The Most Innovative Companies of 2016

What were the most innovative companies of the past year? Several lists of the most innovative companies illustrate one of the most intriguing features of innovation: defining and measuring the quality of innovation is by no means uniform. There are multiple methods of defining innovation and business leadership.

Both Fast Company and Forbes, for example, recently published a list of the most innovative companies of 2016. Both include digital disruptors along with more mainstream innovative companies. Here’s a look at their lists.

Fast Company: New Business Practices

Fast Company partnered with data firm Quid to focus on its Most Innovative Companies list, firms that lead what the magazine characterized as “a new wave of business practices.”

The top pick? Online media company BuzzFeed, which publishes, yes, BuzzFeed and Vox, among other properties. It’s a media innovator partly because of its embrace of social media, where more than three-quarters of the company’s traffic occurs. Almost 33% of its readership is on the newer social media app Snapchat. BuzzFeed’s Snapchat Discover is responsible for more than 20% of its traffic.

Its chosen #2 innovator is the older social media goliath: Facebook. Partly it’s the channel’s reach, over one billion active users each day. But another part is the Midas touch: Facebook acquisitions like Messenger, Instagram, and WhatsApp have each been highly successful. Facebook also ranks high on the list because of its business strategy. It has bet heavily on virtual reality via Oculus and the headset Oculus Rift. The latter alone, to quote Fast Company, positions Facebook to potentially be “the defining player in the next era of computer interfaces.”

The #3 pick at Fast Company was not a tech firm, but a venerable retail chain that rebranded itself two years ago. It’s CVS, a local drugstore in many communities throughout the country. The rebranding, which named the company CVS Health, focuses on making healthcare convenient and affordable. It has an in-store health clinic, MinuteClinic, which offers multiple healthcare services such as flu shots. It’s banned tobacco and stocked up on organic food. It also has a Digital Innovation Lab that offers consumers the ability to use e-pharmacy services.

Forbes: Determining Innovation Premiums

Forbes defined their list, the World’s Most Innovative Companies, by coming up with a valuation measure they dub the innovation premium. It’s the difference between the company’s market capitalization and the net present value of cash flows from existing businesses. (These come from a proprietary algorithm from Credit Suisse HOLT. The list comes from the book The Innovator’s DNA). The difference between the two is, in Forbes‘s words, “the bonus given by equity investors on the educated hunch that the company will continue to come up with profitable new growth.”

Forbes confined its list to companies with at least seven years’ worth of public data and $10 billion in market capitalization, which excluded some tech companies that made Fast Company‘s lists, like Facebook, which went public in just four years ago.

Tesla Motors is #1 on Forbes‘s list. Its innovation premium is 82.4%. The maker of high-tech cars has a projected sales growth of more than 23% over the next 12 months.

Next on the list is online company, which is a cloud computing company that provides management services and a technology platform for apps, carries an innovation premium of 75.5%. Sales growth is expected to come in at 25% over the next year.

Regeneron Pharmaceuticals is the third on Forbes‘s most innovative companies list. Regeneron is involved in research and development in the pharmaceutical industry. Its innovation premium is 72.9%. Sales growth is expected to exceed 36% next year.

Innovation is a multifaceted concept, yet each of the lists highlights one or more of those many facets.