Thematic Report

2020 Innovation

by Jun 20, 2016


Technology-driven “creative destruction” is impacting many different industries as information technology matures into the backplane of the global economy and society as a whole, and businesses undergo digital transformation. Following a frothy period, a funding slowdown for startups will provide established firms with attractive acquisition opportunities. Change is already accelerating within information-intensive industries like tech, media, retail, communications and financial services. Next up will be transport, manufacturing, agriculture, energy, materials and life sciences.

Add the bits together and stir
The information and communication technology (ICT) era is 40 years old. Cloud computing has industrialized IT, deflating costs and squeezing sector margins to the benefit of users and businesses pursuing digital strategies. Value has migrated from infrastructure to platforms, applications and applied analytics. The stage is set for a coming era of combinatorial innovation. Artificial intelligence, robotics, mobility and cloud will power new transformations at the intersection of digital, physical and biological domains. IT-driven deflation disrupts wages and economic “rents” from providers, as benefits accrue to consumers, innovators and transformational organizations.

The Unicorn Era winds down
After years of growth in venture-capital (VC) funding and investment, sentiment is turning more cautious, as the era of Unicorns (privately funded companies valued over US$1bn) fades with “down-rounds” and IPO investors increasingly leery. The pace of new-business formation has rebounded however. Expect belt-tightening among startups to lead to favorable tech M&A opportunities for buyers from different industries. Structural headwinds in the US include slippage in science, technology, engineering and mathematics (STEM) education, broken immigration policies, costly patent litigation and over-regulation.

Bits flow into currents
We update our technology “meta-themes” – transparent IT, intelligent systems and convergence – highlighting the importance of platforms for innovation. Software remains at the top of the tech value chain as the driving force in innovation, gaining strategic importance for non-technology companies as well.

10 themes frame innovations in the digital sphere and physical world
A new generation of high-growth businesses builds on connectivity, massive data-processing power, near-ubiquitous reach and powerful analytics. In this report, CLSA explores 10 themes with disruptive potential that bridge the digital and physical worlds: artificial intelligence, augmented/virtual reality, Blockchain, open source, security, clean disruption of energy and transportation, autonomous vehicles, robotics, 3D printing and the Internet of Things.

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