Page 60 - Fortune-November 01, 2018

company’s capacity to reinvent its business
and sustain revenue growth. Over long pe-
riods, the majority of shareholder returns of
high performers are driven by such growth.
However, consistently delivering growth is
especially challenging for larger companies,
A Global Hunt for which can no longer rely on startup-like
momentum to sustain their performance.
the Next Decade’s Our goal is to create a new tool for manag-
ers to measure and shape growth potential.
Champions Signs of future strength

The Future 50 are the exceptions—the
established public companies with the best
TO FIND THE FUTURE 50, WE SCOUR TODAY’S DATA TO
long-term growth outlook. Our index is
IDENTIFY TOMORROW’S TOP PERFORMERS. AFTER A based on two pillars: a “top-down” market
PROMISING DEBUT, WE’VE EXPANDED OUR SEARCH TO view of growth potential, and a “bottom-
COVER THE WORLD. BY MARTIN REEVES up” assessment of a firm’s capacity to
deliver growth. (See below for details on
our methodology.)
To assess capacity, we focused on four
dimensions: strategy, technology and
investments, people, and structure. We
identified dozens of theories that predict
long-term performance, based on research
IT’S A DISCLAIMER FAMILIAR TO ANY INVESTOR, but it’s perhaps truer now and academic study. Then we tested them,
than ever: Past performance is no guarantee of future success. leveraging a wide range of financial and
Technological changes have accelerated the rate of competition: New nonfinancial data. In the nonfinancial
challengers are rising faster than ever, and incumbent leaders are fall- realm, we used natural language process-
ing just as fast. At BCG, our research shows that for large companies, ing algorithms to parse companies’ annual
there is now less correlation than there used to be between past and reports and SEC filings, searching for
future financial and competitive performance over multiple years. indicators of a firm’s strategic thinking
The tools business leaders use, however, have not yet caught up to on dimensions such as long-term focus; a
this reality. CEOs may pride themselves on being “forward-looking” broader sense of purpose beyond financial
(and the very best ones are called “visionaries”), yet the metrics com- returns; and “biological thinking”—for
monly used to judge the state of a business (for example, profitability, example, embracing complexity and being
revenue growth, and stock performance) are inherently retrospective. adaptive. Finally, we used a machine-
In other words, CEOs are looking into the proverbial rearview mirror learning model to test the predictive power
when they really need binoculars. of these factors, retaining only those with a
That’s why last year BCG and Fortune created the Future 50. Our in- demonstrated impact on long-term growth.
dex is forward-looking, in the sense that it aims to measure vitality—a Vitality operates over long periods and

THE FUTURE 50 METHODOLOGY 50% of a company’s tion of its market value for their ability to pre-
score is based on mar- that is not attributable dict growth over the
ket potential—defined to the earnings stream following five years.
To identify the Future 50, BCG examined 1,100 as its expected future from its existing busi- These factors fall into
publicly traded companies with at least $20 billion growth as determined ness model. four categories:
in market value or $10 billion in revenue in the 12 by financial markets. The other 50% is
Strategy: Our A.I.
months through the end of 2017. A company’s final This is assessed by based on a company’s algorithm relies on
calculating the pres-
capacity to deliver
score represents its outperformance across the ent value of its growth against this potential. natural language pro-
following metrics when compared with peers of a opportunities, which This score comprises cessing to detect a
similar size. (See Fortune.com for more details.) represents the propor- 17 factors, selected company’s strate-

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