Quantumrun ranking report scoring guide | Quantumrun

Quantumrun ranking report scoring guide

One of the services that Quantumrun’s Consulting division assists its clients with is advising companies on their long-term viability based on the internal and external factors that influence their operations. In other words, we measure various criteria to forecast whether a company will survive until 2030. 

All of the criteria outlined below are used when Quantumrun Forecasting analyzes a client’s operations. Many of these same criteria were also used in the production of the following ranking reports:

*The 2017 Quantumrun Global 1000 is an annual ranking of 1,000 corporations from around the world based on their likelihood to survive until 2030.
*The 2017 Quantumrun US 500 is an annual ranking of 500 corporations from around the USA based on their likelihood to survive until 2030.
*The 2017 Quantumrun Silicon Valley 100 is an annual ranking of 100 Californian corporations based on their likelihood to survive until 2030.

To read the full scoring criteria breakdown, the full report and gain access to the full data set used to produce these rankings, click the link below:
Quantumrun Data Access

Criteria overview

To assess the probability of whether a company will survive until 2030, Quantumrun assesses each company based on the following criteria. Scoring details are outlined below the criteria list.


Longevity assets

(Scores attributed to each criterion within this category were weighted x2.25)

 

Global presence

*Core question: To what extent is the company generating a significant percentage of its revenues from overseas operations or sales?

*Why this matters: Companies that generate a significant percentage of their sales overseas tend to be more insulated from market shocks given that their income flow is diversified.

*Assessment type: Objective - Assess the percentage of company revenue generated from overseas customers.

Brand equity

*Core question: Is the company's brand recognizable among B2C or B2B consumers?

*Why this matters: Consumers are more willing to adopt/invest in new products, services, business models from companies they are already familiar with.

*Assessment type: Objective - For each company, assess the rating that brand specialist research agencies use to rank their brands against other companies.

Strategic industry

*Core question: Does the company produce products or services deemed to be of significant strategic value to its home country government (ex. military, aerospace, etc.)?

*Why this matters: Companies that are a strategic asset to its home country government have an easier time securing loans, grants, subsidies, and bailouts in times of need.

*Assessment type: Objective - Assess the percentage of a company's revenue that is generated from home country government agencies.

Funds in reserve

*Core question: How much money does a company have in its reserve fund?

*Why this matters: Companies that have a significant amount of liquid capital in savings are more insulated from market shocks given that they have the funds to overcome short-term downturns and invest in disruptive technologies.

*Assessment type: Objective - Determine a company's unused liquid assets.

Access to capital

*Core question: How easily can a company gain access to the funds needed to invest in new initiatives?

*Why this matters: Companies that have easy access to capital can adapt more readily to marketplace shifts.

*Assessment type: Objective - Determine a company's ability to access capital (via bonds and stocks) based on their credit rating.

Market share

*Core question: What percentage of the market does the company control for the top three products/services/business models it offers?

*Assessment type: Objective - Assess the market share percentage controlled by the company's top three selling products and services (based on revenue), averaged together.

 

Liabilities

(Scores attributed to each criterion within this category were weighted x2)

 

Government control

*Core question: What is the level of government control (regulation) the company’s operations subjected to?

*Why this matters: Companies that operate in heavily regulated industries tend to be more insulated from disruption since the barriers to entry (in terms of costs and regulatory approval) are prohibitively high for new entrants. An exception exists where competing companies operate in countries that lack significant regulatory burdens or oversight resources.

*Assessment type: Objective - Assess the amount of governing regulations for the particular industry the company operates in.

Political influence

*Core question: Does the company invest heavily in government lobbying efforts in the country or countries where they base the majority of their operations?

*Why this matters: Companies with the wherewithal to lobby and successfully influence politicians with campaign contributions are more insulated from the disruption of outside trends or new entrants, as they can negotiate favorable regulations, taxes breaks, and other government-influenced benefits.

*Assessment type: Objective - Assess the total annual amount of funds spent on lobbying and campaign contributions directed toward government representatives and institutions.

Domestic employee distribution

*Core question: Does the company employ a significant number of employees AND does it locate those employees across a large number of provinces/states/territories?

*Why this matters: Companies that employ thousands of employees across multiple provinces/states/territories within a particular country can more effectively lobby politicians from multiple jurisdictions to act collectively on its behalf, passing legislation favorable to its business survival.

*Assessment type: Objective - Assess the number of states, provinces, territories a company operates in within its home country, as well as the distribution of employees among them. A company with a larger number of geographically dispersed facilities and employees will score higher than companies that are more concentrated in their geographical operations. Location and employee distribution are complementary criteria, and are therefore averaged together into one score.

Domestic corruption

*Core question: Is the company expected to participate in graft, pay bribes or show absolute political loyalty to stay in business.

*Why this matters: Companies that operate in environments where corruption is a necessary part of doing business are vulnerable to future extortion or government sanctioned asset seizure.

*Assessment type: Objective - Assess the corruption rating for the country within which the company is based, given by NGOs that research corruption statistics. Companies with based in countries with high levels of corruption are ranked lower than those that are based in countries with minimal levels of corruption.  

Client diversification

*Core question: How diversified is the company's clientele both in quantity and industry?

*Why this matters: Companies that serve a large number of paying customers are usually better able to adapt to market changes than companies dependant on a handful (or one) client.

*Assessment type: Subjective - Assess the breakdown of a company's revenue by client, or if that data is not available, by client type. Companies with more diversified revenue streams should be ranked higher than companies with revenue streams generated from a very concentrated number of customers. 

Corporate dependence

*Core question: Is the company's offerings dependant on the product, service, business model entirely controlled by another company?

*Why this matters: If a company is entirely dependant on the offerings of another company to operate, then its survival is also dependant on the strategic objectives and health of said other company.

*Assessment type: Objective - Assess the composition of the company's product or service offering(s) to measure how dependent a company is on the success of any core product or service, and whether that core product or service is solely dependant on the business or supplies from another company.

Economic health of key markets

*Core question: What is the economic health of the country or countries where the company generates more than 50% of its revenue?

*Why this matters: If the country or countries where the company generates more than 50% of its revenue are facing macroeconomic difficulties, it could adversely affect company sales.

*Assessment type: Objective - Assess what countries generate the majority of the company's revenue and then measure the economic health of said countries over a three-year span. Of the countries that make up more than 50% of the company's revenue, is their average GDP growth rate increasing or decreasing over a 3y term?

Financial liabilities

*Core question: Is the company spending more on operations than it is generating in revenue over a three year period?

*Why this matters: As a rule, companies that spend more than they make cannot last for very long. The only exception to this rule is whether the company continues to have access to capital from investors or the market—a criterion addressed separately.

*Assessment type: Objective - Over a three-year span, we assess the percentage of revenues which each company's revenue surplus or deficit represents. Is the company spending more or less than it is making in revenue over a three year period, leading to a revenue deficit or surplus? (Reduce to two or one year depending on the company's age.)

 

Innovation performance

(Scores attributed to each criterion within this category were weighted x1.75)

 

New offering frequency

*Core question: How many new products, services, business models has the company launched within the past three years?

*Why it matters: Releasing significantly new offerings on a consistent basis indicates that a company is actively innovating to stay ahead of competitors.

*Assessment type: Objective - Count the company’s newest offerings released during the three years leading up to the year of this report. This number does not include incremental improvements upon existing products, services, business models.

Sales cannibalization

*Core question: Over the last five years, has the company replaced one of its profitable products or services with another offering that made the initial product or service obsolete? In other words, has the company worked to disrupt itself?

*Why it matters: When a company deliberately disrupts (or makes obsolete) its product or service with a superior product or service, it helps fight off other companies (usually startups) who are going after the audience.

*Assessment type: Objective - Over the five years preceding this report, how many profitable products, services, business models has the company replaced?

New offering market share

*Core question: What percentage of the market does the company control for each new product/service/business model it released in the last three years?

*Why it matters: Should the significantly new offerings that a company releases claim a significant percentage of the offering's category market share, then it indicates that the innovation the company is generating is of high quality and has a significant market fit with consumers. Innovation that consumers are willing to compliment with their dollars is a difficult benchmark to compete against or disrupt.

*Assessment type: Objective - We collect the market share of each new company offering released in the last three years, averaged together.

Percentage of revenue from innovation

*Core question: Percentage of company revenue generated from products, services, business models launched within the last three years.

*Why it matters: This measure empirically and objectively measures the value of innovation within a company as a percentage of its total revenue. The higher the value, the more impactful the quality of innovation a company produces. A high value also indicates a company that can stay ahead of trends.

*Assessment type: Objective - Assess the revenue from all new offerings a company has released over the last three years, then compare it against the company's total revenue.

 

Innovation culture

(Scores attributed to each criterion within this category were weighted x1.5)

 

Management

*Core question: What is the level of managerial quality and competence leading the company?

*Why this matters: Experienced and adaptable management can more effectively lead a company through market transitions.

*Assessment type: Subjective - Assess industry media reports that detail the work history, achievements, and current management style of each company's top executives.

Innovation-friendly corporate culture

*Core question: Does the company's work culture actively promote a sense of intrapreneurialism?

*Why this matters: Companies that actively promote policies of innovation usually generate a higher than average level of creativity around the development of future products, services, business models. These policies include: Setting visionary development goals; Carefully hiring and training employees who believe in the company's innovation goals; Promoting internally and only those employees that best advocate for the company's innovation goals; Encouraging active experimentation with a tolerance for failure in the process.

*Assessment type: Subjective - Assess industry media reports that detail the culture, as it relates to innovation.

Annual R&D budget

*Core question: What percentage of the company's revenue is reinvested into the development of new products/services/business models?

*Why this matters: Companies that invest significant funds into their research and development programs (relative to their profits) usually enable a higher than average chance of creating significantly innovative products, services, business models.

*Assessment type: Objective - Assess the company's research and development budget, as a percentage of its annual revenue.

  

Innovation pipeline

(Scores attributed to each criterion within this category were weighted x1.25)

 

Number of patents

*Core question: Total number of patents held by the company.

*Why this matters: The total number of patents a company owns acts as a historical measure of a company's investment into R&D. A large number of patents acts as a moat, protecting the company from new entrants into its market.

*Assessment type: Objective - Collect the total number of patents a company hold as of the year of this report.

Number of patents filed last year

*Core question: Number of patents filed in 2016.

*Why this matters: A more current measure of a company’s R&D activity.

*Assessment type: Objective - Collect the total number of patents a company has filed during the year previous to this report.

Patent recency

*Core question: Comparison of the number of patents granted over three years versus over the lifetime of the company.

*Why this matters: Accumulating patents on a consistent basis indicates that a company is actively innovating to stay ahead of competitors and trends. With the increasing pace of global innovation, companies should avoid the stagnation of their innovation.

*Assessment type: Objective - Collect the total number of patents a company was granted during each of the last three years and assess the average annual filings versus the total average since the year the company was founded. What is the difference between average patents filed annually over the last three years when compared to the average number of patents filed annually since the company's inception?

Short-term innovation plans

*Core question: What are the company's reported or stated investment plans to introduce innovative product/service/model offerings in the near future (one to five years)? Will these new offerings enable the company to remain competitive in the future marketplace?

*Assessment type: Subjective - Based off of industry reporting of the company's planned initiatives, alongside Quantumrun research of future industry trends, we assess the company's short-term (5 year) plans for growth and innovation within the industries it operates within.

Long-term innovation plans

*Core question: What are the company's reported or stated long-term (2022-2030) investment plans to innovate its current product/service/model offerings? Will these new offerings enable the company to remain competitive in the future marketplace?

*Assessment type: Subjective - Based off of industry reporting of the company's planned initiatives, alongside Quantumrun research of future industry trends, we assess the company's long-term (10-15 year) plans for innovation within the industries it operates within.

  

Disruption vulnerability

(Scores attributed to each criterion within this category were weighted x1)

 

Industry vulnerability to disruption

*Core question: To what extent is the company's business model, product or service offerings vulnerable to disruption by emerging technological, scientific, cultural, and political disruption?

*Assessment type: Subjective - Assess the future disruptive trends that may impact each company, based on the sector(s) it operates in.

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Scoring

The criteria outlined above are important when measuring the longevity of a company.  However, some criteria matter more than others. The weights assigned to each criteria category are as follows:

(x2.25) Longevity assets
(x2) Liabilities
(x1.75) Innovation performance
(x1.5) Innovation culture
(x1.25) Innovation pipeline
(x1) Disruption vulnerability

When data is unavailable

Depending on the type of data collected, the unique nature of corporate public disclosure laws present in a given country, and the level of transparency of a given company, there are instances where data for specific scoring criteria are not obtainable. In these cases, the affected company is neither awarded or subtracted scoring points for the criteria they could not be graded for. 

Subjective vs. objective criteria

While the majority of the criteria listed above can be assessed objectively using internal and publicly available data, there is a minority of criteria that can only be assessed subjectively through the informed judgment of Quantumrun researchers. While these subjective criteria are important to consider when assessing a company’s long-term viability, their measurement is also inherently imprecise.

Quantumrun Data Access

To read the full report and access the full data set used to produce these rankings, click the link below:

Quantumrun Data Access