The Evolving Economy

How technology is changing how companies and consumers interact

Robots were once a niche opportunity, but significant technological changes over the last few years, such as sensors and vision systems, are enabling more mainstream adoption of robotics and automation into a variety of consumer-facing markets.

The use of robotics has rapidly expanded

Industrial robots first evolved in the automotive industry in the 1970s, and were large, heavy pieces of equipment that were caged to keep them away from humans.  However, with the emergence of collaborative robots, or co-bots, robots can now work safely alongside humans to do the dull, repetitive, and sometimes dangerous, tasks that humans would prefer not to do.

Robots have also grown significantly more flexible and precise in the tasks that they can do, expanding their potential applications across multiple industries. They are also cheaper to own than they have been in the past, making them more accessible for smaller companies to buy and operate.

Total costs (US$ ‘000) of spot welding robot in US automotive industry:

Elsewhere, robotic surgery has moved from science fiction to life-saving reality, as demonstrated by the fact that Intuitive Surgical’s Da Vinci robot conducts over 750,000 procedures a year. A growing number of these patients have also elected to be operated on by a robot, as there are a number of benefits such as quicker recovery times and smaller scars.

In this way, robotics that were created in industrial settings are increasingly being applied across a variety of end markets. As a result, the market for robots is expected to grow at 10-15% per year until 2025 [IFR World Robotics Report, 2015].

Technology is influencing how companies and consumers interact

The rise of today’s connected consumer also means that companies are embracing such technologies to better interact with their customers via digital channels. In particular, online shopping is likely to continue displacing traditional high street shops as digitally-savvy retailers embrace warehouse and logistics automation to improve shopping experiences.

Even though it feels like e-commerce has already been around for a long time, just 9% of global retail sales are transacted online (source: Euromonitor International, Citibank “Technology at work v3.0”, August 2017), which allows for many years of double digit growth in the future.

E-commerce penetration :

We believe this growth is underpinned by two main drivers:

Firstly, digital native millennials are hitting their peak spending years, while older digital migrants are growing increasingly comfortable with transacting online.

Secondly, the global adoption of smart phones has given consumers in developing and developed markets the perfect tool to make quick, informed purchase decisions.

The four Ds of the digital economy

We see these trends as creating opportunities across the entire e-commerce value chain as traditional businesses embrace the digital economy. We refer to these opportunities as the four Ds:

  • Discovery – companies that help people find products through search engines, or digital marketing platforms such as Facebook.
  • Decision-making – e-commerce companies, web portals and mobile apps which provide consumers with convenient and reliable product choices, such as Alibaba or Amazon
  • Delivery – companies creating fintech solutions to keep pace with consumers’ increasing expectations of simple payment processes (such as PayPal) or using automation in order fulfilment for same-day delivery and returns.
  • Data & Enablers – digital companies which help traditional businesses migrate to the digital world. Examples include New Relic, which enables companies to monitor the performance of their website and apps, and Zendesk, which helps companies manage customer service over multiple digital channels.

What does this mean for investors?

The irrevocable trends of internet access and smartphone adoption will continue to influence the ways that consumers shop and interact with companies. These changes represent a significant opportunity for businesses to embrace technologies, which emerged from industry, to meet the constantly evolving needs of their customers across multiple industries.

This digital economy revolution is also still in its early stages, and we believe that the investable universe and diversification opportunities will expand as companies innovate and branch out into new business segments to reach more and more connected consumers.

In our view, identifying the companies that are anticipating these changes will be crucial to generating multi-decade growth, and our philosophy is to focus on innovative and disruptive businesses. To avoid niches and fads we also focus only where we see clear signs of commercial success and mainstream adoption.


See our infographic on the rise of industrial automation

Read more about how to distinguish innovation from investment reality


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