How future-proof are Apple, Twitter and Spotify? Not very, researchers find

A new ranking looks at public companies' likelihood of survival in a world of fast and frequent change

Apple scored lower than competitors Microsoft, Amazon and Google on employee diversity, early results on innovation and business productivity. Reuters
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Tesla, Lululemon, Mastercard and Google topped a new global ranking of future-readiness while Apple, Twitter, Spotify, HSBC and Audi underperformed when compared to competitors in their respective industries.

The Institute for Management Development’s (IMD) Centre for Future Readiness in Switzerland studied more than a decade of data from 2010 to 2021 to rank publicly listed companies against their competitors by how prepared they are for the post-pandemic economy and their likelihood of survival in a world of fast and frequent change.

Capital markets plunged across all sectors in the early days of the Covid-19 pandemic but a recovery soon followed. Beginning in April 2020, the S&P 500 went on its greatest 50-day rally in history.

Rather than a death sentence for growth, Covid-19 has proven to be a test case, rewarding companies that were prepared to harness the acceleration of trends and hastening the decline of those who were hesitant to change, according to stock performance analysis from McKinsey.

“Our predictive analytics equips executives with intelligence to not just recover from the recent economic blow, but better respond to tomorrow's disruptions – like Omicron – with lessons on how not just to survive, but thrive in the future,” said professor Howard Yu, author of the Future Readiness Indicator at IMD.

The ranking analysed 86 of the highest-grossing companies in the four highest-revenue industries: fashion and retail, automotive, financial services and technology.

The US led the list with 40 American companies. Next came China and Germany with seven each; France and Japan with six each; Switzerland and the UK with four each; South Korea with three; Sweden with two; and Argentina, Canada, Italy, the Netherlands, Singapore, Spain and Taiwan with one each.

The ranking relied on objective measurements to arrive at a composite score, which an artificial intelligence-driven algorithm compared against the industry average.

It used data to rank companies against critical drivers of innovation such as financial fundamentals, investors’ expectations of future growth, employee diversity, research and development, early results of innovation, business diversity, cash and debts, brand value, business productivity and openness to new ideas.

Fashion and retail

A Lululemon Athletica store in Manhattan. Reuters

The ranking analysed 16 fashion and retail companies based on revenue of $3.2 billion to $44.5 billion and also considered the strength of e-commerce, presence in mobile apps, the volume of Google search presence, the ability to personalise offerings and the extent to which consumers consider the companies to be environmentally sustainable, among other factors.

Sportswear brands Lululemon and Nike were ranked first and second, followed by luxury brands Hermes, Burberry, Kering and LVMH.

Before the pandemic, the researchers found that top-ranking sportswear brands had already rewired their core operations, "allowing them to instantly make markdown and promotion decisions and move inventory across countries".

Lower-ranking brands such Under Armour, H&M and Hanesbrands, which "took a shortcut" of laying new digital tools on top of existing operations, struggled through the pandemic and "will have difficulty competing in the coming years", according to IMD.

The research found that luxury brands are not as reliant on background digital infrastructure to generate revenue. Instead, personalisation is a key to the future of luxury retail.

LVMH and Burberry, respectively low-ranking and high-ranking in digital savviness, are the two fashion or retail brands that rank highest in positive sentiment. Instead of supply chain digitisation, high-ranking luxury brands depend on data analytics to better understand their customers, and the relationship between market scarcity and exclusivity.

Automotive

Toyota was the world's largest car maker in 2021. AP

The ranking looked at the 19 top publicly traded car makers based on revenue of $6.2bn to $291.9bn and looked at data from 2010 to 2020.

Four traditional car makers – Toyota, BMW, Ford, and Hyundai – hold the second through to fifth positions, but new entrant Tesla captured the top spot.

IMD found that most traditional car makers, despite mechanical expertise, "share conservative views and are relatively unsuited to address vehicle electrification, connectivity and autonomous driving".

For example, during the chip shortage, companies such as Audi found themselves in uncharted territory. But the second-ranking car maker, Toyota, had prepared itself by stockpiling chips and avoided the worst of the disruption to reclaim the title of world's largest car maker.

Tesla’s expertise in programming allowed it to rewrite its firmware, continue production and sell a record number of vehicles during the chip shortage, earning it the top spot.

Two Chinese EV-only car makers, BYD and NIO, share their origins with Tesla in software and are poised to survive future crises and achieve continuous growth, according to IMD.

Financial services

MasterCard topped the ranking because it co-operates with other FinTechs. Reuters

High-ranking financial services brands used the pandemic to shift operations from in-person retail to AI-driven applications. They reaped the benefits as the sector generated record revenue.

Traditional payment companies Mastercard and Visa led the rankings, followed by Ant Group, Square and PayPal.

"Mastercard and Visa lacked the expertise and capabilities to outrun the FinTech giants, so they adopted the concept of frenemies, that is, they collaborated with their rising competition by creating easy-to-adopt application programming interfaces to allow access to PayPal, Square and even Coinbase [with its Visa cryptocurrency debit card]," according to IMD.

Opening their systems to the broader digital ecosystem allows Mastercard and Visa to learn from disruptors and apply what they learn to their own organisations.

The research reveals that the highest-ranking financial services brands are more aggressive than their peers in exploring and exploiting new technology, their openness to collaboration and their conviction that they must continue to prepare for disruption. They are already IT companies that happen to be in the financial industry.

Technology

Branching out from a core vision is spurring financial success in technology. AP

The research includes 29 top technology companies across the semiconductors, software and hardware segments that were selected by revenue of $3.7bn to $218.9bn. It looks at data from 2018 to 2021.

The five top-ranking technology companies – Google, Amazon, Microsoft, Facebook, and US-based semiconductor company AMD – "all have an entrepreneurial orientation, willingness to branch out from their core businesses, ability to scale up quickly and a shared inner vision of the future", according to IMD.

The researchers concluded that high-ranking technology companies’ flexible organisational structures enabled them to make quick, tough decisions when the pandemic struck.

Consumer-orientated companies such as Amazon, Facebook, Netflix and Alibaba adapted quickly to meet their customers’ demand for home delivery services and personal electronics. In contrast, business-to-business-focused technology companies such as Microsoft and Salesforce offered new products to enable work at a distance.

Apple scored lower than competitors Microsoft, Amazon and Google on employee diversity, early results on innovation and business productivity.

Updated: December 15, 2021, 8:44 AM
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