Fourth Industrial Revolution

These are the most innovative companies in the world

A visitor checks a Tesla Model S car during the Auto China 2016 in Beijing, China, April 25, 2016.

A visitor checks a Tesla Model S car during Auto China 2016 in Beijing Image: REUTERS/Jason Lee

Michael Hanley

Innovation is the currency of the fourth industrial revolution. Companies that can innovate faster and more effectively will be best positioned as technology dominates our lives to an ever greater extent.

According to Forbes magazine, Tesla electric cars, SalesForce, the cloud-based database company, and biopharmaceutical company Regeneron are the three most innovative companies in the world.

Nine of Forbes' top 10 innovators are from the United States.

Forbes ranks companies by what it calls an "innovation premium." This is the difference between a company's market valuation – the value of all its shares, plus total debt – and the net present value of the cash being generated by the company's existing businesses. This "premium" is a measure of how much investors think the company's future innovations will be worth.

To get onto the list companies need to have over US$10 billion in market capitalization as well as at least 7 years worth of financial data. This cuts out a large number of smaller and newer companies.

Tesla loses money on every car sold. But investors believe this won't last forever. The company's market capitalisation of more than $30 billion is wholly down to a very high innovation premium.

Tesla is young but already has a solid track-record of innovation. The issue, says Forbes, is whether it can deliver on the huge innovation premium its investors have already priced in.

At number two, SalesForce, the collaborative software company, is making a big push into artificial intelligence. Meanwhile, third-placed Regeneron has a string of innovative drug treatments to its name.

A look at the full list of 100 companies shows a less US-dominated picture. The US has 49 of the top 100, while Asia has 24 and Europe 23. Within Asia, Japan (8) beats China (7) and India (5). Latin America has two positions and there's one company from the Middle East -- Saudi Arabia's Almarai at number 40.

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