Investing £50,000 in ten companies to (hopefully) prove a point on innovation
Introducing the Fit for the Future Fund — an experiment.
I want to know whether a focus on building modern business capabilities (design thinking, lean startup, agile development), creating purposeful innovation programmes, consistently developing new propositions, obsessing over customer experience and building good digital stuff is reflected in long-term financial performance.
A brief history
In 2006, one of the most respected design studios on the planet Teehan+Lax (since acquired by and doing awesome things at Facebook) set up the UX Fund. They hypothesized that companies who delivered a great user experience would have that reflected in their stock price. They invested $5,000 in ten companies that they deemed to providing excellent experiences based on these factors:
They needed to demonstrate care in the design of their products
They needed to have a history of innovation
They needed an inspired loyalty in their customer base.
They tracked the performance of that fund against some major indices such as The Nasdaq, Nasdaq 100, NYSE and S&P 500 and sold their stock twelve months after for a $20,000 gain. Then Geoff did a retrospective in 2016 to find that if they had held on (this was never in the plan), today it would have returned a $250,000 gain.
I wondered what a 2018 version of a similar fund might prove about my hypothesis that ‘companies who are fit for the future will have that reflected in their stock price.’
The New York Stock Exchange
Clearly, this is not the most scientific of tests, neither am I evangelizing a method of investing for all the stock market bros. There are lots of other variables that affect the performance of stock (M&A activity for example). I just think that 12 years on, with all the changes that we’ve seen in terms of changing customer expectations, corporate competition, and technological advancement that it’d be an interesting experiment and give the original one a 2018 lens.
Let’s define what I mean by ‘fit for the future’ — I’m looking for companies who:
Demonstrate an appetite to build modern business capabilities (design thinking, lean startup, and agile methodology) within their organisation
Demonstrate a scalable and repeatable approach to innovation that is purposeful and successful
Demonstrate acumen in their ability to ship new revenue generating customer propositions consistently
Demonstrate that they care deeply about the customer and the experience they have with the company throughout their engagement
Demonstrate an ability to develop digital experiences, products, and services like a technology company.
So with our criteria defined, let’s pick some companies who meet it.
Here’s where I’ve landed regarding the ten companies that we’re going to track. These are listed companies that I believe fit the criteria and operate in markets I’m familiar with (Germany, UK, and the US). Interestingly, a few of the companies on this list are also components of the original UX Fund (Apple, Google, and Netflix).
Adidas’s focus on innovation, particularly speed factory (customising and shipping sneakers on demand), is differentiating them in a market obsessed with acquiring apps and making connected clothes.
Yeah, Google basically. We all know they are one of the most innovative companies on the planet, but I think their foray into the home tied to their existing business models will see revenues grow exponentially.
J-Bez or Jeff Bezos to you is famously obsessed with the customer. Their relentless focus on removing friction from every single part of our lives will see more and more of us buy more and more from them. All hail God Inc.
Their stock has been falling very recently, but they will have to get to disruptive new products this year to stop the rot. The HomePod won’t quite do it but owning the living room or the car just might.
The way we travel is changing, and if I could, I’ve have picked Airbnb, but they’re not listed. Expedia will start to expand their share of wallet by helping customers to buy their entire trip rather than just the car, flight, and hotel.
I’m going to eat my way to ensure their performance in 2018. I joke. Their acquisition of Hungry House will consolidate the food ordering market in the UK and help them to fend off competition from Deliveroo and Uber Eats.
Netflix is on an upward trajectory for sure but I think we might see them get involved in buying global Premier League rights, if not others and take revenue away from the likes of NBA League Pass.
They’re solving customer problems well although they got off to a slow start, we’re already starting to see them think about useful new products and services like linking accounting to shipping.
Business Model innovation will be the focus alongside upping production of Model 3 over the next twelve months. I’d expect to see traditional manufacturers piggybacking their charger network and paying fees soon.
Their acquisition of Fox aside, Disney continue to be customer obsessive in their parks and resorts business too. They’ll soon be using machine learning and AI to improve the experience across these. And we know they’ll do it.
I’ve invested a theoretical £50,000 (hey — it’s just a hypothesis), £5,000 in each company for 12 months. So, on 14th February 2019 I’ll update this so that we can track its performance against a few key indices and see whether ‘Fit for the Future’ companies outperform the market. We’ll check out the performance against the FTSE and the NASDAQ (just in case there is a Brexit related economic collapse here in the UK). See you for a date on 14th February.