By Stephen Hampshire, Client Manager, TLF Research
Every year since 1997 FORTUNE has published a list of the world’s most admired companies. The full list is available at: http://fortune.com/worlds-most-admired-companies. We thought it would be interesting to take a look at the top 10, and unpack what it is that makes them so admired. How do the FORTUNE results tally with other sources of information such as customer satisfaction benchmarks, brand perception studies, and employment surveys? What is it that makes an organisation admired by its peers? What can we learn from the success of these businesses?
- The list is based on a survey of executives at eligible companies and financial analysts, to understand which companies have a good reputation within their own industries and across industries.
- Companies need to be among the biggest in their industry, with revenues of $10 billion plus.
- 15,000 people invited to take part from 476 US companies and 199 companies in 28 other countries.
- Companies are rated on 9 attributes, with the overall reputation score being an average of the 9.
2. People Management
3. Use of Corporate Assets
4. Social Responsibility
5. Quality of Management
6. Financial Soundness
7. Long-Term Investment Value
8. Quality of Products/Services
9. Global Competitiveness
- The “all-star” list is rated separately from the industry lists, and reflects cross-sector reputation – each respondent chooses the 10 companies they admire most (in other words you can be an all-star without being most admired within your own industry).
Overall score (FROM INDUSTRY PEERS): 8.4
Of course it’s Apple. Apple is the world’s largest information technology company, and its third largest mobile phone manufacturer. The iTunes store is the world’s largest music retailer. It’s the world’s most valuable brand. It tops the personal computers sector in ACSI1, and is regularly quoted for its high NPS and customer loyalty. In the most admired survey respondents ranked it first in the industry for all nine attributes (as shown in the diagram).
Overall score: 8.3
The other giant of our times, Amazon is the largest internet company in the world. Like Apple it straddles different industries from consumer electronics to retail and entertainment, although it’s arguably even more ambitious in terms of publishing and creating video content for its entertainment channels.
Customers love Amazon. It tops the internet retailers sector in ACSI (2 points above Apple in that sector), and also scores consistently near the top of UKCSI2. But it’s important to remember that Amazon is much more than an online retailer and streaming service. Its cloud platform is the largest in the world, and it is constantly pushing into new markets, most recently with the launch of “Haven” - a healthcare joint venture with Berkshire Hathaway and JPMorgan (also members of the top 10).
3. Berkshire Hathaway
Overall score: 7.7
Although not a household name, Berkshire Hathaway is the third largest public company in the world. It’s best known because of its Chairman, Warren Buffet, who is regarded with reverence as an investor of oracular wisdom. Buffet is famous for “value investing”, i.e. buying stocks that seem undervalued, but in reality his approach has been to find companies that he believes will offer long-term and sustainable competitive advantage at a fair price. If this magazine had a motto for investors, it would probably be his “It’s better to buy a great company at a fair price, than a fair company at a great price.”
4. Walt Disney
Overall score: 8.4
When we think of Disney, we tend to think of Mickey Mouse and Disneyland, but the entertainment behemoth has grown far beyond that. With existing revenues of $60 billion, its 2019 acquisition of 21st Century Fox will make it even more powerful. It also seems to be committing to the Disney+ streaming service, and will not be renewing its contract with Netflix after 2019.
Overall score: 7.9
A successful Seattle business in the 1980s, Starbucks has seen almost unbelievable growth since the early 1990s. At its IPO in 1992 Starbucks had 140 outlets, and revenues of $73.5 million. That’s now more than 27,000 locations across 76 countries, with a revenue of over $20 billion. Unlike other businesses in this list, it doesn’t top its category in ACSI, although its score of 78 is above the overall average of 76.6.
Overall score: 8.2
I am, of course, typing this using Microsoft software on a Microsoft operating system. I’m not using Microsoft hardware, but I might be. Microsoft is the most valuable public company in the world, and it continues to dominate the world of software. Given previous misfires in consumer electronics, the success of its Surface range is notable, and the Xbox continues to slug it out with Sony’s Playstation for the console market.
Overall score: 8.2
Alphabet is Google’s holding company, created in 2015. For 2 brief days in 2016, Alphabet was the world’s most valuable publicly traded company, before Apple took back the lead. With a radically different business model from most of the other top 10, Alphabet’s 2017 annual report shows that 86% of its revenues are from advertising. Google tops the search engines sector on ACSI, and comes in at number 5 in YouGov’s BrandIndex, showing its strong position with consumers.
Overall score: 7.6
Over 148 million people worldwide subscribe to Netflix, which has grown from its roots as a DVD rental service by mail to not just the dominant streaming service, but also a significant content creator (with a haul of Emmys and even an Oscar in the trophy cabinet).
Netflix is an enormous global business, with revenues of over $15 billion, but its cultural impact is hard to quantify. It has changed the way we watch TV, the formats that will work, and the funding models that support new shows, and we love it. It tops the new streaming services sector of ACSI, and is number 2 in BrandIndex.
9. JPMorgan Chase
Overall score: 7.1
The largest bank in the US has two colossal subsidiaries – JPMorgan looking after investment banking, wealth management, etc; and Chase as its consumer and commercial banking proposition. It remains a megabank in a world which, after 2008, is understandably suspicious of banks which are seen as “too big to fail.” JPMorgan Chase emerged from the storm in a relatively strong position (what the CEO Jamie Dimon famously described as a “fortress balance sheet”). Whatever the regulatory landscape, this is a company committed to the benefits of size and broad scope.
Chase is ranked 4th by consumers in its sector on ACSI, a surprisingly fragmented sector with the number one spot taken by “All others”.
Overall score: 6.5
Fred Smith came up with the initial concept that underpins FedEx’s success while he was an undergraduate at Yale. He saw that speed was increasingly important, a need which only air transport could meet, but that the existing air cargo industry was out of date and inflexible. In a paper he proposed a new model, with one carrier looking after the package from pick-up to delivery, operating all its own aircraft and vehicles. Legend has it he was given a C, but whatever his grade Smith stuck with his idea. In the early 1970s he started building the business, now with revenues over $65 billion.
Compared to the other all-star companies, FedEx is not rated all that strongly by its peers (ranking 2nd for every attribute), and with a relatively low average score of 6.5. Its appearance on the all-star top 10 shows that it’s more admired by those outside the industy.
- What can we learn from the most admired companies? Well, it helps to be a colossal US corporation…but there’s not much most of us can do to emulate that. There’s a notable dominance for companies which own marketplaces (Amazon/iTunes/Alphabet) and publishing (Disney/Amazon/Netflix).
- There does seem to be a US bias to the results, despite making the effort to include respondents from other countries, but in many respects that simply reflects the fact that the USA dominated world commerce through the 20th century, and continues to dominate the technology market.
- Are the nine attributes on which the companies are scored the right ones? The list was developed in the mid 1980s, and although they seem pretty sensible, I wonder if the list would be same if we were starting today?
- Most striking of all, I think, is that although the top 10 feature strongly in ACSI, UKCSI, BrandIndex and other measures of consumer regard, none appear in the top 20 of FORTUNE’S Best Companies to work for3 or in the Times top 25 Best Big Companies to work for4. I can’t help feeling that’s a point that some of the new tech giants will need to address if they’re going to be sustainable.