Monthly Archives: September 2013

Questioning The World’s Most Innovative Companies List by Forbes

Forbes put together a list of “world’s most innovative companies” and we wondered how. If you scroll all the way down, you’ll find a short explanation of the Innovation Premium that Forbes used to rank companies: “The Innovation Premium is a measure of how much investors have bid up the stock price of a company above the value of its existing business based on expectations of future innovative results (new products, services and markets)”

For most of us, this needs to be translated into plain English. We think it means that the more investors found a company to be valuable, the higher the Innovation Premium, but the value of the company seems to be based on “expectations of future innovative results” – in other words, something that doesn’t exist yet. So investors think that these companies may be innovative in the future, therefore they can be considered the most innovative in the world.

But there’s more: “Members of the list must have $10 billion in market capitalization, spend at least 2.5% of revenue on R&D and have seven years of public data.” This means that you’re not included in the list if you don’t have $10 billion in market capitalization – we’re not sure why… Is it because it was too complicated for Forbes to include or even consider other companies? What about the companies that are not publicly traded? Since market capitalization is the total value of the issued shares of a publicly traded company, the privately held companies are also excluded.

Finally, “members of the list must spend at least 2.5% of revenue on R&D and have seven years of public data” – no explanation why 2.5 % of 7 years…

What do you think? Do all these things matter to you? Are the criteria and requirements relevant when it comes to deciding which are the most innovative companies in the world?

Forbes Magazine Building

The Forbes Magazine Building at 60-62 Fifth Avenue on the corner of West 12th Street in the Greenwich Village neighborhood of Manhattan, New York City
By Beyond My Ken (Own work) [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC-BY-SA-3.0-2.5-2.0-1.0 (http://creativecommons.org/licenses/by-sa/3.0)%5D, via Wikimedia Commons

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