Where Will the Competition Arenas of the Next 20 Years Emerge?

McKinsey Global Institute’s October report "The next big arenas of competition" examines high‑growth, dynamic, and transformative sectors—called "Arenas"—that could significantly influence the world economy before 2040.

An Arena is defined by three keywords: Growth (e.g., the 12 identified arenas grew at a 10% CAGR from 2005‑2020 versus 4% for other sectors), Dynamism (measured by industry‑wide shuffle rates), and Transformation (attracting large investment to reshape industries).

The report proposes an "Arena‑Creation Potion" consisting of three essential elements: (1) a step‑change technology or business‑model breakthrough (such as the microchip invention or e‑commerce), (2) escalatory investments driven by scale economies, network effects, and the need to stay ahead (illustrated by the massive, ongoing spending of cloud giants like AWS, Azure, Alibaba Cloud, and Google Cloud), and (3) a large or rapidly expanding total addressable market. These factors usually appear in sequence, but their presence alone does not guarantee an arena.

Reviewing the past 20 years, the report lists 12 arenas—software, semiconductors, consumer internet, e‑commerce, consumer electronics, biopharmaceuticals, industrial electronics, payments, video & audio entertainment, cloud services, electric vehicles, and information‑enabled business services. Together they grew 9.2× in market value (versus 2.4× for other sectors), showed high shuffle rates (e.g., consumer electronics shifted from Sony/LG/Samsung dominance in 2005 to Apple/Huawei/Samsung in 2020), and contributed 49% of total corporate profit in 2019 compared with 9% in 2005.

Looking ahead, the report identifies 18 potential future arenas, grouped into three categories:

Continuing Arenas : e‑commerce, electric vehicles, cloud services, semiconductors.

Spin‑off Arenas : digital advertising (from consumer internet), AI software & services (from software), streaming video (from video & audio entertainment).

Emergent Arenas : space, cybersecurity, batteries, modular construction, shared autonomous vehicles, robotics, industrial & consumer biotechnology, future air mobility, obesity‑related drugs, video games, nuclear‑fission power plants.

AI software & services and cloud computing are projected to generate $1.5‑4.6 trillion and $1.6‑3.4 trillion in revenue respectively by 2040, with the 18 arenas collectively expected to produce $29‑48 trillion in revenue and $2‑6 trillion in profit.

Early markers for spotting emerging arenas include strong VC flows (60‑70% of 2003‑2007 VC went to arena‑related firms), high valuation multiples, and rapid revenue growth—each historically preceding arena formation.

For individuals, the rise of these arenas will reshape daily life, create new jobs, and render some traditional roles obsolete, while raising societal challenges such as data privacy, algorithmic bias, and responsible use of biotech.