By Zachary Ochieng
McKinsey Digital has released its Technology Trends Outlook 2024. It provides crucial insights into the technological advancements that will shape the business landscape in the coming year. The report, conducted by the McKinsey Technology Council, identifies the most significant technology trends of 2024. It emphasizes how these developments can unlock new opportunities for companies amid a challenging economic environment.
“Despite challenging overall market conditions in 2023, continuing investments in frontier technologies promise substantial future growth in enterprise adoption.” The report notes. Among the standout trends are Generative AI [gen AI] and Electrification and Renewables. Both of which defied economic downturns and captured significant interest and investment.
Generative AI Leads the AI Revolution
Gen AI continues to dominate the technology landscape. So far we have seen nearly 700% spike in Google searches from 2022 to 2023. In addition, a significant increase in job postings and investments. “Gen AI has been a standout trend since 2022. With the extraordinary uptick in interest and investment in this technology unlocking innovative possibilities across interconnected trends such as robotics and immersive reality.” McKinsey highlights. This trend is reshaping industries with its advanced capabilities. Including text summarization, image generation, and video production, which are being integrated into enterprise software tools for diverse uses. From customer-facing chatbots to accelerating drug discovery.
Explore further: Combating Fraud and Financial Crimes in the Era of Generative AI.
“The pace of technology innovation has been remarkable. Over the course of 2023 and 2024, the size of the prompts that large language models [LLMs] can process. Known as ‘context windows,’ spiked from 100,000 to two million tokens. This is roughly the difference between adding one research paper to a model prompt and adding about 20 novels to it,” McKinsey report states. This evolution is pushing the boundaries of AI capabilities and driving greater innovation and deployment across sectors.
Electrification and Renewables Gain Momentum
According to the report, electrification and renewables emerged as the other key trend bucking the economic headwinds, posting the highest investment and interest scores among all the trends evaluated. “Electrification and renewable-energy technologies continue to capture high interest, reflected in news mentions and web searches. Their popularity is fuelled by a surge in global renewable capacity. Their crucial roles in global decarbonization efforts, and heightened energy security needs amid geopolitical tensions and energy crises,” McKinsey notes.
This trend has seen sustained public and private sector investment, bolstered by global efforts to enhance energy security and meet decarbonization targets. Job postings in this sector also showed modest growth, highlighting the ongoing need for specialized skills in the renewable energy space.
Resilience in the Face of Economic Challenges
Despite a 30-40% decline in technology equity investments in 2023 due to rising financing costs and a cautious near-term outlook. McKinsey’s analysis underscores a positive long-term trajectory for the 15 technology trends studied. “Although many trends faced declines in investment and hiring in 2023, the long-term outlook remains positive. This optimism is supported by the continued longer-term growth in job postings for the analyzed trends [up 8 percent from 2021 to 2023] and enterprises’ continued innovation and heightened interest in harnessing these technologies,” McKinsey explains.
The report also highlights that companies are strategically diversifying their investments across multiple technologies. With a particular focus on those that promise strong revenue and margin potential. This approach reflects a broader recognition that adopting and scaling cutting-edge technologies is a long-term endeavour, essential for staying competitive in an increasingly digital world.
Addressing the Skills Gap
While tech-related job postings saw a dip in 2023, the demand for specialized skills in high-growth areas like gen AI and renewables remains strong. The report found a significant skills gap, with fewer than half of potential candidates possessing the high-demand tech skills required. This highlights an urgent need for companies and educational institutions to focus on upskilling and reskilling the workforce to meet future demands.
“Even with the short-term vicissitudes in talent demand, our analysis of 4.3 million job postings across our 15 tech trends underscored a wide skills gap,” McKinsey states. “Despite the year-on-year decreases for job postings in many trends from 2022 to 2023, the number of tech-related job postings in 2023 still represented an 8 percent increase from 2021, suggesting the potential for longer-term growth.”
The analysis assesses quantitative metrics of interest, innovation, investment, and talent to gauge the momentum of each trend. Understanding the long-term and interconnected nature of these trends, the research delves into the underlying technologies, uncertainties, and questions associated with each trend.
