Vital Signs

Companies may claim to be forward-looking, but what they report to the market, to investors, and to employees, is usually backward-looking data such as profit performance, revenue growth, and how the share price has performed. The past is not always a predictor of the future in business, and there is evidence that this is becoming even less so.

Fortune Magazine and BCG (Boston Consulting Group) have combined to identify “vitality” factors as predictors of future success. They did this in 2017 just for US companies, and then went global this year, producing a list of the top 50 companies in terms of vitality, i.e. most likely to succeed in the future. The analysis included assessment of market growth potential, and the capacity to deliver it; and the data from annual reports and filings was parsed by natural language processing algorithms.  The sort of questions asked by indicators of vitality include:

  • Do we have a sufficient pipeline of future bets with high-growth potential?
  • Does our strategy balance short-term exploitation with long-term exploration?
  • Are we developing sufficient capabilities in the technologies that are transforming how businesses work?
  • Do we have a culture that promotes cognitive diversity and a competition of ideas?
  • Are we willing and able to challenge our incumbent approaches and beliefs?

Of the resulting top “Future 50”, 42 of them are in either USA or China (mainly the West Coast of USA and the East Coast of China), and only one – Dassault Systèmes, a software company based close to Paris – is European.

A lot of these indicators are also indicators of risk, so future success through vitality has to include close understanding and management of these risks, and in fact, exploit them.

Sources:  Fortune Magazine, BCG website

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