As 2013 reaches it’s climax, we felt the natural urge to form and analyze lists of “Best & Worst.” But we decided not to. Instead, we went where no big data platform has gone before - to analyze past predictions. Granted, they may not be our predictions (given that this time last year we were not yet formed) but they are reputable predictions, beginning with the MIT Technology Review.
The MIT Technology Review releases an annual list of who they see as the 50 most disruptive companies for the coming year. Here is 2013’s list. It was released on February 20th - and the admission criteria are quite subjective. Certain inclusions may surprise you (IBM, Xerox, Microsoft), the usual suspects will allure you (Apple, Google, SpaceX), and some notable exclusions might have you start questioning the meaning of capitalism (Tesla, Uber, Airbnb). Hindsight is always 20-20; and with that kind of clarity, a lot can be learned by taking another look at their preliminary analysis.
The 50 disruptors are fairly evenly split among the capital markets - 26 private & 24 public. Here’s the industry segment breakout:
Computing & Communications (18)
Energy & Materials (12)
Internet & Digital Media (11)
The MIT Technology Review made it clear that this was not a quantitative assessment and that it should not be considered a ranking. So the first thing we did was create a watchlist, included all 50 companies, and let our scoring algorithms do some of the initial heavy lifting.
As expected, only the best of the best made the cut. Next, we exported the data to excel and took a deeper look.
Those A+’s are what we call the DataFox Score - an overall composite we developed that takes into account a company’s age, influence, financial strength, and quality of personnel. It comes in handy when you want to quickly identify the industry leaders within a database of 200,000+ companies (regardless of cap structure). The excel export quantifies the overall DataFox score numerically as well.
Here are the results:
The 10 highest ranked companies by DataFox score show a good mix of established enterprises and promising newcomers - though some of you may be surprised to see Microsoft so high on the list (especially within a pool of early disrupters). Keep in mind though, that their inclusion was warranted at the time the initial selection criteria were applied. It was the beginning of the year, and the company was just entering a new phase of software and hardware integration. They released the Surface tablet, and with arguably even a bolder move, tried to unify the iconic Windows operating system across all desktops, phones, and tablets with the release of the touch-based Windows 8.
In a Q+A with (now departing) Microsoft CEO Steve Ballmer, MIT quizzed him about the prolonged adoption of the new operating system. While Ballmer admitted that enterprise customers do take longer to upgrade - he countered by stating that every new consumer PC sold is equipped with the new software. An answer that seems even less convincing now, in comparison to the rapid adoption of Apple’s OS X Mavericks - that for the first time, was made available for free (a move that many saw as a direct attack against Microsoft). That said; the fundamentals are strong, and they do have the talent - but one does wonder how long Microsoft can keep milking the Windows/Office cash cows in a software world that is rapidly being commoditized.
Turning our attention to one of the strongest predictors of disruptive behavior, let’s see how the companies rank when isolating only the people aspect of the organization. Quantifying HR though is no easy task, but we created an algorithm that does just that. The DataFox HR score is a composite of several indicators of the company’s current and prospective HR strength, including current employees, job listings, and the number of people who want to work there (more on that in the Recruiting Analysis section).
Here we see a quite an unbalanced list that is made up entirely of public companies, most of which are in the Computing & Communications sectors.
It’s great to see these up and coming disruptors rank so highly. That said, and in the spirit of self assessment - this author believes SpaceX really should be at the top of the list - public or private. The company is an engineering recruiting machine; hiring only the best of the best (and poaching NASA’s elite) - while currently standing at about 3,000 employees. They also do things like this. Impressive. You can be sure to expect continued fine-tuning of our scoring algorithms to increasingly reflect massive innovations at that scale.
Interesting to see how these same private companies rank, when ordered by their total funding to date. The sources of capital include everything from small-time angels, late stage private equity, strategic investments, and of course venture capital - aggregating to $2.6 billion in financing.
Above all, technology companies raise money to grow, and to do that they need people. So putting aside capital intensive tasks like building rockets (SpaceX) or large scale solar plants (BrightSource Energy), we the thought we should point out some of the disparity in financings - particularly within the Computing / Internet sectors. For example, Pinterest having raised $562 million (which includes a $200 million Series D in February and a $225 million Series E in October), while Mozilla’s open-source projects have comparably innovative impacts - but only with a $2.3 million investment.
With all this money raised from the private markets, and the public companies having plenty of resources to attract the talent, what kind of people are these companies actually looking for? This is where our crawlers really came in handy… We aggregated keyword data from multiple recruiting sources, grouped them by job function - then did a re-classification by skill-set. As you can imagine... A dominant trend in all the industries quickly emerged.
Nearly 50% of all recruiting positions pertained to a technical or engineering role.
In Silicon Valley engineers are seen as currency (their market values adhere to the laws of supply & demand as well). While it’s no secret that there’s fierce competition for technical talent... Unlike most Silicon Valley competitive outlooks - the recruiting effort actually is zero-sum.
All the companies on the list are in one way or another technology related, so it’s unsurprising that the engineering percentage is high. That said, the number of college graduates earning CS degrees (or any STEM related degree for that matter) is nowhere near 50%. To keep up with demand, that number needs to increase, and fast.
Market Cap Delta
2013 has been a good year in the market, and particularly for technology stocks (except Apple). So the last thing we did was look at the change in market cap for the publicly traded companies. The results are quite positive, although some may surprise you…
Facebook: What a year. Not quite the instant gratification of the Twitter IPO (and subsequent new highs) but the stock soared past the IPO price after relatively strong fundamentals. It’s now safe to start referring to Facebook as “a mobile company” with increases in mobile usage and substantial ad revenue growth.
Illumina: They do genomics, which will lead to personalized medicine, but most importantly, they are based in San Diego. MIT wrote an interesting article about BGI (Illumina’s biggest competitor) titled “Inside China’s Genome Factory.“ An excerpt:
BGI’s bid to buy the company (Complete Genomics), for the fire-sale price of $118 million, has stirred competitive worries in the U.S. The main supplier of DNA sequencing instruments, Illumina, tried to break up the deal with a counter-bid and appealed to Washington to block the takeover. Letting BGI snap up the company would be equivalent to selling China the “formula for Coke,” said Illumina’s CEO, Jay Flatley. Flatley cautioned that the Chinese, until now dependent on U.S. machinery, could dominate next-generation technology—and that they could even somehow make “nefarious” use of American DNA data flowing through their computer servers by the terabyte.
Xerox: Surprised to see Xerox make the list, and even more surprised by the nearly 80% surge in stock price. MIT included a piece about them as well when the list was published; which talked about their expanded BPO (business process outsourcing) revenue stream. This means that Xerox streamlines a lot of the administrative tasks all businesses face, but don’t want to do, or at least are not able to do as efficiently as Xerox. However, the article shows a far too optimistic viewpoint (hope) for the continued demand for paper - even beyond the year 2020. We are not so sure about that last part.
Google: Google wins everything. Excellent year for the “search engine”. Wonder what they’ll do with the Boston based robotic zoo from Boston they just acquired.
Amazon: Google “Amazon 60 Minutes”
Apple: We put together some non-technical technical analysis mapping out investor and media sentiment for $AAPL. The stock is now trading not too far off from the price it left off last year. We recommend you read MIT’s article on “Apple’s Next Innovation.” It focuses on the consumer need for Apple to revolutionize the TV experience - thought all the 2013 anticipation focused on wearables. An iWatch, iClothes , a post-1980’s TV experience? Expect Apple to come out with at least one of those things in 2014 - and none of them are reflected at the current price level.
2013 was a big year for disruption. Many companies on MIT’s list lived up to the high expectations, and then there are others that can't quite expect to reclaim their coveted spot - but lets not dwell on the underperformers. One thing is for sure; the pace of innovation is accelerating, and even companies on this list are not at all prone from disruption! Based on our research and scoring algorithms we put together a list of companies that had an impressive 2013. In our opinion, each one is a worthy contender to be on MIT's 2014 list of disruption.
Let’s start with the public companies:
SolarCity and Tesla (otherwise known as the “Elon Musk trade”) are truly innovating their respective industries; with new technologies, new business models, and new breakthroughs week after week. Netflix’s stock has just exploded this year - and that is good news, because the TV experience is simply begging for innovation.
As for the private contenders, it’s safe to say that this small group of companies will have a big impact on how industries are structured - most likely sooner rather than later. Airbnb is on track to be the "world’s largest hotelier" as early as next year. Uber and Lyft can’t hire drivers fast enough to keep up with customer demand. Dropbox just works. Coinbase has positioned itself as a prime candidate to lead whatever fate Bitcoin will face. Lastly, AngelList is the NASDAQ of our generation - with the potential to give rise to a host of disruptors, who will freshen this list again, and again, and again...
And there you have it; hopefully in a few months we’ll see some of our predictions make the cut. Let us know what you think by tweeting @datafoxco, and don’t forget to check out the DataFox Blog for weekly summaries from your favorite videos!