After getting home from my FinCon travels yesterday, I was catching up on the news on Twitter when a statement from Forbes caught my eye. It was a statement from Forbes regarding their list of the most innovative leaders of America, and how it was a “missed opportunity” to discuss why there was only one woman included.
That’s right – of the top 100 most innovative leaders in America, there is only one woman. And no African-Americans.
Of course, the debate in the comments on this tweet are the typical Twitter pool of some outrage, and some people saying that, basically “well women should just learn to be more innovative.”
Unfortunately all those people are missing an important understanding of how this list was created.
How did this happen? And why are leaders of companies like Monster, McDonalds, Nike, and Electronic Arts so high on the list, when they’re not what a layperson would really think of as “innovative” companies?
There are three really big issues at play here – with methodology, with the definition of innovative, and with the election of a single person as an innovative leader. We’re going to explore them all today.
Let’s see what happened here.
The Methodology Issue
The entire reason this list ended up the way it did was the methodology. In Forbes, the men (you know they were men) who developed the methodology outline it in detail in this article.
Here’s the part that excluded large portions of the population from consideration:
“…our sample of leaders includes the founders or CEOs (or CEOs who have become chairman of the board within the past year) of: (a) U.S. firms with greater than $10 billion market value, (b) the 50 largest private U.S. firms to go public over the past five years and (c) U.S. firms within the top 100 companies on our most recent Forbes Most Innovative Growth Companies list.”Forbes, How We Rank America’s 100 Most Innovative Leaders
Other factors include the leaders reputation in the media for innovation, the social connections they have related to innovation, their record for growing their company, and what investors expect for further growth and innovation at the company. More about what this means in the next section.
Given the first set of criteria, you can already see a problem. In defining an innovative leader, they are deliberately including only companies with a market cap above $10 billion, the 50 largest companies that have gone public in the past five years, and leaders of their top 100 Most Innovative Companies.
The leaders of the biggest companies in the US are primarily led by white men. As of 2018, there were 25 women CEO’s in the Fortune 500, which is 5% of that population. There were only three African American CEO’s as of 2018. I cannot find 2019 data but I do not imagine the numbers have changed tremendously.
Looking back at what definitions were used to develop the “top 100 innovative companies”, you see the same problem. Companies can only be in the top 100 if they are in the top 500 companies in the US by market capitalization.
When your criteria for electing a leader includes only the countries largest companies, diversity and representation don’t have a chance.
But why on earth is innovation limited to only the countries largest companies? After all, doesn’t true, ground-breaking innovation usually come from startups?
As you mean have guessed, this is where the second issue comes in. Innovation in this context is not defined the way you and I and the dictionary think of it.
What Does “Innovative” Really Mean
When I hear the word innovative, I immediately have a picture in my mind that doesn’t match with what most of the countries largest companies are doing.
Even if there were plenty of representation, the types of companies and leaders listed would be confusing to me. Why is McDonalds innovative? What about Monster? I don’t usually think of them when I think of innovative companies.
Very large corporations are only rarely on the cutting edge of innovation. Cutting edge innovation often comes from smaller firms, which large companies partner with or purchase in order to bring that knowledge and innovation to them.
Please note I’m saying “often” here, not always, I’m not familiar with the details of every company and its offerings, some may be truly cutting edge. But large firms are generally slower to innovate than smaller ones.
When someone talks about innovation to me, I have a mental picture of something that’s needed in the world that has never existed before. In fact the very dictionary definition of innovation centers around something new. It is, according to the dictionary, “the introduction of something new; a new idea, method, or device”
That is decidedly not the definition being used here. Which is the second issue, and unfortunately not a focus of the statement issued by Forbes.
When I referred back to the methodology being used by the most innovative company list, I found reference to innovation being measured by “…the difference between their market capitalization and the net present value of cash flows from existing businesses”. This is also the fourth factor in the list above.
What does that mean in English? It means that if the company is more valuable, as measured by the stock market, than the money it’s bringing in the door, then it’s more innovative.
In addition to this factor, the contributors are also using:
- Number of articles about the leader that have the word “innovation” in them. Fun observation – all CEO’s love to talk about how innovative their company is.
- How many LinkedIn connections and Twitter followers the leader has
- How much market value has increased while the leader has been with the company
So essentially, innovation in this context has nothing at all to do with development of new ideas, or groundbreaking inventions. It’s about how innovative the CEO’s say they are, how well connected they are, how much their company has grown, and how much investors expect the company to continue to grow in the future.
The third issue at play here is the election of a single person and crowning them an “innovative leader”.
The Inherent Issue With Selecting An Innovative Leader
When this list crowns an “innovative leader”, what it’s really trying to say is that the person is the leader of a very large company that’s considered innovative as defined in the section above, and they have a lot of social media connections.
I suppose “Top 100 Popular Leaders Of Innovative Companies As Defined By Past And Future Market Cap Increase” just doesn’t have the same ring to it.
When you or I hear the phrase “innovative leader”, we’re thinking of the dictionary definition of innovative. And the phrasing is such that we assume this means the leader is an innovative person, or that their leadership style is innovative.
This is because innovative is an adjective, meaning it’s supposed to describe the word that comes after it. And again our friend the dictionary (of Google this time) says that when innovative is used to describe a person, it means “introducing new ideas; original and creative in thinking”.
The authors of the article are trying to take an abstract concept that can’t be well measured and instead use data and facts to develop a quantitative measurement of innovation. This is where all those facts from the second section come from, they’re an attempt to bring hard measurements to something that is abstract and hard to measure.
Why This Matters
I’ve written in the past about why diverse financial stories are important. Sharing and reading the story, background, history, etc. of someone similar to myself is a huge part of how I’m successful today. The reason I use this site to share the stories of others is because I want to be part of sharing a story that changes someone’s life, just as my life was changed.
When we read a list, particularly a prominent list with much press and publicity, where we don’t see anyone like ourselves, we wonder if it’s really possible for someone like us to succeed. In this case, a list of 100 most innovative leaders showcases that ninety-nine are men and none are African American.
At first read, it would appear that this means women or African Americans aren’t as innovative . Which is simply not true. In fact, it’s this specific methodology that was designed in a way that largely excludes them from even being considered.
It’s not that women, or African-Americans, should “just be more innovative”. It’s that the specific methodology used here to define an innovative leader has nothing to do with what we laypeople think of when we see those words used together.
What To Do About This
Forbes seems to believe the solution is in “discussing the issue”, and feels this was a missed opportunity to reflect on why only one women was in the list. Although, for some reason, not an opportunity to reflect on why there was only zero African-American leaders.
Personally I believe the core methodology and definition of an innovative leader is flawed. I understand Forbes does not want to deal in the abstract, and is looking for a mathematical formula to measure something that cannot be measured. But words mean things, and when you crown someone an “innovative leader”, but don’t actually mean that they are what the world understands those words to mean, there will rightly be backlash and issues.
Personally, I would recommend they either significantly revisit and revise their methodology for calculating innovation as it applies to a single leader, or use different words to more clearly describe what they are trying to communicate. In their statement they agree they will be re-thinking the methodology. I hope it’s thought about through a lens of more than just “how can we get more women included”.
This isn’t about diversity or representation for the sake of saying we have it. It’s about trying to boil down innovation to something that doesn’t represent new ideas, creativity, ground breaking initiatives, and original thinking. If a list were created with a lens towards that kind of innovation, I imagine it would look much different.
What are your thoughts? Do you think these are innovative leaders, or that these companies are innovative companies? Or do you think the methodology needs adjustment? Let me know in the comments.
P.S. I wanted to make sure to let you all known that I was honored to win an award for Best Series for my work with Breadwinning, Six Figure, Millionaire Women. I’m so honored and excited to have it recognized this way! I have been working on those interviews for a long time, and love every one of them. If you haven’t checked them out in a while, be sure to stop by.