Executives know they must incorporate social and environmental trends into their strategies,¹ but few act on trends in ways that would allow them to ride the waves successfully. Our experience, backed by recent research, suggests that companies should navigate important trends by first studying their impact on subindustries, segments, categories, and micromarkets. That kind of analysis breaks down megatrends into microtrends that companies can invest in with confidence. When they do, they are applying an approach similar to the one they should use when targeting growth opportunities in any market.²

Indeed, we find that the importance of taking a granular view of where to compete can hardly be overestimated. We compared the global growth rates of industries with those of an international sample of 416 large companies, from 1999 to 2005. We found that we could explain why some companies grew faster than others only by measuring their exposure to subindustries and product categories.

To show what that approach looks like in practice, we analyzed the market impact that an important trend—aging populations in developed economies—will have in Italy, which has one of the world’s most rapidly aging populations, because of low birth rates and a high life expectancy. The starting point for a granular growth and trend analysis is to break down market information into increasingly fine-grained levels (Exhibit 1)—from the world market (which we call G0); to 24 broad industry groups,³ such as health care equipment and services (G1); to 151 individual industries (G2). These, in turn, can be divided both by subindustry and by country or region (G3) into product categories such as antihypertensive drugs (G4).

• G0. At the world-market level, we estimate that aging populations will reduce global GDP by 0.1 percent a year until 2020. In Italy, the impact will be virtually neutral—lowering GDP by just 0.03 percent a year. This gap offers no useful information for an executive considering whether to ride Italy’s trend to aging.
• G1 and G2. At the level of industry groups and individual industries, the impact of aging clearly varies across the Italian economy (Exhibit 2). We estimate that changes in the age mix will increase demand for health care, housing, energy, and food and beverages by 0.15 percent (food and beverages) to 0.30 percent (health care) between now and 2020. Conversely, industries such as apparel, furniture, and automobiles are all likely to suffer a drop in demand of around 0.15 percent a year over that period. Games, toys, and sports will likely be hardest hit, with an annual decline of 0.4 percent. Aging will therefore have a positive impact on some Italian industries and a negative one on others. But industry averages don’t tell executives enough to make specific decisions about where to compete.

• G3. At the subindustry level, we find that the impact of aging varies widely. Many subindustries in Italian health care, for example, are likely to grow faster as a result of aging, but often at significantly different speeds. We estimate, for instance, that changes in the age mix will probably allow the pharmacy subindustry to grow by an additional 0.43 percent a year from now to 2020, compared with 0.22 percent for health-related goods and services.
• G4. The product category level provides the most fine-grained view of the differences in the impact of aging. It is at this level that executives should make most of their detailed decisions about allocating resources. Within the pharmaceutical industry, for instance, we expect aging to increase demand in Italy and elsewhere for certain drug categories, such as antihypertensives and calcium antagonists, and to reduce demand for others, such as beta-blocking agents.

So while the Italian health care market and its counterparts in many other developed economies will give companies chances to benefit from the aging trend, these benefits are unevenly distributed among industries, and many can be found only deep within industries. Capturing such opportunities will therefore require business leaders to develop specific insights into microtrends before making strategic decisions about growth and the allocation of resources.