The Fit for the Future Fund — 12 Month Update

Twelve months ago, we decided to test a hypothesis I had that ‘companies who are fit for the future will have that demonstrated in their stock price’. In order to do that, we’d use the same methodology that Teehan+Lax had used 12 years earlier to prove that ‘Companies that focus on delivering great user experiences will see it reflected in their stock price.’ Namely, investing £5,000 in 10 companies and tracking those investments against other major indices such as the FTSE 100, NASDAQ 100 and S&P 500. We wanted to see whether companies with a systematic approach to experience design, product development and venture creation outperformed the general market. We called our fund the ‘Fit For The Future Fund’.

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The Method

Firstly, we had to define what it meant to be ‘fit for the future’. We wanted to find companies that demonstrated the following 5 tenets:

  1. An appetite to build modern business capabilities (design thinking, lean startup, and agile methodology) within their organisation

  2. A scalable and repeatable approach to innovation that is purposeful and successful

  3. Acumen in their ability to ship new revenue generating customer propositions consistently

  4. That they care deeply about the customer and the experience they have with the company throughout their engagement

  5. An ability to develop digital experiences, products, and services like a technology company.

The Companies

Next, we had to search for evidence of this behaviour amongst listed corporations. Finally, we landed on 10 companies that we deemed ‘fit for the future’:

Adidas

Adidas’s focus on innovation, particularly speed factory (customising and shipping sneakers on demand), was differentiating them in a market obsessed with acquiring apps and making connected clothes.

12 Month Gain: 6.73%

Alphabet

Yeah, Google basically. We all know they are one of the most innovative companies on the planet, but we thought their foray into the home tied to their existing business models would see revenues grow exponentially.

12 Month Gain: 2.34%

Amazon

J-Bez or Jeff Bezos to you is famously obsessed with the customer. We thought their relentless focus on removing friction from every single part of our lives would see more and more of us buy more and more from them.

12 Month Gain: 30.6%

Apple

Their stock had been falling at the time, but we felt they would accelerate getting disruptive new products to market to stop the rot. The HomePod didn’t quite do it but owning the living room or the car just might.

12 Month Gain: 3.87%

Expedia

The way we travel is changing, and if we could, we’d have picked Airbnb, but they’re not listed. We felt Expedia would start to expand their share of wallet by helping customers to buy their entire trip rather than just the car, flight, and hotel.

12 Month Gain: 27.8%

Just Eat

We planned to eat our way to ensure their performance in 2018. We joke. We thought their acquisition of Hungry House would have consolidated the food ordering market in the UK and helped them to fend off competition from Deliveroo and Uber Eats.

12 Month Gain: -23.8%

Netflix

Netflix was on an upward trajectory anyway, but we thought 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.

12 Month Gain: 35.8%

Sage

They were solving customer problems well although they got off to a slow start, we thought that digital VAT in the UK and the further development of useful new products and services like linking accounting to shipping might see them perform well.

12 Month Gain: -8.65%

Tesla

We thought that Business Model innovation would be the focus alongside upping production of Model 3 over the next twelve months. We expected to see traditional manufacturers piggybacking their charger network and paying fees to do so.

12 Month Gain: 2.43%

Walt Disney

Their acquisition of Fox aside, Disney continued to be customer obsessive in their parks and resorts business. We felt they’d soon be using machine learning and AI to improve the experience across these.

12 Month Gain: 16.3%

The Fund

In total, the fund grew by £5,066 (10.13%) to £55,066 in 2018/19. You'd need to be involved in real estate, peer to peer lending or get extremely lucky on the market to generate those returns.

In comparison with major indices made up of lots of different companies (including some that I invested in)it is pretty remarkable. In the same timeframe the FTSE 100 posted a negative gain of -9.51%, the S&P 500 a shrinkage of -4.56% and the NASDAQ slightly better than these but still negative at -0.395%.

FFTF Fund results: January 19, 2018 — January 19, 2019

FFTF Fund results: January 19, 2018 — January 19, 2019

This is a long-term experiment so let’s check back in on or around 14th February 2020 (it’s a date etc.).

Jacob Dutton