Technology Innovation

Ready for take-off: Why niche markets are the next big thing

December 13, 2022 5-MINUTE READ

RESEARCH REPORT

In brief

In the last 5 years, startups across 8 countries in Asia Pacific, Latin America and the Middle East saw venture capital investments akin to the US.
But many of the innovative solutions developed by these niche players remain subscale for too long.
As a result, the full potential of technology remains unlocked and prevents an enormous amount of societal value from being released.
As investment growth in today’s tech-propelled markets reaches an inflection point, they are on the cusp of becoming attractive to big businesses.

Tech-propelled markets: An opportunity not to be missed

Technology has the power to address some of the most pressing societal issues of our day. Think of how vertical farming is enabling food security, or how robotics is transforming elderly care. In tech-propelled markets, small, entrepreneurial companies are developing solutions that deliver both business and societal outcomes.

And startups are rushing in. Between 2017 and 2021, venture capital investments in startups across the eight countries in our study (Australia, Brazil, China, India, Indonesia, Japan, Singapore and the United Arab Emirates) grew 36%, reaching $361 billion. More importantly, over 50% of these investments went to tech-propelled markets.

But many of the solutions being developed remain too subscale for too long, ultimately failing to unlock the full potential of technology and preventing an enormous amount of societal value from being released. More mature tech-propelled markets, such as fin-tech in the Asia Pacific, have been on the radar of big banks in their pursuit of digital growth for many years. However, other tech-propelled markets—notably agri-tech, construction-tech and clean energy-tech—are still niche, waiting to be embraced by large industry players in a big way.

As investment growth reaches an inflection point, niche tech-propelled markets are on the cusp of becoming attractive opportunities for more big businesses.

In China, for example, agri-tech investments reached $1 billion in less than half the time it took in the US.

Years in China

Years in the US

*as of 2021

The exponential growth of agri-tech in Asia means that it is likely to catch up with the US much sooner than expected. With the rising importance of food production, agri-tech innovation is key to Asia’s new agricultural revolution.

Big businesses are missing in action

Despite intense interest from startups, big businesses make up only a very small percentage of the companies active in tech-propelled markets. The situation was particularly acute in health-tech and agri-tech, where less than 2% of the companies active had revenues above $5 billion. Large businesses that don’t heed the call of tech-propelled markets may lose out to the next wave of disruptive tech companies that emerge.

Less than three percent of companies active in tech-propelled markets had revenues above $5 billion. The low footprint means that innovation is happening on too small a scale to have the needed impact.

Sharpen your focus or face another disruption

Our study found that large companies active in tech-propelled markets have already uncovered opportunities that drive sustainable business growth and address unmet societal needs at the same time. When making a foray into niche tech-propelled markets, these companies adopt a lens that is simultaneously much wider and sharply focused on three key areas:

Opportunities in tech-propelled markets are about unlocking commercial and societal value in tandem. But only 42% of large companies measure societal value today. The strategic impetus lies in quantifying the dual potential of tech-propelled markets and using them to guide decision-making.

What can business leaders do?
Introduce a new market assessment practice that calls for critical evaluation of the dual value potential and helps decision makers see both sides of the value equation.

Start with tech-enabled solutions that are home-grown, in response to a well-defined local challenge. The strategic impetus is to use the power of your business to spread such solutions in other locations with similar issues.

What can business leaders do?
Turn tech-enabled solutions into universal solutions to address the needs of people within local mass markets—and strategically deploy them to other locations that face similar issues.

By 2025, over 80% of companies expect to work with technology partners. The strategic impetus lies in democratizing access to new tech-enabled solutions and leveraging new forms of partnerships outside of one’s industry boundaries.

What can business leaders do?
Work with mature startups and unconventional partners to spark change in your industry and bring technology innovations to more people, at speed.

Big businesses can make a big difference

With their resources, concentration of skills and ability to scale solutions, large companies are in a unique position to address some of the world’s most pressing societal problems. When they embrace this expanded mission, both wider society and the companies themselves benefit. It’s time for large corporations to step up and help unlock the full potential of niche tech-propelled markets, making them the playing fields of tomorrow.