Megatrend Analysis

Defining Megatrend Analysis

Successfully identifying, analysing and acting on megatrends is essential for success in consumer markets. The world is changing faster than ever, and it is becoming increasingly difficult to keep up with competitors as technology spurs both the rate of and access to innovation. Amidst this change, it can be difficult for companies to understand why industries are evolving in the way they are today, much less predict how they will evolve into the future. Megatrend Analysis allows companies to build a long-term strategy that is proactive, rather than reactive, making sense of where they stand today, but also ensuring they have a plan to remain relevant moving forward.

Megatrend Analysis allows companies to build a long-term strategy that is proactive, rather than reactive, making sense of where they stand today, but also ensuring they have a plan to remain relevant moving forward. Megatrend analysis enables businesses to better anticipate market developments and lead both incremental and disruptive change for their industries. This type of analysis can and should be leveraged as a key input to innovating all areas of a business, including both internal and external change.

The Importance of Megatrend Analysis

Megatrends shape both consumer and B2B industries in the present and will continue to do so into the future. For a business to thrive in a fast-paced market, meet disruptions directly and stay ahead of changes in consumer and customer behaviour, it must embrace the analysis of megatrends and incorporate them into core strategy. The broad, holistic view of megatrend analysis enables businesses to look outside their immediate category, industry, and market(s) to observe change having a direct or indirect impact on their future. A longer-term view allows businesses to ensure sustained innovation success, shift from reactive to proactive strategies and provides an opportunity to disrupt before competitors.

Megatrend analysis is not confined to new product development. Rather, megatrend analysis is a key input to innovating across all areas of a business and can be used for both internal and external innovation. For example, megatrend analysis applies to everything from redefining a company’s long-term vision or mission, to developing new business models better meeting the demands of tomorrow’s consumers, to innovating new production processes. Demonstrated below are some major areas megatrend analysis can be applied to a business:

A typical innovation process involves four key stages: discovery and idea generation, making the business case, prototyping and design and go-to-market strategy.

Megatrend analysis is an important part of the first phase of the innovation process, discovery and idea generation, as businesses make sense of market and consumer needs and identify whitespace opportunities for growth. Megatrend analysis helps businesses create a framework for innovating, from guiding the highest level strategic decisions to small, tactical renovations. While megatrend analysis should happen during the early stages of innovation to create a strong strategy, key identified megatrends should be discussed during each of the proceeding innovation phases, ensuring the final launch remains in line with the initial vision and goals. Many companies understand the value of megatrends and their potential for positive impact, but struggle with applying them to their business. First, it is important to understand which megatrends are most relevant to your industry and next, analyse how these megatrends are transpiring in your industry via trends and sub-trends.

Relevant case studies and new product or service launch examples help businesses comprehend the impact of megatrends and to ideate potential future implications or new applications. Next, quantifying current and forecasted impact enables businesses to prioritise which megatrends and industry or category level trends they innovate against and on what timeline. While megatrend analysis provides a starting framework, the application requires additional in-depth understanding at the lowest level in order to activate learning.

Four Step Megatrend Analysis

For companies operating in a rapidly changing global environment with growing competition, it is increasingly difficult to comprehend why branches of industry develop in certain ways. In view of this, the market-research company Euromonitor has produced a four-step method for carrying out megatrend analysis, which shows users where and how they can take advantage of megatrends to achieve long-term growth. An in-depth look at consumer lifestyles, attitudes and motivations can be a decisive competitive advantage and promote sustainable growth. And, according to the market-research company, successfully identifying, analysing and acting in accordance with megatrends is essential for success in the market. Using megatrend analysis, companies can develop proactive long-term strategies and apply them to their own growth strategy – this is shown by a newly published Euromonitor report describing a step-by-step analytical process.

Four-step megatrend analysis:

• 1. Define a megatrend: Despite lots of research into megatrends, there is, says Euromonitor, no universal definition. On the simplest level, a megatrend can be defined as something associated with changes in consumer behaviour or attitudes – with global consequences for all sectors. However, megatrends stand neither for short-term fads nor lasting behavioural changes that impact fundamentally on the market.
• 2. Establish what is driving long-term shifts in behaviour and attitudes: Euromonitor lists five superordinate factors that drive megatrends: **shifting economic power,
  • population change,
  • technology,
  • environmental shifts and
  • pressures as well as changing values.
• 3. Build an exhaustive list of megatrends: The market-research company lists 20 of the most influential megatrends that will mould the world up to 2030 whereby eight of them will have a far-reaching impact on industry and consumers:
  • Premiumisation: Prioritisation, increased expenditures on selected products.
  • Shopping reinvented: Constant process of change through economic and technological circumstances, the use of different platforms, the customer journey should create ties instead of being a pure transaction (i. a. via social media).
  • Healthy living: Through an increase in the number of illnesses, food intolerances and obesity, there has been an increase in demand for a holistic approach to spiritual and mental well-being, and physical health. This is reflected by lifestyle changes, inter alia, with respect to nutrition and beauty.
  • Ethical living: There is an increasing focus on moral values. This is reflected by corporate decisions regarding the environment, sustainability, animal protection, and production and working conditions. Companies are working on authentic environmental strategies (`green business`) driven by three main factors: awareness, availability and affordability.
  • Connected consumer: Consumers are using digital devices for shopping, which increase speed, comfort and direct access.
  • Experience more: The service sector is growing faster and more constantly than the goods industry.
  • Middle-class retreat: In developed markets, small to medium-sized companies are having difficulties holding their business position.
  • Shifting market frontiers: Unused potential and markets must be used to counteract future demographic, economic and technological developments. The challenges in this connection include expanding channels of distribution and identifying suitable consumers.
• 4. Pinpoint the megatrends which matter most for your business: The significance attached to the individual megatrends will vary according to the branch of industry concerned. Therefore, says Euromonitor, it is important to pinpoint the most impactful trends for your business through the integration of megatrend analysis in the corporate strategy.

The Megatrend Analysis Process

• Identify and assess: Identify the critical megatrends affecting your business. Evaluate causes, links and consequences of the complex interactions and overlap in trends. Identify new and emerging business models
• Evaluate and measure: Map the most influential multidimensional megatrends affecting your business. Evaluate the direction and speed of change and quantify the impact on your markets.
• Adapt and grow: Innovate and develop new solutions matched to future trends. Formulate strategies to prepare for potential threats. Inform long-term strategic planning.

How Megatrends Drive Innovation

Global megatrends represent changes in our world that have a sustained impact on everyone. There are many online references and reports that discuss their importance. Understanding how these megatrends impact your business can provide insight and inspiration into your future product portfolio. While one can argue which megatrend(s) will be the most influential, there is no doubt they paint an interconnected narrative that will have implications for product development. Drilling down into each megatrend can reveal opportunities for innovation.

• Digitalization has brought us the internet-of-things, artificial intelligence, augmented reality, 3D printing, and sophisticated robots. These tools can strengthen brands by creating product visualization applications, enterprise manufacturing and quality systems, robotic painters, and new types of polymers to literally print a structure in-situ. How are you leveraging these new tools?
• The aging population has resulted in an increased focus on everyone staying healthy longer. Consumers are more concerned about the toxicity of things in their home, and this may influence their buying decisions. How are you addressing their concerns with your future product offerings?
• The shift in global economic power has created wealth in previously poorer regions and changed supply chain logistics. Populations with increasing wealth are better able to buy products. Are you taking advantage of this increasing opportunity?
• Connected customers means on-demand access to information and products at the touch of a button. It has created the ability to instantly comparison shop and make decisions on what to purchase and how to pay for it. Witness the decline of many great retail brands like Sears and the growth of online brands like Amazon. The power of the connected consumer is real. How is your business working with the global online customer?
• The lower demand for oil and the increasing demand for alternative sources of energy from wind, solar, battery technology, and geothermal will continue. We already see a shift to more efficient means of transportation in battery-powered vehicles, self-driving cars, trucks and trolleys, and phone apps like Uber and Lyft, that provide us with convenient transport. Wind farms and solar panels will continue to be part of our landscape. How will the shift in these markets affect the way you deliver product?
• As climate change continues, natural disasters and abnormal weather patterns have resulted in water scarcity, flooding, forest fires, resource and food scarcity, and infrastructure damage. This creates the need for restoration products; better water-, mildew-, and UV-resistant technologies; and products that can be used in adverse conditions. Are you developing new products that address these issues?

Understanding how these megatrends impact your business and product development can provide a window into the future. Look at these trends as influencers in favor of disruptive innovation and new product opportunities, and your products will address the needs of future generations.

Tips for Using the Megatrends

• Avoid “all or nothing” thinking. Megatrends tend to make people think about inevitable and all-encompassing changes. In reality, the developments are rarely black and white. Urbanisation does not mean that everyone will live in cities, or that cities will remain unchanged. Automation does not mean that robots will take over all jobs, or that new jobs will not be created. It is advisable to challenge trends with countertrends and examine the tensions between them. This helps us see the shades of grey within them.
• Challenge assumptions and be open to different opinions. We often have preconceived notions about future directions of development. These notions tend to reflect our interpretations of the consequences of the megatrends. Nevertheless, we should challenge our preconceived notions and consider alternative interpretations. What factors do we expect to remain unchanged? When the population grows older, will life in old age remain the same as it is now? Does a rise in the standard of living inevitably lead to higher consumption? One good way to challenge one’s own assumptions is to discuss the megatrends with others and be open to different views.
• Complement the megatrends with weak signals. The megatrends paint a picture of changes that are happening now. However, in the post-normal age, we should also focus on discontinuities and surprises. Weak signals of emerging phenomena or the early symptoms of change help us consider less expected directions of future development.
• Examine the trends at the individual level. Megatrends help guide our thinking about changes at the global level. This may make it feel impossible to respond to them. How can we ever achieve the necessary major changes in society and our lives as quickly as they are needed? When we are faced with this kind of anxiety about the future, we should keep in mind that major changes have been achieved in the past, and changes are happening all the time. We just do not always notice the changes when they occur gradually. For added perspective, we should think about how the megatrends and the changes they necessitate are manifested in our daily lives.
• Don’t forget hope. In light of the megatrends, the future may appear threatening. Climate change, the ageing of the population and geopolitical power struggles may feel like insurmountable challenges and the future may appear lost. There are various threats out there. At the present time, it is important that we outline desirable futures. The tensions and uncertainties around the megatrends illustrate factors that we can influence.

Further Reading

• How Companies Can Use Megatrends Analysis To Anticipate Long-Term Societal Shifts Forbes
• Beyond the Noise The Megatrends of Tomorrow’s World Deloitte
• First to the Future! Capitalizing on Megatrends Analysis m Brain