Have you noticed how the recession of 2020 actually accelerated the future in terms of advancing certain secular growth trends?
Cloud computing, e-commerce and video streaming all provided solutions and cost-saving efficiencies throughout the year, and investments in many companies tied to these trends performed well.
Our thought leadership pieces related to innovation were among the most popular pieces we published in 2020. Below, we invite you to explore our top-three blogs of the year.
We all know “great companies” when we interact with them as consumers. They feel different. They almost seem like they have some special power or special sauce that leads to great experiences, strong execution, and high customer satisfaction. At Evolutionary Tree, we believe that this specialness comes from companies having built a unique and effective culture.
Why should investors care about culture?
Whether it’s video streaming supplanting cable TV or e-commerce taking share from brick-and-mortar stores, most investors realize innovation is rapidly creating winners and losers across today’s economy. However, navigating this environment and keeping up with the pace of innovation can be extremely challenging. This issue of determining who the leading innovators are, as well as avoiding the companies being disrupted, is as critical as ever.
We performed an analysis of the S&P 500 Index and determined 25-30% of its constituents are being displaced by a relatively smaller group (just 15-20% of the Index companies) that is creating next-generation innovation and driving value creation. We call this group the Leading Innovators, as illustrated by the visual below.
In the Age of Innovation, we need to shift our thinking about where risk lies. Increasingly, the leading innovators are less risky as businesses (and investments) than non-innovators.
Traditionally, it was the defensive so-called “stable blue chips” that offered lower risk and solid returns. However, with the pervasive rise of digitization and related technology-enabled business models, industry after industry is undergoing massive change. Many describe it as disruption. We describe these secular trends as evolutionary shifts, which create opportunity (winners) and risk (losers) across the economy.