Public and Private Avenues: How Franklin Equity Group Sees Digital Transformation

Franklin Equity Group has a long history of researching and investing in public and private companies across the technology space. In this article, Portfolio Managers Jonathan Curtis and Ryan Biggs share their insights on where they see opportunities in digital transformation and how they are thinking about the relative attractiveness of public and private company investment opportunities.

What is digital transformation?

Digital transformation is the process of using digital technologies to create new or modify existing business processes, products, services and customer experiences. It is not just about adopting new tools or platforms, but about fundamentally changing how a business operates and delivers value to its customers and stakeholders. We believe successful digital transformations can affect every aspect of a business, from strategy and culture to operations and innovation.

How do we research and invest in digital transformation?

We are constantly evaluating how various themes are influencing and being influenced by new developments from both public and private companies. To gather insights, we have found significant benefits from leveraging a global network of analysts, portfolio managers, venture capitalists and industry experts. These perspectives have shaped our own views, which today focus on 10 sub-themes within the digital transformation landscape: artificial intelligence, new commerce, electrification and autonomy, digital media transformation, cloud computing, fintech, digital customer engagement, IoT/5G, cyber security and the future of work.

Digital Transformation Key Pillars

Why do we think generative artificial intelligence and cloud computing are misunderstood by investors?

One of the sub-themes that we are particularly excited about is generative artificial intelligence (AI), which is the ability of machines to create new and original content, such as images, text, music and videos, based on data and algorithms. We believe generative AI can disrupt and transform various industries and sectors, such as media, technology development, entertainment, education, and healthcare. For example, generative AI can be used to create realistic and personalized digital content, such as movies, games, books and art, that can cater to the diverse and evolving tastes and preferences of consumers. Generative AI can also be used to enhance and optimize the design and production of physical products, such as clothing, furniture, and cars, that can meet the specific and customized needs and demands of customers.

However, we think that many investors misunderstand generative AI. These investors tend to focus on the ethical and regulatory challenges and risks associated with it, such as privacy, security and intellectual property. While these risks are valid and must be monitored, we also believe they can be addressed and mitigated by the responsible and ethical use of generative AI and the development and adoption of appropriate standards and regulations. In our view, investors tend to underestimate the positive and beneficial impacts and opportunities that generative AI can bring to society—such as enhancing creativity, innovation, and productivity—as well as improving access, affordability, and quality of digital and physical products and services. Our work convinces us that this generative AI opportunity will be measured in trillions of dollars in the years ahead.