07 Jul 2021
Posted in Disruptor
GlobalData launches data-driven framework to identify innovation driven technologies
Technological innovation is relentless, progressively more impactful, and disruptive. This challenges the best of people to make informed decisions at the right time to avoid being disrupted, with added challenge of separating hype from reality. Against this backdrop, GlobalData, a leading data and analytics company, has launched ‘Technology Innovation Intensity (TII)’—a coherent, data-driven framework to identify leading innovation driven technologies.
Technology Innovation Intensity framework
TII leverages key innovation drivers like ‘patents’ and ‘deals’ from GlobalData’s proprietary alternative datasets to track a technology’s pace of innovation and its lifecycle stage. The TII indicator is composed of four factors: 1) Patent Applications 2) Patent Grants 3) Venture Capital (VC)/ Private Equity (PE) Deals and 4) M&A / IPO Deals.
Adarsh Jain, Director of Financial Markets at GlobalData, says: “Patents and funding are key drivers of tech innovation. Rising patent applications initiates the innovation process, followed by pick up in patent grants 1-2 years later. Patent grants confer ownership rights, opening-up commercial opportunities and incentivizes VC funding, which in-turn accelerates innovation intensity. This intensity stabilizes when patent grants peak, signalling limited future innovation potential, leading to slowing VC funding as they exit via IPO to fund the next emerging tech while incumbent firms merge and acquire firms exposed to tech they are weak in.”
GlobalData’s TII indicator is subjected to robust external validation to test its predictive nature. It is compared against thematic price indices, Google search trends and fundamental data and in each of these, the indicator inflects ahead of the reference series, which bestows credibility and validity.
TII indicator inflects ahead of the AI thematic price index confirming predictive nature of the indicator. GlobalData sees similar pattern across technologies, when indicators are compared to Google trends and other tech specific fundamental data points.
Real-world applications of TII
- Build ‘future-proof’ strategic technology roadmaps by selecting the right technology set to bet on. Looking ahead, Blockchain, AI, Hydrogen, 5G, Crypto, Insurance Tech, Autonomous Vehicles, Space Systems, Virtual Reality are among the leading innovation backed technologies to bet on.
- Construct custom basket of stocks ranking high on innovation intensity to enable thematic/tech investing to capture ‘innovation’ or ‘disruption’ factor premium / alpha. GlobalData’s Artificial Intelligence stock basket generates 5% annualised alpha over last seven years.
- Enable top-down start-up tech investing tool in the hands of PE investors and corporate M&A teams. GlobalData’s TII framework helps identify technology to invest in, while GlobalData start-up scorecard, used in conjunction with GlobalData’s Unicorn Prediction model selects top ranked start-ups with high unicorn probability in the identified technology.
Mr. Jain concludes: “Most often, views on the future potential of technologies are polarized due to the scant availability of relevant data leading to excess reliance on and extrapolation of anecdotal evidence clouded by personal biases. Amidst this, GlobalData provides objective assessment of a technology by leveraging real-word data and comparing proprietary indicators against external benchmarks to establish credibility / validity of conclusions. GlobalData’s TII indicators help clients navigate the complex and rapidly shifting technology landscape with more confidence.”
Please login to GlobalData’s webinar on 12 July 2021 to learn more.