Innovation Is Everywhere: Five Platforms for Growth
There are five evolving growth themes that could generate considerable economic value over the next five to 10 years, according to Franklin Equity Group’s Matt Moberg. He explains how innovation can be found in any part of the economy and where his team is uncovering it for their portfolio.
View the full paper “Investing in Innovation.” An excerpt follows.
We believe innovation can be found in any part of the economy and seek to invest wherever innovation occurs, regardless of sector classification, market capitalization or geographical location.
There have been significant breakthroughs in many sectors. To organize the change occurring in the economy, we have outlined five major evolving platforms of growth. These are not intended to be completely inclusive; in fact, we hope they are not. We expect these five platforms of growth to generate considerable economic value over the next five to 10 years.
We believe global e-commerce is an arena of tremendous opportunity. Per estimates, global sales were only 14% penetrated by e-commerce pre-COVID.1
Today, with the new reality of COVID, we have seen estimates of between 22%–25% penetration.2
Even in the United States, so-called “highly” penetrated industries, like travel, books, office supplies and media are, on average, only 41% penetrated.3 And, there are many more industries—like groceries and global transportation—that are only modestly penetrated by e-commerce.
Within global e-commerce, beyond companies like Amazon and Alibaba, we see significant opportunity in industries like fashion, automobiles, travel, ride sharing, restaurant delivery and even textbooks.4 We also see opportunity in payment companies that significantly remove friction, both in terms of ease of use, security and safety from the system.
Other opportunities include business-to-business (B2B) procurement, and software that enables brick-and-mortar companies to have an online presence. Drone manufacturers and other new ways to deliver packages and products could also become potential investments.
The common perception may be that global e-commerce is late stage. In our view, there is so much further to go.