In a year of loss, they're building market share, upending their industries, and changing consumers' lives
"Power lasts 10 years," goes an old Korean proverb. "Influence, not more than a hundred."
In a year that brought the mighty to their knees, some of the biggest players in business have seen their power whittled away. The once-venerated Lehman Brothers filed for bankruptcy in September. American International Group (AIG) now bows to government officials after nearly collapsing under a web of risky bets. Even the blue-chip General Electric found itself going hat-in-hand to Warren Buffett.
As the proverb points out, influence has a shelf life, too. And it's probably getting shorter as the cycle of change accelerates. Companies that once wielded a seemingly unshakeable hold over their industries—General Motors (GM), Sony (SNE), Microsoft (MSFT)—now find themselves following the lead of more nimble players such as Toyota (TM), Apple (APPL), and Google (GOOG). "There's no standing still," notes veteran strategy guru Gary Hamel. "Influence is like water, always flowing somewhere."
The core characteristics of influence are unchanged, whether it's inspiring a loyal following, spawning big ideas, or building up mammoth market share. What has changed is how players achieve it. A company's physical assets are less important now than the force of its ideas. In the age of blogging and instant communication, consumers are less the recipients of corporate influence than powerful actors who help shape it. "We're coming to realize a brand is not just what the manufacturer says it is," says Shelly Lazarus, chairman and CEO of Ogilvy & Mather Worldwide, "but everything that the consumer or the customer experiences." Think of the community built around Apple products.
With that in mind, BusinessWeek developed a list of the World's Most Influential Companies. We chose 10 companies that have devised winning strategies in their industries. They are the ones with the game-changing ideas, the greatest impact on consumers, and the bold tactics rivals emulate. None is infallible or without controversy. And our choices were more art than science. But we believe each company played a major role in business over the past year and could shape the corporate landscape for years to come.
In honing the list, BusinessWeek worked with an advisory board of 14 academics, consultants, and industry leaders worldwide. Several themes emerged. For one, the developed world is no longer the sole repository of influential companies. Nearly a third of the board's suggestions were for companies based in emerging markets, where a vibrant workforce and global capital play a vital role.
And forget about first-mover advantage. Google was not the first search engine, just the simplest and most technologically advanced. Apple, though late to the cell-phone race, has revolutionized the industry with its iPhone. Futurist Andrew Zolli notes that these latecomers don't "just define, but redefine, the terms of competition."
A company's ability to exert power beyond its own people often reflects the strength of its relationships. Roger Martin, dean of the University of Toronto's Rotman School of Management, notes that "influence today is about how sophisticated, how broad your network is." Facebook may not yet make much money, he argues, but it's creating a new way for companies to reach customers. Wal-Mart (WMT), meanwhile, is leveraging its ties with Chinese suppliers to exert influence over mainland environmental practices. While its motivation may be as much about saving costs as saving the planet, that initiative could help the retailer leave its biggest imprint yet.
The influence of talent farms—companies revered as much for their management bench as for their products—could be changing, too. Whether it was marketing savvy at Procter & Gamble (PG) or the "Get me a CEO from GE!" refrain of the 1990s, certain companies have been deified for their management skills. But University of Michigan professor C.K. Prahalad argues that the assumed superiority of such alumni hasn't always been borne out. The entrepreneurial cultures at Home Depot (HD) and 3M (MMM) struggled under the rigorous management systems brought in by GE veterans Bob Nardelli and Jim McNerney. Best practices don't always travel well. Poaching from marquee names "was perfectly legitimate when everybody used to run similar manufacturing-oriented, cost-oriented businesses," says Prahalad. With today's need for innovation, he says, it's the "unique person you want to look at, not necessarily whether he had this or that experience at P&G."
Don't conclude that influence today is more ephemeral or harder to measure than in decades past. Strip away the fast-moving trends, the flip-flops in consumer behavior, and influence still comes down to what Munich-based strategy consultant Roland Berger sums up as "impact on society." In the 1950s that meant shaping the needs of a swelling consumer culture. In the decades since, influential companies built everything from air travel infrastructure to the information highway. Today, the best are trying to serve a global customer base while finding profitable ways to solve a range of societal ills. It's a daunting mission at a time when the world seems overwhelmed. Those who tackle it, however, may wield influence for a generation. And, perhaps, for even more than 100 years.
Slide Show: The World's Most Influential Companies
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