I would like to recapture that freshness of vision which is characteristic of extreme youth when all the world is new to it.
— Henri Matisse
Many investors obsess over variant perception. At TenCore, we have a variant obsession: customer experience compounding (CXC).
From the customer’s perspective, we believe today’s business climate is as exciting as ever. Across multiple product categories, customers no longer need to prioritize just one or two attributes among convenience, selection, quality, price, safety, speed, and reliability. Instead, today’s benchmark (global best) companies delight customers with fast-improving, no-brainer propositions that offer a layer-cake of value across multiple dimensions.
These propositions are often integrated services that compound both individually and atop each other—just as technology has compounded from material science to electricity to the internet to today’s leading platforms.
The way to solve the conflict between human values and technological needs is not to run away from technology. That’s impossible. The way to resolve the conflict is to break down the barriers of dualistic thought that prevent a real understanding of what technology is—not an exploitation of nature, but a fusion of nature and the human spirit into a new kind of creation that transcends both. When this transcendence occurs in such events as the first airplane flight across the ocean or the first footsteps on the moon, a kind of public recognition of the transcendent nature of technology occurs. But this transcendence should also occur at the individual level, on a personal basis, in one’s own life, in a less dramatic way. . . . Making an art out of your technological life is the way to solve the problem of technology.
— Robert Pirsig, Zen and the Art of Motorcycle Maintenance: An Inquiry into Values, (William Morrow, 1974)
As a result of such no-brainer propositions, customers are becoming entitled and spoiled for choice; they are no longer happy with either good enough or local best. Only “insanely great” will do (h/t Steve Jobs). And these delightful experiences earn customers’ commitment through repeat purchases, subscriptions, and referrals. Some backward-looking governments may try to slow or reverse this trend, but it will be difficult to do.
It’s also an exciting time for company owners (aka long-term investors), not so much because of dreamy concepts like cryptocurrencies and commercial space travel, but because of companies’ improved ability to discover and resolve the tangible and granular pain points for customers right here on Earth. The resulting category-defying propositions can power gravity-defying value growth.
In the past, the business world had failed to produce companies with broad and deep relevance—restraining businesses from the type of beauty that we associate most often with nature, individuals, and art, and less often with community, academic, and government organizations. We may well have entered an era of durable business beauty.
There are always flowers for those who want to see them.
— Henri Matisse, Jazz, (Teriade, 1947)
The best companies today are no longer the category- or niche-specific artisan creations of years past that would improve along an anchor attribute or two. Instead, benchmark companies build magnetic architectures where each incremental step—whether new talent, partners, products, customer segments, geographies, or scale efficiencies—enhances value for each customer cohort. This architecture encompasses a company’s business model, technology, and operating framework that both keeps competitors at bay and managements on their toes.
In addition to compounding value for billions of consumers, today’s leading companies are building an infrastructure layer that helps other complementary platforms. For example, on top of Apple’s and Google’s app stores, many companies are building their own open platforms, including vibrant app stores and other creator ecosystems. These include Epic Games, Facebook, Microsoft, Roblox, Salesforce, Tencent, TikTok, WhatsApp, YouTube, and Zoom.
Each of these companies has its own distinct attributes. However, they are all relatively flat organizations with fully empowered small teams that respond instantly—through thousands of new features and personalized experiences—to meet evolving customer needs. Their improvement curves are steepening to awe-inspiring levels.
The Internet’s speed and pace are already N times faster than traditional industries, but ByteDance is faster than some of the “old” Internet companies. According to The Late Report, when ByteDance implements a product feature, it takes as little as a week to prepare for launch and review the feedback. A similar thing could take two weeks at Meituan.
ByteDance excels at blitzkrieg and has always pushed for “vigorous miracles”. When entering a new area, they usually invest a lot of resources quickly, with multiple teams advancing multiple projects simultaneously. But once they find out that the ROI is not working, they will soon shut it down.
— Lillian Li, “The People Who Left ByteDance,” Chinese Characteristics Substack, March 26, 2021
Along with helping billions of consumers and each other, the platforms are also building ecosystems to help millions of other businesses and creators to express themselves, refine their offerings, and grow. The strategic imperative for Salesforce, for example, is to improve rapidly for its customers, so that they can in turn improve rapidly for their own customers.
What’s more, the best software companies enable speedy improvement in part by coveting the toughest customers—those with their own unreasonably aggressive improvement curves. Salesforce, Amazon, and Microsoft, for example, are all leveraging the benefits of associating with fast-improving startup companies as customers and partners.
Many individuals and entities are choosing to leverage today’s CXC opportunities by accepting the new and shedding or readjusting previously useful mental models and self-identities. Whether recently minted or decades old, the most forward-thinking entrepreneurs and institutions are accelerating the demise of outdated corporate, category, and social structures.
The compounding agility of modern tech and operating stacks is leading to a business model and competitive landscape that is increasingly as fluid as Bollywood star Hrithik Roshan’s dance moves. In order to understand and follow these dynamics granularly, we are honing an investment process that reflects the practice of meditation—gradually improving our sensitivity through extreme focus on narrow areas to the point that underlying patterns and flows reveal themselves. In meditation, this process can lead prepared individuals toward enhanced clarity of observation and more “obvious” decisions.
Familiarity can blind you too.
— Robert Pirsig, Zen and the Art of Motorcycle Maintenance: An Inquiry into Values, (William Morrow, 1974)
A primary goal of this process is to focus on not missing the painfully obvious. For example, we believe one painfully obvious fact is that value will continue to concentrate in the meta platforms that compound their own value through their CXC breadth and pace.
In food delivery, DoorDash and Meituan are bringing the generic attribute of efficient speed to all restaurants and other local businesses, just as ecommerce platforms have done for one- to three-day delivery. In apparel, fast-fashion companies like Boohoo, Shein, and Shopee are vertically integrating to set a new global standard of cheap, fast, and desirable clothing.
At the same time, workflow platforms like ServiceNow and Salesforce are attempting to destroy the negative connotation of their namesake (“work”) by easing coordination, creation, curation, and automation. Within software, various platforms are collapsing subcategory walls to align with the open floor perspective of their customers for content creation, commerce, security, data, and other parts of the tech stack.
Another painfully obvious fact is that corporate leaders are beginning to accept social responsibility. Eric Yuan of Zoom is focused on “delivering happiness” for all stakeholders. Google is increasing the number of businesses it benefits directly. Facebook is helping nonprofits raise funds and users to vote and get vaccinated. Even Jeff Bezos has added employee happiness as a goal for his notoriously customer-obsessed company. We believe these expanded goals are a natural outcome within the overall value cycle, which must always focus on customers first in order to surface the value (and responsibility) that can then be reinvested for broader goals.
Through this blog, we look forward to sharing our CXC observations. And, as always, we welcome your feedback and insights as we strive to improve in tandem with today’s benchmark companies.