The Future of Technology: Overcoming Headwinds and Unlocking Growth Potential
Introduction
Every year, Fortune publishes the Future 50, a ranking of the world’s largest public companies by their long-term growth prospects, co-developed with Boston Consulting Group. In this series, we assess trends related to the future growth potential of businesses.
A recent study showed that a small fraction of companies is responsible for the majority of wealth creation in the stock market. Digital technology players, including the “MAMAA” companies (Meta, Amazon, Microsoft, Apple, and Alphabet), have led the way in generating total value. However, the tech sector is currently facing several stumbling blocks, including government crackdowns and layoffs.
The Challenges Facing the Tech Sector
In China, the government has launched a crackdown on its tech champions, imposing data privacy measures and increasing antitrust vigilance. The US is facing increased public scrutiny over the impact of social media, while companies like Amazon are facing landmark monopoly cases. Geopolitical tensions and the effects of the pandemic have also impacted the tech industry.
Evidence from the Future 50
Despite these challenges, data from the Future 50 ranking suggests that technology will remain a key growth engine. The ranking consistently includes firms from the IT and communications sectors, which have outperformed the S&P 500 on revenue growth. B2B software providers and cleantech players are among the top-ranked companies in terms of growth potential.
How to Overcome Challenges and Unlock Growth Potential
To unlock growth potential, companies must follow a set of prerequisites:
- Identifying a specific application for the technology
- Defining a unique approach that is difficult to replicate
- Developing a plan for capturing and sharing the value created
- Having the capacity for continuous renewal
Companies such as Datadog and Spotify have successfully applied these principles to leverage technology and gain a competitive advantage. It is important for companies and investors to realize that embracing new technologies alone is not enough—identifying valuable applications, deploying the technology in unique ways, and capturing and sharing the value created are essential for sustainable growth.
Importance of the Operating Model
The Geek Way, a revolution in how business is done, is a key factor in the success of tech giants in Silicon Valley. Future 50 tech players exhibit cultural and structural characteristics that contribute to their growth potential, including heavy investment in R&D, youthful and stable leadership, lean corporate structures, and a long-term strategic orientation.
Conclusion
Despite current headwinds, technology is set to remain the growth engine of the global economy. However, embracing new technologies alone is not enough. Companies must identify valuable applications, deploy technology in unique ways, and capture and share the value created. The Future 50 companies exemplify these principles and demonstrate how technology can unlock growth potential. As AI and other technologies continue to evolve, investors should remain prudent and focus on companies that exhibit the prerequisites for sustainable growth.
Source: Why tech will remain the economy’s biggest growth engine
