on Strategy

It’s out, Barron’s latest ranking of the World’s Most Respected Companies and no surprise to see Apple at the top of the list!  What is most interesting in this latest announcement is not the rank of the world’s 100 largest corporations (based on Dow Jones Indexes of total stock-market capitalization at year-end);  but  the perceived justification of what got them there.

Barron’s survey of  professional money managers submitted views of the world’s 100 largest companies, also included the factors the managers  considered most important in determining respect for corporations

Respected companies treat their shareholders, customers and employees well, and companies whose shares go up seem to garner ever greater respect.

Looking over the top 10 it’s easy to see what they mean,as the companies favored this year not only have a strong vision, but are also highly innovative.

That’s innovation on more than one dimension or category.  For example, Gary Hamel describes a natural hierarch of  innovation that can propel a company forward.  The lowest level is operational, superseded by product,  then business model, followed by architectural as on the industry level.  The the most enduring source of advantage is when innovation occurs at the management level and ripples across the organization to create a culture that is adaptive, engaged  capable of mobilizing the collective imagination .

For example, Apple and Amazon are continuously investing in improving the consumer experience.  McDonald’s and IBM  also  committed  and stuck to this path some time ago.

What’s also a testament to value?  A company’s ability to keep reinventing themselves as clear by  McDonald’s  cracking #5 place up from #7 a year ago.

The company’s image on Main Street as the biggest fast-food chain in the world doesn’t do it justice, according to our respondents. On Wall Street, McDonald’s is viewed as a company that changed its spots for the better back in 2002-03, moving away from a single-minded focus on unit growth to a more mature approach that balances growth with the return of cash to shareholders. Much as investors like McDonald’s appetizing 3.3% dividend yield, they also appreciate that it has responded effectively to changes in society’s eating and drinking habits.

Re-invention is as much about purpose as it is about adaptation to larger environmental conditions.