Wednesday, November 20, 2013

Measuring innovation: tracing progress in Fortune 500

This is a follow on post from : Feb 2011 which looked at 2006 - 2010 Fortune 500 data. This post updates to 2013 Fortune 500 updates.

Three fast risers: Apple, Google and Amazon continue their surge.
Innovation can manifest as rising sales; bring new products to new customers (new iPad users) or old customers (selling iPad to iPhone users) or reselling products or services to old customers (such as  selling apps to iPhone users).  The Fortune 500 traces rising sales (rather than profits) which are more difficult than profits to manipulate.

Two techniques to inflate sales and therefore confound the Fortune 500 as a measure of innovation are: 1. buying a competing business and hence buying sales, such as Amazon buying Book depository. Thus mergers artificially inflate a businesses Fortune 500 ranking at the cost of liquid assets (paying cash) or by issuing shares. Thus I would adjust Sales from year to year by subtracting out sales from purchased businesses 2. Buying into a new industry by acquiring a business, such as Microsoft buying Nokia, Google buying Motorola, Facebook buying Instagram, or Yahoo buying Flickr. Such business purchases do not reflect bringing new products to old customers or reaching out to new customers.

These three fast risers can be compared to slower risers: Microsoft and Nike.

For comparison, three other companies are fairly static: Coca Cola, AT&T, and Berkshire Hathaway.
For companies near the top of the Fortune 500 there is nowhere further to go.

The Data: (2006 - 2013) [Click on image to see all the data]
Data at:  figshare. http://dx.doi.org/10.6084/m9.figshare.870121



The Picture: (LHS is Fortune 500 ranking)

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Dr Richard Ferrers said...

Fortune reports Most Admired Companies (2014:
http://money.cnn.com/magazines/fortune/most-admired/2014/snapshots/670.html?iid=H_F_News

Including: Top 3 as identified as Most Innovative:

1. Apple
2. Amazon
3. Google
4. Bershire Hathaway
5. Starbucks

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