4 ways innovation is changing business

Innovation. In today’s business environment, there’s no word more powerful and all-encompassing. Finance, education, healthcare, retail and transportation: No sector is immune. Every day, new companies are introducing technologies that have the potential to reshape entire industries and how people conduct their day-to-day transactions.

All you need to do is look at the success of companies like Uber to realize the scale and scope of the transformation enveloping our world.

The World Economic Forum calls this era of innovation the Fourth Industrial Revolution. In January government and business leaders met in Davos, Switzerland to discuss how to navigate these unprecedented changes. It is a monumental discussion, because the reality is that these regular and system-wide innovations will continue to crack the foundations of traditional industries for years to come. Businesses need to recognize this and make sure that they will be nimble enough to succeed wherever change takes them.

Venture Capital (VC) investors are ahead of the curve in this regard. In 2015, VC investors embraced new possibilities. The year was record setting, with over US$128 billion of VC investment globally – a 44 percent increase compared to 2014.

For most of the year, large deals were the cornerstone of the VC market. Sixty-seven VC-backed companies achieved a valuation of more than US$1 billion, earning them the coveted Unicorn status. This is compared to the 38 new Unicorns introduced in 2014. The focus of VC investors on mega-deals signified how much they want to capitalize on the Fourth Industrial Revolution.

While insights from the latest Venture Pulse report shows that the coming year is expected to reign in some of the more blue sky VC investing, VC investors will likely still be keen to invest in innovative companies that could set industries on their head – as long as they have their financial house in order – meaning a sound business plan, profitability model and low burn rates.

But what industries will change the most? That’s the beauty of the Fourth Industrial Revolution: Every industry is ripe for disruption. Every problem is one that can be solved in a more innovative way. A look at 2015 Unicorns showcases the breadth of innovation already transforming business. These companies are using innovation to:

Change how people shop and access services. Companies like Jet.com (US$500 million – Series B funding) – a club-based retailer selling goods based on real-time pricing algorithms, and Gerson Lehrman Group (US$212 million – Private Equity – II funding) – a membership-based platform that provides independent ad-hoc consulting services.

Change how people communicate. Companies like Vice Media ($US200 million – Corporate Minority – III) – a youth media company and digital content creation studio.

Change how people travel. Following in the footsteps of Uber, companies like Lyft ($US24.7 million – Series F) – a company connecting people who need a ride with people who have a car and GetYourGuide ($US50 million – Series C) – a destination services company for booking vacation attractions and activities.

Change how people dine. Companies like Ele.me ($US1.2 billion – Corporate Minority) and Deliveroo (US$100 million – Series D) are both online food ordering and delivery services.

These are exciting times, both for innovative companies and for VC investors. If you’d like to learn more about what happened in the VC world in Q4 or would like to stay abreast of key trends in venture capital activity and the innovations that will help shape the fourth industrial revolution, check out KPMG’s quarterly Venture Pulse Report, which we publish in association with CB Insights.

Note: Data has been sourced through the Venture Pulse Report (Q4’15). A global analysis of venture funding by KPMG International and CB insights (data provided by CB Insights).