Building Trust Is the Key to Unlocking High-Growth Sectors
Earlier this week, McKinsey revealed details of 18 emerging arenas that they project will reshape the global economy by 2040, generating between $29 trillion and $48 trillion in revenue.
In its ‘The Next Big Arenas Of Competition’ report, McKinsey presents business arenas ranging from AI and E-Commerce to semiconductors, cybersecurity and space, all, if you look closely, influenced by the evolution of technology and the value it is helping unlock.
Investment in R&D and companies in these arenas and their sectors are creating transformative solutions that are delivering value and growth. Countries and economic markets around the world are themselves recognising this and where needed are having to redesign their regulatory landscape to support these emerging technologies and the markets and value they can deliver.
Looking closely at the report, what you see are investment opportunities that venture capital, corporate venture capital and nation states can help deliver growth and an improvement in quality of life.
Just look back at the investment made in 2005 and before in semiconductors and electrical components and the services that this has unlocked - cloud computing, AI and many more services that require the processing power that we experience today. The investment made in these arenas and sectors back then has delivered not just a financial return but transformative technology.
Just look at AMSL semiconductor companies like and Arm, NVIDIA, TSMC (Taiwan Semiconductor Manufacturing Company), AMD (Advanced Micro Devices) and how their designs and physical components drive the world we live and work in.
The Next 10 Big Arenas of Competition
Here are 10 out of the 18 emerging arenas of competition as outlined by McKinsey and it's The Next Big Arenas Of Competition’ report.
In each of these 10, you will see details of the growth potential of these arenas and companies within each arena, as well as a summary of the investment needed and the regulatory and strategic communications required to support the financial growth and market adoption.
1. E-Commerce
Growth Potential: Expected to grow from $4 trillion in 2022 to between $14 trillion and $20 trillion by 2040 (CAGR of 7-9%).
Investment Needs: To fuel this growth, e-commerce platforms require funding in logistics, AI-driven personalisation, and cybersecurity.
Regulatory Support: Streamlined cross-border e-commerce policies and updated data privacy regulations will be essential.
Strategic Communications: Building trust through transparent operations and aligning with international trade policies will enhance reputation and foster stakeholder confidence.
2. AI Software and Services
Growth Potential: From $85 billion to $4.6 trillion by 2040 (CAGR of 17-25%).
Investment Needs: Significant R&D in advanced AI applications across healthcare, finance, and consumer markets.
Regulatory Support: Establishing ethical AI frameworks will be crucial to managing data use and ensuring public trust.
Strategic Communications: Companies need clear messaging on AI’s societal benefits and ethical considerations to build public and governmental trust.
3. Cloud Services
Growth Potential: Set to reach between $1.6 trillion and $3.4 trillion by 2040.
Investment Needs: Investments must focus on scalable infrastructure, secure data handling, and edge computing.
Regulatory Support: Harmonised data sovereignty laws across regions to support global cloud adoption.
Strategic Communications: Engaging with local regulators and communities to address data use and cybersecurity concerns will be vital.
4. Electric Vehicles (EVs)
Growth Potential: Estimated to grow to $3.2 trillion by 2040 (CAGR of 10-12%).
Investment Needs: Funding for battery technology advancements, charging infrastructure, and sustainable production.
Regulatory Support: Incentives for battery recycling and emissions reduction targets.
Strategic Communications: Positioning EVs as central to climate goals and mobility innovation can attract broad stakeholder support.
5. Digital Advertising
Growth Potential: Expected to reach between $2.1 trillion and $2.9 trillion by 2040.
Investment Needs: Enhanced data analytics, machine learning, and privacy-first advertising technologies.
Regulatory Support: Alignment with evolving data privacy regulations, like GDPR and CCPA.
Strategic Communications: Transparent and responsible data usage will be essential for maintaining advertiser and consumer trust.
6. Semiconductors
Growth Potential: From $630 billion in 2022 to $2.4 trillion in 2040.
Investment Needs: Accelerated chip design, materials, and manufacturing innovation.
Regulatory Support: National and international policies for secure semiconductor supply chains.
Strategic Communications: Clear articulation of semiconductors’ role in technological independence and security is vital.
7. Shared Autonomous Vehicles (SAVs)
Growth Potential: Projected at up to $2.3 trillion by 2040.
Investment Needs: High upfront investments in technology development, safety, and infrastructure integration.
Regulatory Support: Safety standards and legal frameworks for autonomous operation and liability.
Strategic Communications: Educating the public on safety, benefits, and regulatory compliance will encourage acceptance and adoption.
8. Space
Growth Potential: From $300 billion to up to $1.6 trillion by 2040.
Investment Needs: Investment in satellite technology, space tourism, and planetary resources.
Regulatory Support: Multinational cooperation on space exploration and usage rights.
Strategic Communications: Transparent goals for societal benefits like communications, research, and environmental monitoring are crucial.
9. Cybersecurity
Growth Potential: Expected to reach between $590 billion and $1.2 trillion by 2040.
Investment Needs: Innovations in AI for cybersecurity, quantum encryption, and cybersecurity as a service.
Regulatory Support: Stronger data protection laws and industry standards for resilience.
Strategic Communications: Building a reputation as a trusted data guardian will differentiate leaders in this high-stakes sector.
10. Batteries
Growth Potential: Growing from $98 billion to $810 billion and $1.1 trillion by 2040.
Investment Needs: Scaling production of sustainable batteries, enhancing energy density, and recycling facilities.
Regulatory Support: Policies supporting sustainable extraction of battery materials and efficient recycling practices.
Strategic Communications: Emphasising sustainability and energy efficiency will be key in attracting environmentally conscious stakeholders.
What Is Needed To Unlock Growth
Investment
Investment is critical to unlock growth, and finding the right balance between public and private investment and regulatory frameworks can make or break opportunities.
From a source of capital, the better-known investors are venture capital companies (VCs). They typically fund startups in exchange for equity, aiming for high returns within 7-10 years. This investment cycle incentivises early-stage growth and rapid scaling, with a preference for achieving substantial revenue or market share dominance in a shorter timeframe. VCs often have defined exit strategies, such as IPOs or acquisitions, to realise profits within this timeframe.
It’s worth noting that the success rate of VC investments can be relatively low. Approximately 75% of VC-backed startups do not return the original investment, and only around 25% achieve significant profitability or market exit, often through an IPO or acquisition.
Corporate Venture Capital (CVC) companies, created by large corporations, invest in startups that align strategically with the parent company’s objectives. Unlike traditional VCs, CVCs can have a longer investment horizon and are often less focused on immediate financial returns, allowing startups more time to mature. Startups benefit from the corporation’s network, resources, and distribution channels, which can be crucial for market entry and brand recognition. Examples include Google Ventures, Samsung Ventures, and Novartis Venture Fund, which offer substantial industry insights and access to expansive networks.
Private Equity (PE) firms typically engage at later stages, focusing on companies with demonstrated stability and revenue potential. Their investments often support startups in scaling operations, preparing for an IPO, or making acquisitions. They have a shorter investment horizon than VCs, generally seeking profitability and returns within five years.
Meanwhile, Sovereign Wealth Funds (SWFs) increasingly invest in new technology companies, often focusing on high-growth sectors like artificial intelligence, biotechnology, and fintech. Funds such as the Public Investment Fund (PIF) of Saudi Arabia, GIC of Singapore, and Mubadala Investment Company from the UAE are some of the most active players in this space. Their strategies usually focus on leveraging patient capital to gain long-term returns, provide national economic diversification, and access innovation ecosystems supporting national growth agendas. Unlike traditional venture capital firms, SWFs typically have extended timelines, often 10 to 20 years, allowing technology startups more time to mature before expected profitability.
Long term vision
Knowing the growth timeline for a new company, sector and/or arena is critical if investment is going to be made. Some investors want a quick return, while others if positioned correctly, can support over a long period, which is why the effective public, private and transparent communications are critical in helping innovative and transformative companies establish themselves.
For example, Look at Amazon, which was founded in 1994 and made and received US $8 million from Kleiner Perkins in a Series A fundraising two years later in 1996. The following year, in 1997, Amazon went public, raising $54 million at an IPO price of $18 per share, valuing the company at approximately $438 million. At this early stage, Amazon was primarily an online bookseller, generating just $15.75 million in revenue from about 80,000 average daily site visits. It didn’t make a profit until 2003.
Twenty years on, in 2023, Amazon generated revenues of $574.79 billion and profits of $30.4 billion. $231.87 billion of its revenue came from its online stores, yet its most profitable division was Amazon Web Services (AWS), which was founded in 2006 and took nearly nine years to make a profit. In 2023, AWS generated $90.8 billion in revenue, with over $24 billion in operating profit, cementing its role as Amazon's most profitable segment and confirming the vision, investment and long-term focus needed.
Regulatory alignment
Having the right regulatory framework is critical in unlocking growth in innovative sectors. Here are three reasons:
Encouraging Investment: Clear regulations provide a predictable environment that attracts investment by reducing uncertainty. For instance, Singapore has established a supportive regulatory framework for fintech, leading to increased investment in its digital banking sector and its reputation as a leading financial hub in Asia. When investors have confidence that regulatory barriers are manageable, they are more likely to back high-potential, innovative companies.
Enabling Cross-Border Expansion and Market Access: Harmonised regulations allow companies to expand into new regions more smoothly, particularly in cloud services and data-driven businesses. The GDPR in Europe, for example, established standardized data privacy laws that not only protected user data but also helped tech companies adapt their systems for broad compliance. This has allowed global companies to operate within the EU without facing disparate legal requirements in each country.
Creating Trust and Safety Standards: Regulatory frameworks can set essential standards for safety, privacy, and transparency, especially in fields like artificial intelligence (AI) and financial technology (fintech). For example, the EU’s AI Act, implemented in 2023, mandates risk assessments and transparency for high-risk AI applications, fostering public trust and aligning business practices with ethical standards. Such regulations encourage responsible AI innovation, helping companies avoid legal pitfalls.
Working with countries and regulatory bodies is critical to help deliver growth, not just for companies in sectors and arenas but also for countries.
Building fact-based narratives is critical to support regulatory stakeholders and the audiences they support and influence.
Trust and Reputation
Trust and reputation are critical for emerging companies, particularly in transformative sectors where consumer and investor confidence drives long-term success, as this McKinsey report outlines.
Trust acts as a performance multiplier, with studies showing that trusted companies often outperform their competitors by up to 400% in market capitalization, return on equity, and shareholder returns.
By building trust, companies can boost their financial performance and secure sustained buy-in and preference from investors, employees and business and/or consumer customers. This loyalty directly influences revenue growth and market dominance, especially as customers are more likely to stick with brands they trust, even during times of crisis or industry shifts.
Meanwhile, reputation helps companies mitigate risks related to regulatory scrutiny, public perception, and market challenges. For instance, trusted brands receive less negative media coverage and regulatory intervention, creating a stable environment for further investment and innovation.
In the current AI and tech space, transparency, as demonstrated by companies implementing responsible AI practices in line with frameworks like the EU AI Act, boosts stakeholder confidence, reducing friction with regulators and building a positive brand image that can sustain market position and financial growth.
Investing in building trust and establishing a solid and positive reputation equips companies with the ability to unlock substantial financial and market value, positioning them for robust growth and resilience in competitive, rapidly evolving markets.
Such investments, when strategically aligned with skilled execution in transparency, customer experience, and regulatory compliance, are a powerful differentiator for transformative businesses today. Growth only happens when companies, consumers and other stakeholders have trust and confidence.
From the 18 sectors outlined by McKinsey, some already established, you see not just leaders and their future pathway to growth but also the opportunities that start-ups in specific industries and arenas have.
The world of tomorrow must also be built based on the trust that stakeholders give these new transformative technologies and opportunities.
Positioning for the Future: A Call to Action for Leaders
As these sectors take shape, businesses must align with an evolving regulatory landscape and prioritise strategic communications and stakeholder engagement to unlock full growth potential.
Investors and policymakers will find unique value in an approach that champions transparency, collaboration, and societal benefits, ultimately supporting businesses’ reputation and trust.
For leaders, partnering with an experienced strategy and communications advisory offers a valuable path to navigate these complexities and position their company and investment at the forefront of tomorrow’s economy.
These arenas present compelling opportunities for forward-thinking investors, business leaders and policymakers. Embracing targeted investments and strategic stakeholder engagement is critical to unlocking these sectors’ full economic and societal potential by 2040.
