Vitality : yet another KPI?
In partnership with Fortune magazine, the BCG Henderson Institute created the Fortune Future 50 index to identify companies with vitality — with the long-term growth potential needed in today’s climate. But why is vitality so important?
If a company is vital, it means it can reinvent itself for the future while ensuring strong performance in the present. But value creation depends on (among other things) sustainable prospects for growth — prospects that are shrinking given: (1) the long-term decline in economic growth and (2) the increasingly rapid exhaustion of new economic models. Worse still, the value creation metrics that are most commonly used (growth, market share, and profitability) only measure what has already happened — yet past performance is less and less a predictor of future success. So this new index — vitality — focuses on the long term, and points to ways that even behemoths can reinvent themselves. “The index incorporates factors demonstrated to predict long-run success, organized into five pillars: market potential; strategy; technology and investment; people; and structure.”
The companies with the highest index are largely tech firms; 25% are headed by women (compared to 17% for the rest); and aren’t necessarily the firms that post the top performance. However, they have clearly developed a genuine “ambidexterity”: the ability to manage and reinvent themselves at the same time.
To go further: Achieving Vitality in Turbulent Times (BCG, October 2019)