to
increase demand in Italy and elsewhere for certain drug categories, such
as antihypertensives and calcium antagonists, and to reduce demand
for others, such as beta-blocking agents.

So while the Italian health care market and its counterparts in many other developed
economies will give companies chances to benefit from the aging trend, these benefits
About the Authors
are unevenly distributed among industries, and many can be found only deep within
Stefano Proverbio
is a director in industries. Capturing such opportunities will therefore require business leaders to
McKinsey’s Milan develop specific insights into microtrends before making strategic decisions about
office, Sven Smit is
a director in the growth and the allocation of resources.
Amsterdam office,
and Patrick
Viguerie is a Notes

director in the
Atlanta office. This 1
See “Acting on global trends: A McKinsey Global Survey,” mckinseyquarterly.com, April 2007.
article is adapted
from The Granularity 2
See Mehrdad Baghai, Sven Smit, and S. Patrick Viguerie, “The granularity of growth,” mckinseyquarterly.com, May
of Growth: How to
2007.
Identify the Sources
of Growth and Drive 3
We used the Global Industry Classification Standard (GICS), developed by Morgan Stanley Capital International
Enduring Company
(MSCI) and Standard & Poor’s.
Performance, by
Patrick Viguerie,
Sven Smit, and
Mehrdad Baghai, to
be published in the
United States by
Wiley Publishing in Related Articles on mckinseyquarterly.com
April 2008.
“Acting on global trends: A McKinsey Global Survey”

“The granularity of growth”

“The do-or-die struggle for growth”

“Extreme competition”

“Staircases to growth”

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