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How hyper-growth industrial companies have used AI, automation and decarbonization tech to differentiate themselves
The digital revolution is often front-page news in the context of consumer products. A similar transformation has taken place in the industrials space, but there are no Atlantic or Bloomberg correspondents devoted to covering it, nor have many industrials firms that capitalized on disruption reached the levels of notoriety common to consumer-facing “supergrowers.” There has been an important shift in the industrials sector, though: established and newer industrial firms have pivoted from products to solutions, with impressive results for those that have focused on catering to the so-called “new economy.”
So what sets our fastest growers apart from others that tend to grow at the rate of the broader economy at best? Our analysis suggests one common thread: innovation. When we dig deeper, these companies have differentiated themselves in one of three ways: 1) catering to demand for climate solutions, 2) incorporating AI and automation, and 3) supporting transportation and electrification infrastructure.
First, the push to electrify and decarbonize economies has changed the game, supported by government infrastructure programs. Alfen’s smart grid and energy storage solutions fill a market gap, as do the air treatment and climate solutions piloted by Munters Group AB.
Hammond Power Solutions—a producer of transformers—has also grown its book of business as demand for electric vehicle (EV) chargers and renewable energy infrastructure continues to transform the sector. AAON, Inc. is also on the list as a heating, ventilation, and air-conditioning (HVAC) manufacturing and engineering company that can deliver clients better indoor air-quality and less energy-intensive building operations to satisfy state and federal initiatives tied to the Paris Agreement and to avoid being left behind as the built environment decarbonizes.
The second leading segment consists of companies that offer solutions for firms looking to incorporate AI and automation into operations to drive productivity. Symbotic, the American robotics warehouse automation company, has been a darling of investors as it seizes the opportunity to serve retailers and distributors amid the AI revolution. Symbotic’s AI-powered robotic technology platform implements a fleet of fully autonomous robots and A.I.-powered software to transform distribution operations.
Other supergrowers have focused on increasing supply-chain resilience and their distribution footprint.
FTAI Aviation Ltd. has expanded its aviation leasing and aerospace services businesses, serving airlines worldwide. The company has worked to increase the longevity of carbon-intensive engines, reusing parts and modules, as well as recycling others, to save 198 tonnes of material. FTAI has also worked to find efficiencies, with greater control of CFM56 engine and module shop, vertical integration of piece-part repair shops, and expanded maintenance capacity alongside the Miami Quickturn facility. Trinity Industries, founded in 1933 as Trinity Steel, operates rail, construction products, inland barge, energy equipment, and railcar leasing businesses, currently accounting for half the $3.2 billion backlog of railcars. The company has benefited from improved labor and operational efficiencies, increasing operating margins as the company boosted utilization of the lease fleet.
The bottom line is each of these industrial supergrowers have capitalized on changing customer needs and preferences in a way that their peers have not.
Can these companies retain their “supergrower” status into the future? What may help them is the estimated $5 trillion to $11 trillion in additional investment that climate solutions may see by 2030, according to the World Economic Forum. However, given the degree of innovation the supergrowers have exhibited to achieve their current position, they will have to work extra hard to continue growing faster than competitors.
Symbotic Inc.
The pipeline is strong for American robotics warehouse automation company Symbotic. With a $23.3 billion backlog—including a $6 billion master automation agreement with Walmart—as of September 2023, revenue has grown at compound annual growth rate of 134% over the last four years. The company has been positioned to ride the tailwinds of digital transformation. Retailers are coming fully online, and they need a fast, connected, smart and scalable AI-based infrastructure.
Symbotic has made, and expects to continue to make, significant investments in business to facilitate this growth, including plays in infrastructure, technology, marketing and sales. These include dedicated facilities expansion and increased operational staffing. For now, the company is only operating in North America—international markets could lie ahead with even more potential for further growth and expansion.
FTAI Aviation Ltd.
Founded in 2011, FTAI Aviation Ltd. has a roaring pair of engines in its aviation leasing and aerospace products businesses. Revenue from aerospace products increased $276.5 million in 2023, driven by an increase in sales relating to the CFM56-7B, CFM56-5B and V2500 engines (for commercial clients), engine modules, spare parts and used material inventory as operations continued to ramp up.
The aviation leasing business owned and managed 363 aviation assets last year—96 commercial aircraft and 267 engines, including eight aircraft and 17 engines located in Russia—serving 50 airlines and lessors. As the average lifespan of narrowbody aircraft goes up, the maintenance needs have increased, providing a tailwind for the company. In 2023, the company signed a $170 million purchase agreement for Lockheed Martin Commercial Engine Solutions to bolster its position as a leading maintenance and repair operator, as well as lock in a five-year maintenance services agreement with Pratt & Whitney.
AAON Inc.
During 2022, commercial and industrial HVAC solutions manufacturer AAON had the shortest lead times in the industry. The company has made strategic moves across the board, pushing its product portfolio to be ready ahead of the higher minimum energy efficiency standards that went into effect on January 1, 2023, while competitors were waylaid redesigning their equipment. It has also shown an unmatched ability to overcome supply chain issues thanks to the company’s custom engineering capabilities.
Hyperinflation and supply-chain issues weighed on the sector, but AAON wielded significant pricing power. Looking ahead, the company has surfed the decarbonization trend, positioning itself to serve greater indoor air-quality demands and to do so in a less energy-intensive manner. AAON finished 2022 with record sales, earnings, and a backlog that was up 110% year-over-year, even while the company increased capacity and production rates.
Hammond Power Solutions Inc.
Hammond Power set an ambitious goal to hit over $800 million in global capacity by end-2024 and over $900 million by end-2025, allowing the company to deliver on its backlog and push growth higher. As a manufacturer of transformers, Hammond is supported by growth in data centers, warehouses, industrial manufacturing, mining, and the energy sector—EV charging, renewable energy, and oil and gas production—amid the energy transition.
The company has operations in the U.S., Canada, India, and Southeast Asia, where sales are on a steep climb, and is constantly adapting. The new Power Quality business unit in particular is focused on growth and making new products, as well as forming strong partnerships with other companies
Trinity Industries Inc.
Lest we only highlight electric and robotic specialists, Trinity Industries is here to shine a light on the opportunities within railway transportation products and services. That includes the leasing business, which, as of the beginning of 2023, entailed a $7 billion on-paper fleet or owned, partially owned, and managed railcars transporting more than 900 different products serving 700 customers. During 2023, the company invested $287 million in new railcar additions, sustainable railcar conversions, and railcar modifications.
The rail products group produces 270 different railcar designs and maintenance thereof. The end-2023 backlog of 25,890 railcars, represents approximately half the industry's total backlog ($3.2 billion).
Return to the Practical Growth homepage to learn more about our Supergrowers research.
