Is Apple The World's Most Innovative Company (Still)?

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Boston Consulting Group ranks Apple as the world’s most innovative company--as it has every year since 2005 when it first put out its most innovative companies list. That’s quite a contrast to Forbes’ own 2013 list of most innovative companies, which we released in August. Our No. 1: Salesforce.com , followed by a pharma company, Alexion Pharmaceuticals , and VMware , a virtualization software outfit based in Palo Alto. Neither Alexion nor VMware even make BCG’s list.

Why such a contrast? Methodology. BCG quizzed 1,500 senior executives, simply asking them which companies they thought were most innovative. Then it tacked on three financial measures--three-year total shareholder return, three-year revenue growth, and three-year margin growth. The problem with BCG’s method: It is backward-looking, failing to account for future innovation. Though Apple’s launch of the iPhone 5 this month was criticized by tech columnists as lacking innovation (despite big sales), that didn’t affect the BCG ranking, since the firm finished polling before the launch and asked survey respondents to consider the company’s track record in the rear view mirror. Though Apple’s shares are down from their high in late 2012, over the last three years its stock has doubled in value. Revenues are way up, from $42.6 billion in 2009 to $156 billion in 2012.

On Forbes’ list, Apple ranks toward the bottom, at No. 79.

BCG’s No. 2 and No. 3 companies are also tech companies: Samsung and Google. Samsung doesn’t even make the Forbes list, while Google comes in at a middling 47.

Why such a discrepancy? Dare I say it, but Forbes’ methodology is far more complex and, we think, forward-looking and sophisticated. As Forbes contributors and innovation consultants Jeff Dyer and Hal Gregersen (business professors at Brigham Young University and at INSEAD) explain, we don’t base our rankings on popularity or, as they put it, “editorial whims.” Rather we look at how investors pick out firms that they think are innovative now and will be in the future. As Dyer and Gregersen put it, we look at “the premium the stock market gives a company because investors expect it to launch new offerings and enter new markets that will generate even bigger income streams.” In brief, we project a company’s income from existing businesses plus the anticipated growth from those businesses and we look at the net present value of those cash flows.

Though we may think the Forbes ranking is superior, BCG’s is still interesting, especially when compared to its own past lists. The biggest story is the car companies. Back in 2010 there were only eight auto firms on the tally. Now there are 14 in the top 50, including General Motors, which sped up 16 spots this year to No. 13 and Volkswagen, which jumped up 31 spaces to No. 14. Audi, Honda, and Daimler also did well. Though there are still no automakers on Forbes’ list, they deserve some credit for innovations like increased fuel efficiency and big steps forward in hybrid and electric models. Though it’s not on Forbes’ list, Tesla, No. 41 on the BCG  roster, certainly deserves recognition for its electric models and its efforts to produce a self-driving electric car.

A few other intriguing corporate stories on the BCG list: Intel, Dell and Royal Philips all dropped at least 11 spots. Again, those companies are totally missing from Forbes’ list.

Here are BCG’s top 20:

1. Apple

20. Daimler

Note: Only three firms, Apple, Google and Amazon, make Forbes’ list, coming in at 79, 47 and 7, respectively.

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