Innovation and interest in the tech sector remain strong, despite market challenges and dips in investment. On this episode of The McKinsey Podcast, McKinsey technology experts Lareina Yee and Roger Roberts share findings from the McKinsey Technology Trends Outlook 2024 report. They talk with editorial director Roberta Fusaro about where innovation is exploding, interest is deepening, and investment is flowing.
In our second segment, from our CEO Insights series, McKinsey partner Blair Epstein explores how successful CEOs organize their yearly communication plans, including how to manage communications through a crisis.
This transcript has been edited for clarity and length.
The McKinsey Podcast is cohosted by Lucia Rahilly and Roberta Fusaro.
The state of technology
Roberta Fusaro: This is the fourth year in a row that McKinsey has released its outlook on technology trends. The research covers 15 trends, including advanced connectivity, cloud and edge computing, quantum computing, generative AI [gen AI], and applied AI. What parameters did you use for this research?
Roger Roberts: We look at several different dimensions. One, we look at innovation. So we try to assess how much innovation is happening in each trend. Then we look at interest, which tries to assess the volume and depth of dialogue that’s happening about each of these trends in the world. And then we look at investment—how much money is flowing into the companies and technologies that are enabling and driving the trends.
Roberta Fusaro: According to the latest research, innovation and overall interest in technology remains strong, although investment in new technology did fall. Lareina, what accounts for these findings?
Lareina Yee: In many ways, that’s not surprising. We are in a golden age of innovation and possibility in terms of technology. The drop in investment was between 30 percent and 40 percent, which is about $570 billion. What’s interesting is that, despite that drop in investment, we do see that there are pockets amongst the trends that are continuing to see a rise in investment. To no surprise, an example of this is gen AI. But what might be less expected is in areas such as robotics, as well as in climate and sustainability technology.
Roberta Fusaro: The research also showed a dip in job postings for tech talent. How much of that was due to macroeconomics, and how much due to other factors?
Roger Roberts: When we see the job-posting numbers, we also find those to be quite correlated with investment. Headwinds around investment turn into headwinds around talent addition. When we look at a multiyear picture, we see that talent demand remains strong against all of these trends. It’s especially impressive that in a few areas, such as AI and renewable energy, the talent demand continued to hold up, even this year in the face of significant economic headwinds.
Gen AI as an influencer
Roberta Fusaro: Lareina, in regard to gen AI, what stood out in some of the research that we did this year?
Lareina Yee: What is interesting is how gen AI is a catalyst. We think of it as sunshine that lights up many of the trends.
Some of it is good, old-fashioned analytical AI, machine learning. We see increases in interest and investment in those arenas, and we certainly see very interesting deployments. I’ve heard more about digital twins anecdotally recently than I have in the past couple of years. But also, there are impacts into other trends. The capabilities in gen AI are very relevant for robotics, which is one of the trends that we highlight this year.
Roger Roberts: I would also highlight that gen AI builds on the progress in cloud computing. It also builds on technologies that enable energy-efficient data centers fed by lower-carbon sources of energy supply. It also builds upon advanced connectivity to assure that users around the world have true access to the amazing capabilities rapidly evolving in the AI domain.
Robotics and digital trust
Roberta Fusaro: Lareina, you had mentioned two newer trends that were covered in this year’s report. One was robotics. The other one was digital trust and cybersecurity. Can you tell us more about why these two technology domains made the cut this year?
Lareina Yee: I think you have a combination of necessity as well as inspiration. If you want to start implementing gen AI, digital trust is a day one essential. So all of the things we do to create data security, to create a trust framework, to be able to use these models in safe and responsible ways while moving fast, are very connected to digital trust and security.
Roger Roberts: Robotics is obviously a form of automation that’s been around for a while—decades and decades. On the other hand, what’s changed more recently is the notion that robots can be designed and can adapt to more than just a few tasks.
The training of robots using modeling techniques that are either borrowed from or very similar to those for large language models and even the use of large language models themselves as components of robotic systems have opened up new vistas for robots to take a particular task, learn it, improve it, and then move on to additional tasks. And the notion that robots have become more and more general purpose has really drawn a lot more interest, innovation, and investment into the robotics sector, and we’re going to see an ongoing blooming of innovation in this domain.
The notion that robots have become more and more general purpose has really drawn a lot more interest, innovation, and investment into the robotics sector.
Roberta Fusaro: Can you give us an example of a cool use case for robotics?
Roger Roberts: Robots are getting better and better at food preparation. This is a skill that requires not just tactical picking and placing of items you might put on an assembly line. It also requires vision, assessment of context, understanding of changing conditions in the kitchen, and the flexibility to make many kinds of dishes on a menu that might also be constantly changing. And so the ability for robots to move into this domain has been an exciting development and certainly one that we’re starting to see more and more food preparation businesses experiment with and begin to scale up.
Lareina Yee: There are also broader pilots happening in the retail and consumer segment. For example, think about how you do stocking in inventory management. In the past, we’ve had robots and machines helping with these activities.
But with the infusion of gen AI, the robot might expand into some of these analytical capabilities. Before it was a very literal set of instructions. To oversimplify, before you could say, “You move left five feet, then you go straight two feet, then you move right one foot.” But with our current types of modeling and analytics, there could be more variation and judgment involved. And it’s not actually human judgment, but it may appear more like that.
Electrification, renewables, and quantum
Roberta Fusaro: There are two other standout trends mentioned in the report, both of which saw growth and investment: electrification and renewables. How can businesses use electrification to stay competitive?
Roger Roberts: Electrification has been a priority, given the need to move toward more and more carbon-free energy sources. As we transform toward carbon-free generation, then that drives demand into the electric grid, which then can create opportunities. It also can create some new constraints. This means a lot of development and a lot of innovation will need to come into our electric infrastructure.
To manage the grid better, we’ll need technologies and tools to manage the sources and uses that will provide the shock absorbers or storage technologies that help us balance the supply and demand in the grid. All of these are important areas of innovation and investment and are attracting a lot of interest these days.
Lareina Yee: One of the things that’s been interesting this year, in addition to the engineering and scientific advancements, is we’re seeing an increase in investments and incentives. Part of those incentives come from the government. For example, we’re seeing policy initiatives in Europe that provide incentives and subsidies in some cases.
But you also see private sector actors providing incentives. An example of this is that Cargill, in its agricultural program in many countries, will pay farmers who use sustainable techniques. And in electrification, you saw a huge surge in terms of Amazon and its investments in renewable energy. It’s a combination of the need that Roger talks about in terms of what we need in sustainable energy consumption but also increased incentives and investments and focus from both the public sector and the private sector.
Roberta Fusaro: What do leaders need to understand about what’s happening in the area of renewables?
Roger Roberts: This is another domain in which we’ve seen growth in the volume and velocity of technologies coming into the market. There is more and more deployment of current, strong, renewable tech in solar and wind. And there are more innovations that allow you to bring those new energy sources into the grid effectively. This will continue to be an important driver of productivity on the electric-power-generation side and also an important element of our global response to the climate challenge that faces all of us.
Lareina Yee: One of the trends that I’ve heard increased interest in that is not actually powered by AI but inspired by how that trend has evolved is quantum technology. Quantum experts debate whether that technology will be ready in the next couple of years, five to ten years, or even more—ten years out.
But what we’re seeing amongst many business leaders is at least an increased awareness. And why would that be? Quantum technologies are very different from gen AI, but they do have a similarity, which is that once they’re actually here and deployed, they will change the way we work very quickly. For example, banks are keeping an eye on the pace of quantum technology because that has the ability to massively change cryptography, which is important for banks.
The ebb and flow of tech development
Roberta Fusaro: Awareness is one aspect, but it leads to a broader question. What are some of the challenges that companies face with scaling some of these trends that we’ve been talking about?
Roger Roberts: When we think about all of these trends collectively, we see them moving down a path from science to engineering to scale. Sometimes the scientific breakthrough then runs into challenges when it comes to engineering scale-up. You’re moving from something that’s been proven in a lab to something that must be brought to a level of volume production, has to be brought down in cost, and must be brought up in consistency of quality.
That can take time and investment. It can take years of engineering effort. What we’ve observed recently is that if we think about the trends, like cloud computing and connectivity, collectively, these are allowing innovations to flow around the world more quickly.
If we think about the trends, like cloud computing and connectivity, collectively, these are allowing innovations to flow around the world more quickly.
As a result, we see this time cycle from science to engineering to scale compressing. This is exciting because it allows for more rapid propagations of innovations and their impacts positively in the world, but it also can cause concern. It can mean that challenges from technology can hit us before we’re ready. It means that a lot of work has to be done to thoughtfully consider the downstream implications of the introduction of new technologies at scale.
Lareina Yee: What’s also interesting is we’re just seeing the cusp of some of these breakthroughs. We will continue to see more and more capabilities on some of these. For example, if we look at gen AI, we’ve seen an explosion in terms of the multimodal models. They were there, but we’re starting to see more practical use cases of these.
We’re seeing changes in the context window size, which is the short-term brain of a gen AI model. We’re starting to see agentic AI models, which Roger and I just published an article on. It describes the ability of these models not just to summarize but to take an action. So even within these trends, you will see increasing technology innovations and capabilities that allow us to do more things.
Roberta Fusaro: Given the speed at which technology advances, the speed at which gen AI is advancing, do you have a few words for executives about how best to keep up?
Lareina Yee: My very short answer would be to play and be curious. One of the most outstanding things about these technologies is that you can play with them—you can experiment with them; you can learn about them. And so for the curious mind, it’s a playground.
Roger Roberts: Part of the answer here is also just making sure you’ve got some investment set aside, no matter the economic climate, in looking at the horizon, over the horizon, as you are navigating the challenges that face your business today.
And that small investment can sometimes pay off in big ways when you spot a trend that you can take advantage of and ride before your competitors. So keep your eyes on the horizon. Don’t fall victim to “short-termism,” no matter what the weather is around you.
Plotting out the CEO communication plan
Lucia Rahilly: Next up, McKinsey partner Blair Epstein talks about communication road maps, especially when prepping for a crisis, with managing editor of podcasts Laurel Moglen.
Laurel Moglen: There are many competing priorities for CEOs. Based on your experience with clients, what percentage of time do great CEOs spend on interactions with their stakeholders?
Blair Epstein: There isn’t a universal answer. It really will vary across CEOs. Now that said, we do know from our research that, on average, CEOs spend about 30 percent of their time with their external stakeholders.
But let me bring that variation to life. Brad Smith, when he was the CEO of Intuit, talked about how he spent 20 percent of his time with those external stakeholders. What that meant was if someone wanted to be a part of that 20 percent, they had to prove why they were a better use of his time than something else.
And now, I’ll contrast this with Peter Voser, the former CEO of Shell International. He spent about 50 percent of his time with external stakeholders because he felt it was critical for him to be the primary ambassador for the organization to the outside world.
The amount of time CEOs should spend on stakeholder engagement depends on their priorities, where they are in their tenure, and what’s going on. However, 30 percent is a good average number to keep in mind.
Laurel Moglen: Whether CEOs are investing 20 percent or 50 percent of their time in stakeholders, what approaches to that time have you seen work?
Blair Epstein: First, they’re disciplined about planning for the year ahead. They’ll have a 12-month view of what they’ll do and when—investor calls, customer visits, and conferences. Of course, it’s dynamic. It will change. But that helps set the priority for the year and define some of the anchor points of their stakeholder engagement.
The second thing they’ll do is that they’ll align stakeholder interactions with their strategic agenda, and they’ll make the most of every opportunity. CEOs, especially today, are on the move quite a bit. When they visit a given place, they’re going to fit in community events, interactions with government regulators and stakeholders, and employee town halls. They’re making the most of every moment so that engaging the right stakeholders isn’t a trade-off. It becomes an “and” with other things on their agenda.
As I mentioned earlier, they’re going to set a limit. Typically, we find that they set those boundaries based on a few questions: Does the stakeholder help reinforce or augment our strategy? Are there opportunities to cocreate strategy and infuse new thinking by engaging the stakeholder? Are there long-term or short-term risks in engaging or failing to engage the stakeholder and in doing it now?
Laurel Moglen: CEOs must always be prepared to manage crisis. How does that fit into a CEO’s communication approach?
Blair Epstein: It’s a great question because the reality is, from 2010 to 2017, headlines that carried the word “crisis” alongside the names of the 100 largest companies on the Forbes Global 2000 appeared 80 percent more often than they did during the previous decade. We can attribute that to a few things.
One is that there’s heightened demand for business leaders in this era of stakeholder capitalism. And we’re in an increasingly complex geopolitical landscape. There’s a saying: good news travels fast; bad news travels faster. I think we could say that false news travels fastest.
These factors can come together to create a perfect storm, with the CEO at the center.
Laurel Moglen: Would you say it’s not a good idea to avoid the storms?
Blair Epstein: I don’t think it’s even an option. This is something that comes up often in our conversations with new CEOs, who may not have found themselves engaging with stakeholders in this way prior to stepping into the role. You don’t have a choice. The storm will find you. The crisis will find you. The only question is, how prepared are you for it?
Laurel Moglen: What do the best CEOs do to prepare for such storms in this risk-heavy environment?
Blair Epstein: There are four things that we see CEOs consistently doing. The first is that they’re going to regularly stress test the company. They’re looking five, ten years out to assess what challenges they may face, what scenarios they may encounter. And then they work backward from that to adjust plans and build in more resilience for the organization today.
Second, they’re going to have a built-in command center. We’re in an always-on world, and that means that there must be capabilities embedded across the organization to quickly monitor, manage, and disseminate relevant information not only across the organization but to those key external stakeholders when the storm starts brewing. This is typically a cross-functional team, including comms, legal, risk, and executive employees, all of whom have a clear sense of direction on how to manage short- or long-term risks before and during the storm.
The third piece is that CEOs have to keep a long-term perspective. They have to have an ability to be in the moment, to manage what’s happening now, while also thinking about what’s around the corner, the potential opportunities that could arise out of a crisis.
And lastly, and not to be underestimated, the CEOs are personally resilient. They’re able to lead by example, to be a steady, a guiding force, the calm captain at the helm, so that they can mobilize teams and stakeholders to navigate the roughest waters.
Laurel Moglen: Is there one of these four that CEOs more commonly overlook or ignore?
Blair Epstein: One of the pain points I see is when people think about crisis management as a communications exercise, it’s easy to miss that opportunity to have done the scenario testing. To have gotten yourself ready in advance so that your strategy may evolve puts you in a better position to navigate any eventual storms.
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