Knowledge Center: Article
VUCA, meet META: The 2017 list of superaccelerators6/13/2017 Colin Price
The VUCA acronym has been around for some time now, because we really do live in a volatile, uncertain, complex, and ambiguous world. As we near the one-year anniversary of the Brexit vote that is ushering the United Kingdom out of the European Union, any sort of VUCA index would have to be on the rise, given the fallout from Brexit, the surprise of the US presidential election, mixed signals about any number of international political and trade relations, and so on. The list of VUCA factors could be a long one.
But META can provide at least a modicum of reassurance. META is the acronym, based on extensive research into the four key aspects of corporate performance, that my colleagues at Heidrick & Struggles and I use to describe a detailed method for accelerating that performance: Mobilize, Execute, and Transform with Agility. And the good news is that the measurement we developed to identify the very best performers among the 500 largest companies in the world registered an improvement between our first list, in mid-2016, and the list we are now releasing for 2017.
VUCA may be taking the world in one direction, but META shows at least the top performers moving in the other.
The list of top performers, which we call “superaccelerators,” grew from 23 in 2016 to 25 this year. These companies are those that passed stringent tests that we developed for Accelerating Performance. Our research found that these four tests measure the kind of deep understanding of management that leads to sustained success. We call them the “rules of 20,” and we applied them to the top 500 companies in the world by market capitalization, as follows:
- The companies had to be in the top 20% in revenue growth in both the last three years and the last seven, meaning that they have been standouts both recently and over an extended period. We use revenues, rather than stock price, as the measure because it is the most direct test of how much customers value a company.
- The superaccelerators could generate no more than 20% of their increase in revenue inorganically (through acquisitions). Growth, alone, isn’t what matters. To be an indicator of success, that growth has to come from serving customers better or finding more of them.
- The companies couldn’t get more than 20% of their revenue from their home governments. Many state-owned companies are global powers, but that doesn’t mean they’re paragons of management.
- Finally, the model companies couldn’t have seen their profit margin drop by more than 20% over the seven years. We didn’t want to recognize companies that focused on revenue growth to the exclusion of everything else, because that sort of emphasis is rarely sustainable. (This rule of 20 addresses the question we get asked most frequently: “Why isn’t Amazon on the list?” Amazon is a great company, but its mantra that “your profits are our opportunity” has produced enough pressure on margins that it simply didn’t meet this fourth criterion.)
Those are stringent tests, so it’s encouraging that there are more superaccelerators this year than last. (For the 2016 list, see “What does it take to be a ‘superaccelerator’?”) These companies did not benefit just from being in one sector, such as technology, or in one particularly hot geography. While the United States dominated the list of superaccelerators again this year, with 16, China’s representation increased to 5, from 3. In all, Asia is represented by 9 superaccelerators; Europe has none. The companies come from a range of industries—healthcare/life sciences, consumer, financial services, real estate, professional services, and communications, as well as technology.
The spread of industries and geographies underscores one of the most interesting findings from our research: how a company is managed along our four dimensions—mobilizing, executing, transforming, and agility—mattered far more than being in an especially profitable industry or geography. A top-performing team, for instance, generates 23% more economic value than a poorly performing team handling the same function. Boards of superaccelerators show distinct characteristics—for instance, they are smaller than average, have less experience from outside the industry, and have fewer members over the age of 60.
The principles of META can be applied at organizations in any industry or geography, helping companies make sense of changes in their environment and react in a timely manner. They let companies play, in essence, offense and defense at the same time, sustaining the current source of competitive advantage while exploiting new sources of growth.
With capital becoming ever more global, liquid, and informed, creative ideas and agile execution can produce success in any combination of industries and markets.
Here is the full list of the companies that are this year’s best examples of how to take advantage of those opportunities (arranged in descending order of 2016 revenue):
Unless you know something I don’t, the world will stay in a VUCA state for the foreseeable future. Yet as these 25 companies demonstrate, when organizations find ways to mobilize, execute, and transform with agility, they can turn uncertainty into opportunity—now and for years to come.
About the author
Colin Price (firstname.lastname@example.org) is an executive vice president and the global managing partner of Heidrick & Struggles’ Leadership Consulting Practice; he is based in the London office.