But a narrow focus on these technological leaps often leaves the more subtle but important progress of organisational, industrial design, and the move towards automation overlooked, according to Franklin Templeton, a global investment manager.

Francyne Mu, Portfolio Manager of the Franklin Global Growth Fund says: “Our experience has shown us, however, that these seemingly small tweaks can be game changers. For instance, when Henry Ford modified the assembly line in car manufacturing, this increased productivity and reduced costs, making the Model T accessible to every household and launching the age of the automobile.”

She says: “As managers of an investment strategy with a mandate to purchase companies driven by secular growth trends, we believe it’s worth reflecting on how these more subtle changes can act as a driving force at both the industry and company level to create new sustainable competitive advantages and profit pools.

“To illustrate this, let’s look at one of the pioneers of process improvement and how his insights transformed one of our oldest trades. The achievements of one of industrial designs pioneers Frank Gilbreth illustrates the gains that can be made by this subtle mode of progress. Gilbreth started his career as bricklayer’s assistant at the age of 17. Possessing a natural curiosity, he soon became determined to find out what the “one best way” of executing any given task on the jobsite might be.

“Through keen observation and measurement, Gilbreth determined that bricklaying could be made vastly more efficient simply by keeping the bricks both within a short reach of the workers and at waist height. To this end, he developed and patented a “Vertical Scaffold” apparatus which was estimated to at least double the productivity of each bricklayer. It almost goes without saying that this innovation provided Gilbreth and his construction firm a powerful competitive advantage.1

“That one of history’s oldest crafts could achieve a two-to-three-fold improvement in efficiency without the invention of any substantially new technology speaks to the power that intelligent organisational efficiency can have on society,” says Mu.

With this in mind, Mu reviews a few companies held by the Franklin Global Growth Fund that are continuing Gilbreath’s innovations by harnessing the power of both technology and systems engineering to create value for both themselves and their partners.

Rockwell Automation – Mining for efficiency

At their heart, Gilbreath’s innovations in the field of bricklaying were a function of keen observation and an ability to measure what mattered. Today, technology like the internet of things (IOT) and machine vision is empowering companies to digitise their workflow process and enable similar levels of productivity insights. Rockwell Automation is at the leading edge of building such IOT systems, one of which is their Factory Talk InnovationSuite (Factory Talk).

Factory Talk is a software platform that combines advanced analytics, machine learning, and Industrial IoT (IIoT) capabilities to improve organisational design in manufacturing settings. By integrating data from various sources within the factory, this platform provides real-time insights and predictive analytics that enable better decision-making, improved efficiency, and reduced downtime.

One example of how this technology is driving organisational efficiency is its deployment with Helsinki-based Mesto, a leader in sustainable minerals processing technologies. Metso offers its customers an IIoT-driven solution called Metso Metrics for Mining, which leverages Rockwell Automation’s FactoryTalk platform for predictive maintenance and asset optimisation, aiming to enhance productivity and prevent equipment failure and downtime.

FactoryTalk is deployed to connect to IIoT devices on essential equipment, collecting sensor data and securely transferring it to the cloud. Once the data is in the cloud, advanced AI algorithms within FactoryTalk analyse the information to detect failure patterns and alert managers of potential issues. At an Australian iron ore mine site, FactoryTalk, as a part of Metso Metrics, monitored the crushers’ data for known failure patterns and anomalies, enabling predictive maintenance and downtime avoidance. According to Rockwell Automation, this system detected a potential catastrophic event that could have cost the Miner more than A$1 million if it had not been addressed in time.2

By constantly pushing the boundaries of what is possible and embracing new technologies, Rockwell Automation is well-positioned to shape the future of industrial automation and bring about positive change for businesses and society alike.

Aptiv PLC – Driving innovation

Aptiv PLC, a global technology company specialising in automotive solutions. Aptiv’s business started by focusing on integrating components for vehicle safety and has since evolved to develop integrated systems for autonomous driving and fleet management.

Aptiv is transforming the automotive industry with its advanced technologies and systems. The company’s expertise in areas such as vehicle connectivity, electrification, and advanced driver-assistance systems (ADAS) is enabling the development of more intelligent and connected vehicles. These advancements not only improve the driving experience but also pave the way for a more efficient and environmentally friendly transportation ecosystem.

As Aptiv moves towards the integration of autonomous driving and fleet management solutions, the company is poised to help bring about significant benefits for its customers and society. Just as Gilbreth’s innovations improved worker efficiency, Aptiv’s focus on autonomous vehicles has the potential to reduce traffic accidents, alleviate congestion, and lower carbon emissions.

Furthermore, we see Aptiv’s integration of technological capital as having the potential to create a sustainable business advantage by offering propriety systems that deliver a critical service. In essence, we believe these proprietary systems will allow Aptiv to capture more of the automobile market value chain and place the company in a position to deliver attractive returns to shareholders.

In summary, Aptiv’s journey from component integration to the development of advanced automotive systems and autonomous driving technologies reflects the innovative spirit of pioneers like Frank Gilbreth. By continually pushing the boundaries of what is possible and embracing new technologies, Aptiv is well-positioned to shape the future of transportation and bring about positive change for society.

Zebra Technologies – Mastering motion

Gilbreth’s vertical scaffold transformed the bricklaying process by rethinking the way materials were handled and organised. Zebra Technologies (Zebra) is continuing down a similar path by helping companies reimagine their workflows through data capture, automation, and connectivity. By providing businesses with tools such as barcode scanners, RFID systems, and mobile computers, Zebra enables organisations to collect and analyse real-time data, leading to more informed decision-making and optimised processes.

MotionWorks, an asset tracking and management solution, is one implementation technology suite that Zebra uses to enhance the efficiency of manufacturing and logistics operations. By employing RFID tags, barcode labels, and real-time location systems, MotionWorks allows companies to monitor the movement of assets and inventory throughout their facilities, oversee equipment usage, and streamline workflow processes. This heightened visibility empowers businesses to make data-driven decisions, reduce operational expenses, and elevate overall productivity.

Whirlpool Corporation, the world’s leading global manufacturer of home appliances, implemented Zebra’s MotionWorks to optimise mobile device management across its distribution centres. They faced challenges such as misplaced devices, limited battery life, difficulties in updating devices systematically, and a lack of data metrics concerning device performance.

Whirlpool partnered with Industrial Service Technology (IST), which provided them with Zebra hardware and software solutions for warehouse management, RF, and RFID systems. Whirlpool implemented Zebra XT15 mobile computers, VH10 vehicle-mounted computers, and Zebra’s Operational Visibility Service (OVS). This combination allowed Whirlpool and IST to sense potential problems, analyse the issues, and act on a solution in real-time.

With Zebra’s solutions Whirlpool saw quick results, including an 18-site remote rollout of 635 Zebra devices across 20 U.S. facilities in just over two months, achieved a 63% return on investment (ROI) on the deployment over the course of November and January.3 Whirlpool’s partnership with Zebra and IST has allowed the company to leverage technology to improve logistics, control costs, and enhance performance across its distribution centres.

Moreover, just as Gilbreth’s approach to industrial design emphasised the importance of ergonomics and the well-being of workers, Zebra Technologies continues this legacy by designing user-friendly devices that simplify tasks, minimise errors, and reduce strain on employees. Their solutions not only contribute to greater efficiency but also prioritise the health and safety of the workforce.

Zebra Technologies continues to empower its customers to achieve new levels of efficiency, productivity, and growth, much like Gilbreth’s pioneering efforts did in his time.

Mu adds: “Organisational design, much like other more celebrated technological breakthroughs, plays a pivotal role in shaping the modern business landscape. While its significance might be overlooked, savvy investors recognise the opportunities it presents. By leveraging data and technology, companies like Rockwell Automation, Zebra and Aptiv are developing proprietary solutions to enhance their customers business and in the process creating a strong foundation for their own sustainable competitive advantages.

“In a fast-evolving world, we believe the power of organisational design will serve as a key driver for growth, fostering innovation and efficiency, and ultimately positioning businesses at the forefront of their respective industries.”

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Endnotes
[1] “Illustrations of the Success of Scientific Management Principles,” NRAOIEKC, August 4, 2013, http://nraoiekc.blogspot.com/2013/08/illustrations-of-success-of-scientific_4.html
[2] Rockwell Automation, Metso: Achieving the Autonomous Mine Starts with IIoT: https://www.rockwellautomation.com/en-au/company/news/case-studies/metso-achieving-the-autonomous-mine-with-iiot.html
[3] Zebra Technologies, Zebra and IST Help Whirlpool Increase Visibility at U.S. Distribution Centers

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Matthew Harrison

Franklin Templeton Australia has been named, for the second year in a row, the winner of the International Equities category at the 2021 IMAP Managed Account Awards.

The Institute of Managed Account Professionals (IMAP) is the only industry organisation for advisers, managers, providers and other businesses actively involved in offering or supporting Managed Accounts.

This annual award recognises the strong performance of the Franklin Concentrated Global Equity Ex-Australia Model Portfolio, a Separately Managed Account (SMA), with a long-only high conviction portfolio of global companies.

The Franklin Concentrated Global Equity ex-Australia Portfolio employs a disciplined, bottom-up, investment philosophy that seeks to deliver alpha over a full market cycle.

Franklin Templeton Australia Managing Director, Matthew Harrison said: “We are very proud to receive this prestigious award, for the second year in a row, that recognises our Franklin Global Growth team’s strong research-driven process and track record of investment excellence.

“This team has consistently demonstrated a high level of commitment to their investment methodology, implementing a bottom-up approach—which focuses on high-quality, sustainable growth companies—across a variety of market environments since 2004.

“We believe that investing in global equities offers investors the opportunity to access a broader investment universe, as well as enhanced diversification. This investment approach, which focuses on high-quality sustainable growth companies and a framework for diversification in the portfolio construction process, has enabled us to deliver strong risk-adjusted returns for our clients over the longer term.

“Putting clients first is our core value of Franklin Templeton and our award-winning managed accounts are part of a growing number of investment solutions we offer advisers. We look forward to continuing to provide access to our leading investment management solutions through the growing managed accounts sector,” said Mr Harrison.

Australian based portfolio manager Francyne Mu added: “Our rigorous investment approach results in a concentrated, best ideas portfolio of approximately 20 stocks. We look across all industries and countries for companies with sustainable business models that meet our growth, quality, and valuation criteria.

“We take a long-term perspective, researching stocks that we believe we can hold for three- to five-year periods as a company executes its growth model.

“The portfolio includes businesses that have solid growth prospects, strong management teams, and a sustainable competitive advantage, ranging from well-known to less discovered companies, adhering to the investment team’s strict quality and valuation metrics. Our preference for focused business models, in conjunction with a long-term investment horizon, allows for a differentiated approach, leading to good diversification across the portfolio,” she added.

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The Fund is an actively managed, long only international equities product that invests in a concentrated portfolio of approximately 35-40 stocks and aims to outperform the MSCI World ex-Australia Index (the ‘Benchmark’, after fees) over the medium to longer term.*

In its rating report, Lonsec highlighted among the Fund’s strengths its portfolio management team and the flexibility to invest down the market cap spectrum.

“Lonsec has strong regard for the Manager’s growth investment philosophy and intensive research process,” the report stated.

The report also recognised the “experienced portfolio management team with long co-tenure” who operate with a “differentiated growth equity investment style that has been consistently applied through time.”

Deep research and flexible approach

The Franklin Global Growth team was also named a finalist for Morningstar Australia’s 2021 fund manager of the year in global equities, off the back of a 2020 win in the same category. Finalists for the 2021 award were all recognised for their oversight of funds which delivered outstanding outcomes to investors through the pandemic.

Sydney-based Portfolio Manager Francyne Mu said the team’s bottom-up stock analysis aims to identify quality, sustainable growth companies with robust balance sheets and healthy free cash flows that can remain resilient in challenging economic circumstances.

“The Franklin Global Growth Fund has allowed Australian investors to achieve strong risk-adjusted returns along with diversification and access to innovation,” Ms. Mu said.

“The Fund’s emphasis on in-depth research and its flexibility to move down the market cap spectrum allows the Fund to identify opportunities that may be under researched and overlooked by the market.”

Ms. Mu said this approach enables diversification and access to companies that may be earlier in their growth cycle.

“Our differentiated, research-intensive approach has seen the Fund significantly outperform over the last year without holding any of the well-known FAANG (Facebook, Apple, Amazon, Netflix and Google’s Alphabet) growth stocks.”

Beating the benchmark

The Franklin Global Growth Fund has outperformed the Benchmark over the last several years on a foundation of strong research and investment insights.

Over five years to February 2021, the Fund delivered a return of 18.9% p.a. (after fees), outperforming the Benchmark by 6.6% p.a. The Fund returned 30.6% in the 2020 calendar year, outperforming the Benchmark by 24.8%.

Information technology, industrials and consumer discretionary were the biggest contributors to the outperformance in 2020. While its growth style provided tailwinds over the period, stock selection provided the bulk of the positive contribution, reflecting the depth of research and differentiated investment approach.

Matthew Harrison, Managing Director of Franklin Templeton Australia and New Zealand, said the Fund’s recent recognitions are a testament to the caliber of the investment management team.

“The Franklin Global Growth Fund has an exceptional team with Don Huber and John Remmert in the United States and Francyne Mu on the ground here in Australia. They continue to demonstrate their ability to identify international stocks with compelling long-term growth prospects and deliver strong risk-adjusted returns for our investors,” Mr. Harrison said.

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*The investment objective of the Fund is to outperform the MSCI World ex Australia Index-NR, in Australian dollar terms after fees and expenses (but before taxes). Net Returns (NR) include income net of tax withholding when dividends are paid.

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