Sizing up the future

Now that we are 3 years old, we are beginning to accumulate the data we need to check that what we are doing is having the intended effect. One thing we have always tried to do - even in the DTI days - was to apply criteria to find those areas and activities where there was an opportunity for UK based businesses to compete effectively. In the case of Innovation Platforms, we achieve this by working closely with Government Departments who are driving policy in the area, examining the likely impact of the policy implementation on the market, and then using that to inform those who could contribute towards addressing the challenge the policy is aiming for.

What we have realised as we look at our activities is that estimating future markets comes in many forms. In some markets, we can at least start with a linear extrapolation of the current state to give us a size - any specific change within that can be at least grounded in some logic!

For example, for our activity in low carbon vehicles, we know how many cars there are on the UK's roads at the moment (about 34 million), we know the past growth rate (about 600,000 a year) and can allow for the inhibiting effect of congestion on growth rate and so estimate that there will be about 40 million cars around in 2050. We also know the value and distribution of value from the cars currently sold and so can estimate the value of the market in 2050. The question that then remains is whether the cars we buy in 2050 will be highly efficient versions of what we drive today, pure electric, hybrid (probably series) or fuel cell powered.

Similarly, with our activity on Low Impact Buildings, we can apply the same logic. There are currently about 26 million houses in the UK. In a normal year we build about 250,000, although this has gone down to around 75,000 in the current economic downturn. So we can estimate that there will be around 35 million houses in 2050. As with the cars, we know the value and distribution of value for the houses we have at the moment, and so can estimate the value of the market in 2050. With new build, we can assume that the Code for Sustainable Homes will have done its job and that all new houses built between 2017 and 2050 will be highly energy efficient - but that will be only 25% or so of the total. We will need to have retrofitted the existing housing stock to similar efficiency standards. The good news is that this retrofitting will have lowered the household energy bills and the financial models needed to supply the necessary money are being developed now!

In other areas, it is more difficult to estimate the size of the market. At the moment, in the UK there are about 470,000 of each gender aged 45, and 98,000 males and 156,000 females aged 85. By 2050 those 45 year olds will be the 85 year olds and there will be 268,000 males and 328,000 females - an increase of 173% in the number of males and 110% in the number of females. This is just indicative - the number of those over 65 will have gone up by a greater percentage and everyone lives longer! However, in 2050, the number of 20-30 year olds that would be the doctors and nurses will be about the same as it is now. The result is that - from a purely mechanistic argument - we will need a new way to look after older people. Of course, the situation will be even more extreme because those older people (and I intend to be one of them) will be healthier and more active than those of today and will want more from life.

This much altered demographic will mean that health services will have to be very different and the overall approach of society to its senior citizens will need to radically change from what it is today. The basic numbers are easy to collect and analyse - the problem is to estimate the size of the resultant market. It gets more complicated when you realise that it is by no means clear who will provide services to this new "grey" sector of society. We assume that society will provide basic healthcare for those who are sick, but most of them (or should I say "us") will be defiantly well and may even wish to pay for a service that allows them to remain so. The extension of what we now call "private" healthcare may burgeon. Entirely new service providers may well evolve - perhaps as an extension of the current home services? There is a tacit acceptance by many that some kind of home based monitoring system may be used to enable early stage diagnosis of the diseases which befall older people and that a combination of medical treatment and lifestyle amelioration may be the package we want.

The question is, where the money will come from? Will we be using up our lifetime savings? Will there be an annuity that provides for our old age? Will we rely on our children to pay for our healthier old age? To estimate the size of the market, we need to consider what we would be willing to pay for to achieve a healthy old age.

One of the things I learnt from my time in business was that knowledge of the future market enabled us to develop products and services that people wanted to buy - and so went a long way towards sustaining the business. However, the level of investment we were prepared to make was dependent on the size of the market, the potential cost of providing those products and services and the likely competition we would face when we got there. What we are finding is that, once you get to the larger societal challenges and the opportunities they provide, and once you step outside of markets that already exist in some form, there is still a lot of work to be done to estimate what these future markets will be.


Last updated on Friday 24 February 2012 at 10:09

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