How Innovation Has Helped Fortune 500 Companies

15 minute read

The Fortune 500 - the annual ranking of American companies that divides opinion amongst many in the nation and around the world. Seen by some as a gratuitous display of the American obsession with money, the Fortune 500’s stated mission is both simple and free from bombast: A ranked list of the largest 500 US corporations, measured by revenue.

More than a buzzword

Though some may be more familiar with the term ‘Fortune 500’ as a buzzword, within the business community the annual list has real gravitas. It offers a snapshot into the business landscape of the time, and the players who shaped our world that financial year.

The significance of the corporations on the list in influencing global markets cannot be overstated. The power they hold, both economically and politically, is momentous. Looking at the Fortune 500 for 2018, this can be evidenced by their combined revenue (12.8 trillion USD).

The highest accolade in business

Seen as the highest accolade in business, a place on the list is coveted, but what does the ‘happily ever after’ look like for a company that makes it to the top? For the lucky few on the Fortune 500, this question becomes: How does a company continue to generate revenue greater than its competitors and maintain its place on the list?

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Invariably, it seems, the answer is: it doesn’t. Archival lists dating back to 1955 when the first Fortune 500 was released, show that only 56 companies have maintained their position on the Fortune 500 since its inception (and with the recent acquisition of Monsanto by Bayer, the list will have one less survivor since its inception). 

Fortune 500 meaning?

The fortune 500 is a list of the top 500 companies in the U.S. This list is compiled annually by fortune magazine and the companies included are ranked by revenue. The fortune 500 meaning for companies is one of prestige and a milestone for established companies. 

What makes a company fortune 500

These Fortune 500 stalwarts have not only beat out the competition to remain at the top, but they have also survived financial crises, international wars, and political movements with varying degrees of hostility towards big business. These corporations have not endured; they have thrived. Looking at the data, the upward trajectory of both revenues and (in general) profits show that the rich really are getting richer.

(Displaying total revenues and profits of all companies on the Fortune 500, for figures for individual companies, use the 'Company selected' searched panel)

It is possible to align the dips in profits of the Fortune 500 with the political and economic issues of the time, and this sheds light on how the global environment affects the business cycle even in the case of Large Scale Enterprises (LSE’s).

1990’s political turmoil

1993 is the only year that saw a negative value for the average profits of the Fortune 500, though profits had been stagnant for some years prior. This coincides with the end of the Cold War, which forced the US government to reduce spending on its defence budget.

This hit the manufacturing sector, and as a result, many workers lost their jobs. This led to an overall reduction in personal consumption expenditure that was part of a greater trend of decreasing consumer confidence during that period.

infographic line chart documenting customer confidence over the years 1989-1992. text and lines in white on a turquoise background

Consumer confidence in the US was further undermined by the actions of then-President George H. W. Bush when he increased income taxes, reneging on a well-known campaign promise: “read my lips: no new taxes”. Famous last words.

The 21st Century

Similar dips in average profits can be attributed to the early 2000’s dot-com bubble and the late 2000’s global financial crisis. This however only describes the success of the Fortune 500 relative to the business environment. For a more nuanced understanding, the rise and fall of individual companies must be taken into consideration.

Inspection of these figures reveals that around 10% of corporations listed lose their places each year, with the exception of a few particularly disruptive years. The spike in new companies on the list in 1994 corresponds to a change in methodology by Fortune magazine to include service companies in order the better reflect the climate of business.

The peak in 2013/2014 reflects a confluence of macro-factors that had far-reaching consequences in business. The continuing European sovereign debt crisis slowed sales in Europe and affected global supply chains. Brewing tensions between the West and Russia escalated with the annexation of Crimea, the subsequent economic sanctions, and the dramatic fall in the price of crude oil all contributed to increased uncertainty in the business environment.

Why don’t companies last?

Considering the obvious competitive advantages that a large corporation has in the market, it is perhaps surprising that only 56 of those on the inaugural Fortune 500 remain today. This represents only 10.6% of those companies, and indeed many of the companies present in 1955 would seem out-of-place today. Long-Bell Lumber Company, Great Western Sugar, and the American Can Company all seem somewhat antiquated in 2019.

The question then becomes: why? Why do so many companies fail to maintain their place on the list? And why have certain companies been on the list since its inception, some even improving their rankings? What makes those 56 corporations ‘special’?

The answer to this question failure is the evolution of the market. As we develop as a society, consumer needs and preferences develop with it. This change stems from the continual growth in the options provided to consumers. Innovations in technologies and processes reach the mass market, disrupting previous market norms as consumers move on to something new.

Product innovation and market obsolescence

Many of the companies on the list generate revenue from innovative products that are simply beyond human imagination. The computer is known in Mandarin Chinese as the 电脑, directly translated to English as ‘electric brain’. It was so far outside the understanding of the public at the time, that this amalgamation of characters seemed apt. New innovative products and services, borne from innovation, change customer behavior so dramatically that they make other products completely obsolete.

Take Tesla as an example, in 1999 the electric car was a concept reserved for Sci-fi films, but advancements in technology continue to increase their commercial viability, and plug-in vehicles increase in global market share year-on-year. In Norway (the market share leader) 40% of new vehicles sold were plug-in in 2018.

Indeed, Tesla only joined the Fortune 500 in 2017, having been founded in 2003. The companies most prominent founder Elon Musk was ridiculed as outlandish up until recently, but electric vehicles are now generally accepted as the future of transportation.

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Decreasing company and product innovation lifecycles

To further evidence this, 52% of companies on the Fortune 500 since 2000 have either gone bankrupt, been acquired, or ceased to exist, all resultant from market evolution. This marks a significant increase in the rate at which companies are falling away.

According to a 2016 report by Innosight, the average company lifespan on the S&P 500 list in 1965 was 33 years. This had shortened to 20 years by 1990, and is expected to reach 14 years by 2026. This downward trend in the lifespan of companies may worry some, but it is merely a facet of human innovation. It took us 300 years to invent the wheel as we know it, Apple now releases a new iPhone almost annually.

The increasing rapidity of technological obsolescence can be attributed with the decreasing duration of company lifespans. Looking beyond the Fortune 500 this concept also applies on a global scale.



The changes in the global brand ranking, according to Interbrand, show that those companies we perceive to be the ‘most’ innovative are those that had the highest rate of growth this century (Apple, Google), and those that fail to innovate eventually exit the list (Marlboro, Nokia).

Creative destruction as a cause of market evolution

Innovation causing the market to evolve was first described by economist Joseph Schumpeter in 1942, who identified it as ‘creative destruction’. He defined creative destruction as the “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.”

Going on to say: “The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that enterprise creates.”

Schumpeter believed that innovative entries into the market sustain economic growth by disrupting monopolies. This theory has been developed further over the years, though in its simplest form you only need inspect the Fortune 500 to observe creative destruction in action.

(this infographic displays company placements on the Fortune 500 for every year they appeared on the list, for individual company placements use the 'Highlight Company' search panel)

Apple, now in fourth place on the Fortune 500, was a startup. Apple revolutionized the mobile phone market upon entering it, leaving the likes of Nokia and Blackberry in the dust. However just as technology company Apple was once a disruptive startup, so too was Walmart. Now first on the Fortune 500 for the sixth year in a row, Walmart began as a one-store discount retailer in 1962, hoping to disrupt the then traditional variety store model.

Market evolution as an inevitability

There are those that deny creative destruction, and instead blame market forces for the downfall of many corporations. Globalization seems to be a particularly contemporary force that is commonly blamed for the contraction of the manufacturing and processing industries in the US and other MEDC’s.

Taking the American Midwest as an example, many decry outsourcing as the cause of the deindustrialisation of the region, earning it the title of ‘the rust belt’. Donald Trump described this phenomenon as ‘American Carnage’ in his inaugural speech: “Rusted out factories scattered like tombstones across the landscape of our nation… This American Carnage stops right here and stops right now”.

In fact, the steel industry in the rust belt makes a perfect study of creative destruction in action. During all the years the Fortune 500 has been active, 31 companies with ‘steel’ in their names have placed on the list. In 2018 there were only 4, while in the sixties there was as many as 17 present on the list.

Rank of companies by year - line chart in blue, white background(showing the placement of companies with ‘steel’ in their title in dark blue versus the rest of the companies on the Fortune 500, every year 1955-2018)

In the case of American carnage versus creative destruction, it was a lack of innovation that led to the demise of the steel industry. US steel corporations experienced high revenues during World War II, when their innovative products were required for the war effort. Post-war American steel continued to prosper due to its monopoly on steel production. This was caused by the destruction of the majority of steel plants in Europe and Japan.

By the seventies, foreign steel corporations had rebuilt with modern techniques, reducing the overall cost of manufacturing. During the boom-years, American steel companies had failed to innovate, instead focusing on short term profits, resisting modernization. By 1970, we see a sharp decline in the number of steel companies on the Fortune 500.

The idea that creative destruction will eventually cause all companies to fail, and that the lifespan of companies is becoming increasingly short, is obviously bothersome to corporate executives. It implies that, just as quickly as a company can disrupt the market, they will become obsolete. In 20 years time, perhaps we will see Apple as archaic, at least in its current form.

Innovation as the key to growth

Yet 56 companies have maintained their places on the Fortune 500, some even improving their rankings. How has this been possible in the face of massive technological change?

The answer lies in the companies willingness to innovate. Whether that be in the form of technology or process, this will depend on the industry. Accepting change, even in the fundamentals of the business model, will be required in order to stay relevant.

The only way you survive is you continuously transform into something else. It’s this idea of continuous transformation that makes you an innovation company. - Ginni Rometty

Making a comparative study between two companies: Honeywell International and Bethlehem Steel. Both were present on the Fortune 500 at its inception, however, the former remains on the list today whereas the latter went defunct in 2003.


disused stell mill stands in front of a blue sky with greenery and trees in the foreground Photo from SteelStacks


Honeywell began as a retailer of heat regulatory systems, selling the invention its founder: the mercury seal generator, while Bethlehem was a steel and shipbuilding company. Both thrived due to lucrative contracts from the US military during the war and interwar periods. These contracts enlisted them to develop innovative products for the war effort.

These contracts inspired Honeywell to open an aerospace division, and to continue innovating, not just within the aerospace industry but across the company. Today, Honeywell develops smart technology for climate regulation and security systems for the home.

Bethlehem remained motivated by short-term profits due to the rigid corporate structure of the company and the aforementioned global monopoly. Management failed because it didn't ask: What do we have to do today to prepare for tomorrow?

Long-range planning should prevent managers from uncritically extending present trends into the future, from assuming that today's products, markets, and technologies will be the innovative products, markets, and technologies of tomorrow - Peter Drucker

General Electric and market expansion: innovation in business

For a company to remain on top, innovation must also come from the top in the sense that its importance must be understood by management. Take General Electric as an example, a multinational conglomerate straddling industries from lighting to healthcare to renewable energy, the company was ranked at eighteenth on the Fortune 500 in 2018.

Perhaps being founded by one of the most prolific inventors in American history (Thomas Edison) is the reason that General Electric has innovation at the core of its business. This innovative spirit continues today with General Electrics maxim being “GE - Imagination at Work”, as well as their stated business mission: “GE works on things that matter. Finding solutions... Building, powering, moving and curing the world. Not just imagining. Doing.”

General Electric has a history of innovative ‘firsts’, being the first business in the world to own a computer. General Electric innovates not just in terms of technology, but also in terms of market expansion, moving into renewable energy in a move that surprised many. Management recognised the growth of the wind industry and decided to pivot towards it in an attempt to align their operations with long-term trends.

By investing, General Electric is acknowledging that renewable energy will be the future of electricity generation. Wind currently only accounts for 6.3% of energy production in the US. However, it is one of the fastest growing sectors, consumer demand for it is growing as they become increasingly concerned about the environment. In business terms, General Electric is anticipating a ‘tipping point’.

The tipping point

The tipping point, first defined by Malcolm Gladwell, describes “the moment of critical mass, the threshold” over which “ideas and products and messages and behaviours spread like viruses do”, the point at which the outbreak of an idea becomes an epidemic. Were General Electric to remain solely a purveyor of non-renewable electricity, they would be obsolete at the tipping point.

This phenomenon can be observed in innovative consumer tech trends such as Spotify. Developments in digital technology and access to the internet allowed the streaming service business model to become viable. Initially the service’s users were limited to a younger demographic, but as word spread Spotify’s user base grew increasingly diverse, and Spotify’s share of the music retail market grew significantly.


graphic of an ipad and another tablet, the screens both show spotify playing Photo from Unsplash


The tipping point for Spotify can be disputed. Was it when Spotify first became profitable in 2018? Or when it began to send traditional music retailers into administration in 2013? Or earlier still? Wherever the tipping point lies, streaming services are now regarded as standard and have not only disrupted the market, but completely upended it. Those brick-and-mortar music retailers that failed to prepare are already or will soon be out of business.

This magnitude of this disruption was highlighted with particular weight by TechTarget’s Tom Goodwin: “Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate”, stressing how dramatically these innovations have disrupted the market.

The fourth industrial revolution

Klaus Schwab, Executive Chairman of the World Economic Forum, describes these disruptions as the beginning of the fourth industrial revolution, and predicts that it will have further significant effects on innovation in business. He notes that the time it takes new entrant to dominate the market is also decreasing (Google achieved revenues of 1 billion USD within 5 years), profoundly altering the market over brief periods.

This opinion is echoed by John Chambers, CEO of Fortune 500 company Cisco: “big industries that are getting disrupted (40% of Fortune 500 will become irrelevant in 10 years) - you get Uber’d, you get Netflix’d, you get Amazon'd - you get a business model or government model in transition enabled by technology - if you don’t get ahead you get disrupted quickly.”


They agree that this disruption comes from those companies who are agile and innovative enough to provide increased value in terms of quality, speed or price than established corporations are able to. These are qualities typically associated with startups.

Yet despite being in the midst of this fourth industrial revolution, many of the companies on the Fortune 500 have been established market players for a long time (and as previously mentioned 56 have been on the Fortune 500 since 1955). So how do these LSE’s compete with agile, innovative startups?

Collaboration over competition

In the case of General Electric, they are choosing to invest in startups, rather than compete directly with them. Klaus Schwab believes this form of partnership can be mutually beneficial. Corporations provide capital to the typically cash-strapped startups, and startups provide insight into the market, having the flexibility to experiment with innovative ideas, a trait lacking in the rigid organizational innovation structures of corporations.

When comparing companies on the Fortune 500 in 1955, those that remain today are those that have innovated beyond what made them successful in the first place. General Mills is a perfect example of a company separate from the science and technology industries that has continually innovated to meet evolving consumer preferences, at the same time diversifying its assets.

General Mills started out as a flour mill in Minnesota. They now manufacture over 100 brands of consumer products. General Mills acts primarily as a manufacturer and consumables, however they have experimented with opening an aeronautical division and a restaurant division, founding the chain restaurant Olive Garden. They also recognized the consumer trend towards health consciousness, employed product innovation, and started catering to this trend.


exterior of a stone-walled restaurant with a green and purple neon sign above the door at night Photo from Stacy Uncorked


It is this willingness to move away from the corporation's core competencies that allow them to continue to meet their customers' needs. Had General Mills not invested in a research department to develop new innovative products, the Great Depression would have bankrupted the company.

Continuing this spirit of innovation into the 21st century, General Mills is investing in various food and beverage startups in ‘niche’ sectors such as plant-based protein, vegetable chips and probiotics. The corporation primarily finds startups to invest in through startup accelerator 301 Inc which looks to “collaborate with emerging food brands… to create breakthrough innovations and build successful businesses”.

The rise of the startup and organizational innovation

Corporations that fail to innovate are increasingly losing market to share to the very startups that they might have invested in. This is because in the digital age the barrier to market entry has significantly lowered: technology costs are greatly reduced, and existing market players no longer hold the same information advantage they used to with the advent of the internet. Startups are as easily able to reach consumers as corporations are, at least digitally.

This raises a further troubling question for executives: Does the world need corporations? When our needs as consumers can arguably be better fulfilled by the nimble startup, ready to tailor their offering to our individual preferences, what purpose do corporations have? Encumbered by extensive physical supply chains and a rigid organizational innovation structure, perhaps it is the corporations that represent the true market nichers?

Indeed, given that the lifespan of corporations and the time it takes for a new entrant to dominate the market are both decreasing, is it still desirable, in business terms, to operate a corporation or LSE?

Historically corporations have never really gone out of market. Rather, by acts of mergers and acquisitions, simply continue to exist as arms of a larger corporation, or by way of administration procedures, fracture and are scattered between various corporations. However, as society continues into the fourth industrial revolution, perhaps is it startups that will perform this function.

The emergence of the unicorn

If corporations represent the slow-moving giants of industry, startups are the agile players capable of reducing them to bare bones within minutes. This theory is highlighted by the advent of the unicorn, so-called due to their statistical rarity when the phrase was coined in 2013. Since then the rate at which unicorns appear has increased by 353%.

The unicorns ascension is facilitated by the same factors that make startups more viable: the economies of scale afforded by the internet, and the innovative tech of the fourth industrial revolution.

Their billion-dollar valuations connote their power and influence in the market however, with many dominating their respective industry (name a successful competitor to Airbnb, for example). With their significant financial backing they are able to more effectively disrupt markets, toppling established market players (ie, corporations) with increasing rapidity. For big business, unicorn startups may foreshadow uncertain times ahead.

Startups as market influencers

A more optimistic point of view (at least for executive management), is that the purpose of startups within society isn’t to replace corporations, but rather to influence them. Whether that be towards providing greater value for consumers, or more altruistic goals, startups enforce change by giving consumers more diverse options.

Every time you spend money, you’re casting a vote for the kind of world you want - Anna Lappé

Whilst this quote was an expression of political activism, it can be loosely applied to innovation in business. If the revenues generated by a company represent ‘dollar votes’ for a product or service, by startups finding niches in the market they allow consumers to ‘vote’ for these products. Proving that there is a market for a niche product by gaining market share, the startup influences large corporations to bring them to the mass market.

Elon Musk was asked about this view at a recent TedTalk on Tesla and it’s profound effect on the automobile industry. Prior to the interest shown in Tesla, no car corporations were considering electric cars, and now they are accepted as the future of transportation. Therefore, even if Tesla had failed, hadn’t their business mission been successful regardless? (this is, in fact, a point of view that Musk disagrees with, but it is not without merit).



Take the unicorn Transferwise as another example. Since the beginning of international travel, big banks have held the power, allowing them to charge consumers exorbitant fees for international funds transfers and offering terrible exchange rates. Transferwises’ business mission is “build a better way to transfer money internationally”, offering consumers an alternative, fairer way to move money.

The success of the startup, coupled with advances in technology, led to the beginnings of a banking revolution. Digital banking services began to grow in popularity, with online-only, app-based services such as Revolut and Monzo offering customers alternatives to the corporate banks that had been their only option thus far. Whilst traditional banks may not have altered their strategies yet, these challenger banks grow their user base daily, and the tipping point is surely on the horizon.

Product innovation and fortune 500 companies

As consumers become increasingly enabled by technology, they are more easily able to circumvent traditional business models. In these turbulent business times, one thing can be assured: the future is more uncertain than ever. We are at a point in history where the future of institutions such as governments is being thrown into question by technological innovations, as predicted by Klaus Schwab.

Technology is being harnessed to bring new innovative products and services to market by innovative startups, having the potential to disrupt markets across a range of industries, even those thought beyond the influence of tech developments. Being first to market does not guarantee success however, and a successful startup requires the right environment.

Explore innovative technology trends

And where does this leave corporations, those players typically slowest to adapt? In order to achieve continued success they cannot rely on size and scale of assets alone, but instead must place innovation to maintain their position.

Collaboration between startups and corporations can be critical to both parties success, as each has what the other needs. The startup can incite innovation within the corporation, often presenting solutions to the problems they face in terms of understanding customer needs and expanding their product innovation. The corporation in return provides capital to the startup and enables them to reach a mass market.

As the market churns with increasing pace, what will become of the 56 corporations present on the Fortune 500 since its inception? And what of those corporations on the Fortune 500 at large? Will these corporations be present in 25 years? Whilst nothing is assured, it seems that the best recourse in facing the future is in seeking collaborations that create value for not only startup and corporation, but society in general.

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