“I Wonder What the Ostrich Sees …”
“… when he pulls his head from the sand? Probably a transport barreling towards him on the highway that was built while he wasn’t paying attention.” The Internet tells me that Stephanie Martin-Smith crafted this brilliant observation about the last US elections. It is an equally brilliant descriptor of Fortune magazine’s latest “The World’s Most Admired Companies.” Here’s why: 9 of the top 10, 19 of the top 20, 28 of the top 30 and 41 of the top 50 companies are … American!
I actually think very highly of many of the American companies on the list. I currently work with two of the top ten, and help (or have recently helped) several other companies – which rank high on the industry specific lists. I used to work for American Express and in my book, have praised Hewlett-Packard. But in the eighth year of the 21st century, to think that America has a monopoly on good management is short-sighted, if not ridiculous.
All such surveys have methodological biases. So I checked that out. Fortune essentially started with a list of 1000 large US companies and 400 large non-US companies. A bias no doubt, but minor. Then it asked “executives, directors, and analysts to rate companies in their own industry on nine criteria, from investment value to social responsibility.” This became the basis of the industry specific rankings. Finally, to create the list of the 50 most admired, it asked “4,047 executives, directors, and securities analysts who had responded to the industry surveys … Anyone could vote for any company in any industry.” Here’s one major possible source of bias: who ranked these companies? I could not find any description of their nationalities or domiciles or global experiences.
There are several reasons why this matters, but I’ll stick to the most important: Such biases give us a false sense of security about the quality of our businesses. While I think highly of many of the companies on the list, others simply don’t belong there. When one of them gets wiped out, the deliverer of the blow will be a foreign company whose position it had usurped. The wipe out will be a big surprise to many people because the judges, the editors and the companies themselves were not paying real attention to the lessons of Friedman’s Flat World or Zakaria’s Post American World. Think I’m exaggerating? Remember what Toyota and Datsun did to the US auto industry in the 1980s?
Convince yourself if you don’t believe me. If you are a world traveler and have stayed in top tier (highly profitable, innovative, socially responsible, high quality … use Fortune’s nine criteria) hotels, make your own list of the top five chains. If you fly around the world a lot, try ranking airlines. If you know much about the IT industry, do the same. You’ll end up with several European, or Asian companies (I confess I don’t know much about African or South American ones) that do not appear on Fortune’s lists. Your analysis won’t be statistically rigorous, but it will probably give you greater insights than Fortune’s will.