“Haves”and “Have Mores” THE ACCELERATING
DIGITIZATION OF THE US ECONOMY MCKINSEY GLOBAL INSTITUTE February 2016

Digitization now touches every aspect
of the economy PERCENT OF US ECONOMY IMPACTED BY DIGITIZATION: 98%10% ICT* as a share of GDP, taking into account price effects 5% ICT* as a share of GDP in official statistics Retail via e-commerce Investment in ICT as a share of total investment Payments made digitally Freelancers who have done work online Adults with smartphones Households with broadband Adults who use social media Taxes that are e-filed Adults who use the Internet Millennials who regularly use e-mail Americans with access to high-speed wireless Internet Households subscribing to online video streaming services Americans who get news from online aggregators THE ACCELERATING DIGITIZATION OF THE US ECONOMY 01 Up to 98% of the economy: 98% 90% 87% 85% 74% 73% 64% 51% 42% 36% 28% 17% 13% *Information and communications technology

By 2025, digitization could contribute
up to $2 trillion to annual US GDP* THE ACCELERATING DIGITIZATION OF THE US ECONOMY 06 Total $2.2 Multifactor productivity Capital productivity Labor productivity Low estimate High estimate~0.5 ~0.8 1.6 ~1.3 0.3 0.4 Trillion *This sizing is not comprehensive and reflects only certain applications of big data, the Internet of Things, and online talent platforms. The potential for technology-fueled growth is much wider.

Those on the digital frontier
already do more, better, faster Faster revenue growth Faster productivity growth 2-3X faster profit margin growth THE ACCELERATING DIGITIZATION OF THE US ECONOMY 04

THE ACCELERATING DIGITIZATION OF THE
US ECONOMY 02 Some industries are more digitized than others ICT sector Finance and insurance Wholesale trade Oil and gas Advanced manufacturing Government Personal and local services Retail trade Education Transportation and warehousing Basic goods manufacturing Health care Construction Hospitality Selected sectors Overall digitization Assets GDP share Relatively low digitization Denotes leading digitized firms within relatively un-digitized sectors Relatively high digitization Employment share Productivity growth 2005-2014 CAGRUsage Labor INDUSTRY DIGITIZATION INDEX 5% 8% 5% 2% 3% 16% 6% 5% 2% 3% 5% 10% 3% 4% High level results from a sample of sectors out of 22 analyzed (November 2015) Digitization by area 3% 4% 4% 0.1% 2% 15% 11% 11% 2% 3% 5% 13% 5% 8% 4.6% 1.6% 0.2% 2.9% 2.6% 0.2% 0.5% -1.1% -0.5% 1.4% 1.2% -0.1% -1.4% -0.9%

Overall level of digitization More
digitization over time . . . and the digital leaders are maintaining an enormous lead over everyone else. THE ACCELERATING DIGITIZATION OF THE US ECONOMY 03 Overall Most digitized sectors Rest of US economy 1997 2005 2013 1x baseline 1.7x increase in leading sectors 4.1x increase in leading sectors 8% 12% 14%

Automation could accelerate the displacement
of middle-skill jobs to nearly twice the rate of recent decades THE ACCELERATING DIGITIZATION OF THE US ECONOMY 07 Up to 45% of tasks could be automated Up to 30% of tasks in 60% of jobs could be automated Millions of middle-skill jobs displaced 1960s 1970s 1980s 1990s 2000s 2007-15 2015-25 US MIDDLE-SKILL JOBS DISPLACED DUE TO TECHNOLOGICAL CHANGE 2 3 5 5 6 6 12 5% 7% 4% 6% 9% 8% 10% 13% 15% Low Estimate Medium Estimate High Estimate

Implications THE ACCELERATING DIGITIZATION OF
THE US ECONOMY 08 Companies Opt out at your peril Know where the digital frontier is–and realize that it's not waiting for you Just having IT is not enough–you need the "must-have" digital capabilities Beware competitors from everywhere Embrace and enable digital Ease the transition Don’t kill the goose, but solve for the issues together with technologists Adapt and learn Governments Individuals It's a great time to be a consumer and a user Embrace the evolution of your “job” Build digital savvy

MCKINSEY GLOBAL INSTITUTE Find this
report and other MGI research at: www.mckinsey.com/mgi MCKINSEY GLOBAL INSTITUTE @McKinsey_MGI