Technology Economics: The Real Business Impact of Technology Leaders – the “Rubin 300”

Rubin Worldwide has identified a group of 300 firms that demonstrate technology leadership across several key industries, which we refer to as the “Rubin 300.” It is our hypothesis that these firms, as a result on business-results focused technology investment, will demonstrate better performance vs. their peers.

In earlier studies, we examined the differences in performance of the Rubin 300 (in a theoretical index called the Technology Leadership Index, or TLI) vs. traditional indices such as the S&P500 and the Dow Jones Industrial average. Our findings were that from January 2006 to December 31, 2010, the TLI has consistently outperformed the S&P500 and, since the beginning of 2010, has begun to surpass the DJIA. Since the beginning of the study, the TLI has averaged a 1.2% difference in value from the DJIA, 6.7% from the S&P500, and -2.3% from the Fortune 500.

This early research has begun to support the hypothesis that organizations that leverage technology efficiently do in fact create value to the shareholders. However, the stockmarket is not based on business results alone and can be impacted by unrelated market conditions and market sentiment. For this reason we have continued our research into the “real” business performance of the Rubin 300.

The Next Stage of the Rubin 300 Experiment

In theory, technology can create value in 2 basic way: by increasing revenue or by driving down costs. The mechanisms behind this are not quite as simple, but we have identified 5 basic categories by which technology impacts the overall margin:

  1. Growing revenue:  supporting new products and services
  2. Protect revenue: Lights on functions that ensure efficient delivery of existing products and services
  3. Reducing costs: typically derived from IT on IT optimization efforts
  4. Avoiding costs: removal or prevention of taking on additional business costs from IT transformational initiatives
  5. Managing risk:  technology support of regulatory and security requirements

Figure 1. Business Initiative Categorization of Technology Investments

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If IT is creating value for technology leaders, we would expect to see evidence along these lines. Have margins been improved? Has efficiency improved? What other benefits can be seen from leveraging technology?

The Findings

To do this analysis we looked at 415 companies that have remained in the Fortune 500 between 2006 and 2011 – of these 148 are Rubin 300 organizations. Key findings include:

  • Increased Job Creation: Rubin 300 firms generated a compound annual growth (CAGR) of total employees of 14% vs. 6% for non-Rubin 300 firms between 2006-2011.
  • Lower cost per employee: average cost per employee declined by 3% annually for Rubin 300 firms vs. 1% increases for Non-Rubin 300 companies.
  • At the same time Rubin 300 companies maintained similar revenue per employee levels and revenue growth, although slightly lower growth in terms of profitability.

Figure 2. Rubin 300 Performance vs. Fortune 500 Firms

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What Does This Mean?

It appears that many of the Rubin 300 firms have been able to generate new jobs, reinvesting their efficiencies to support economic growth, at a lower cost without having a significant impact on business growth or success.   While this may not have had a significant impact on overall business value to date, it does imply that technology has been a driver of new employment rather than replacing the need for human capital.

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  • Kristen VN

    Where can I find the original version of this study? Thanks!