[WHITE PAPER] The Mag 7/FAANG Stocks: The Biggest Value Creation Myth in Business?

SYNOPSIS: Now expanded to become the "Magnificent 7" with the additions of Microsoft, NVIDIA, and Tesla (and removal of Netflix), the original FAANG stocks—Facebook (Meta), Amazon, Apple, Netflix, and Google (Alphabet)—are economic marvels. Accordingly, the mythology surrounding these outlier companies suggests that their "secret sauce" lies in their cutting-edge technology. Curiously, their technology, as impressive as it may seem, is fundamentally a commodity—available to any business willing to invest. this article challenges that belief, arguing that the real reason behind their success might be something far less visible yet far more impactful. The mythology surrounding FAANG’s technological prowess distracts from the deeper lesson they offer: that it’s not the technology itself but how it’s wielded in service of customers and their experiences that create their competitive edge.

The original FAANG stocks—Facebook (Meta), Apple, Amazon,  Google (Alphabet),  Microsoft, NVIDIA, and Tesla  —have delivered an unprecedented value creation "supercycle", dramatically outpacing the broader market. Between 2010 and 2023, these companies generated a combined market capitalization increase of over $6 trillion, accounting for nearly 40% of the S&P 500’s total returns during that period. Behind the headlines, an equally significant phenomenon has occurred—Particularly with the original FAANG component of the MAG 7, their dominance has also triggered a capital investment supercycle, as companies of all shapes and sizes attempt to emulate the financial good fortunes of FAANG. Whether in retail. entertainment and media, auto manufacturing, or financial services, trillions of dollars have been poured into digitalization, tech stacks, algorithms, AI, cloud computing, and everything in between, ostensibly to mimic the FAANG approach, capture some of their financial magic, and being reborn as proper tech companies.

Despite these significant investments, as the other side of market cap and total returns story tells, virtually every other company in the S&P (or any index for that matter) has struggled to achieve results anywhere near FAANG levels. As a prominent case in point, through its "Predix" software platform, even a legacy industrial enterprise like GE made a very public effort to transform itself from a traditional portfolio of manufactured products and associated services into a software-powered “digital industrial company.” To that end, the company invested heavily to attract top-tier tech talent in data science, AI, and software engineering akin to FAANG. GE’s ambition to emulate FAANG-like success showed uncharacteristic aplomb and vision, but the commercial results were decidedly mixed. In essence, reflecting a pattern across industries, GE was able to replicate what it perceived as the FAANG playbook but was unable to replicate the results.

While the reasons for GE’s specific outcomes ran the gamut from culture and strategy to execution and timing, they bring up critical questions:

• With sustained investment and democratization making technology accessible to everyone, why haven’t more companies been able to generate performance anywhere near those levels?
• What does MAG 7/FAANG do that’s different?
• Beyond tech, what’s their real secret sauce? 

This scenario reinforces the primacy of the MAG 7/FAANG and reveals a critical paradox. Entering its second decade, this economic marvel is broadly celebrated as a technology phenomenon, borne of Silicon Valley genius and exceptionalism. This mythology has set off the aforementioned supercycle of capital investment and corporate envy and brought algorithms, coding, hoodie-wearing founders, and legions of seemingly extraordinary engineering talent out of basements and dorm rooms and into popular culture. However, with the exception of technology pure-play NVIDIA, a closer more nuanced examination of the MAG 7 narrative reveals that their success might have been mischaracterized as a technology phenomenon when it could more accurately be characterized as a customer experience phenomenon.

While the MAG 7/FAANG companies have reset the bar on what tech can do, the tech itself is just a means to an end. Specifically, the subtle, but significant nuance in the MAG 7/FAANG playbook indicates that their endgame is to create differentiated value for customers and outsized performance for themselves by consistently delivering exceptional customer experiences. In effect, rather than technology being the source of their value creation and differentiation formulas, the MAG 7/FAANG “secret sauce” is to put the power of technology to work in service of consistently delivering exceptional and innovative customer experiences.

Key Takeaway: Crucially, as a defining element of their status as Customer Excellence Enterprises (CXEs), for MAG 7/FAANG customer experience is not an abstract concept, it is fundamental to their business models, corporate success formulas, and unique selling propositions. Amazon redefined convenience with one-click ordering and lightning-fast delivery. Netflix created value by understanding user preferences through recommendation algorithms. Tesla delivered intuitive online ordering to over-the-air updates and exceptional post-purchase support. Transcending the utility of widely accessible, but fundamentally non-differentiated technology, MAG 7/FAANG’s collective focus on customer experience redefines differentiation and value and serves as the (somewhat hidden) mechanism to compound and sustain their competitive advantage.

Redefining Differentiation.

In markets where access to technology has become ubiquitous and democratized, this customer experience-led approach challenges traditional notions of differentiation and shifts the paradigm. Historically, competitive differentiation was often tied to proprietary technology, economies of scale, or resource control. However, MAG 7/FAANG companies demonstrate that meaningful differentiation must increasingly come from creating seamless, personalized, and frictionless customer experiences rather than just technological superiority. In commoditized markets, where competitors often offer similar products or services, MAG 7/FAANG companies stand out by focusing on intangible elements such as ease of use, trust, and emotional connection. Apple’s success, for instance, lies not only in the hardware of its devices but also in its ecosystem, which integrates hardware, software, and services into a seamless, intuitive user experience. Google’s dominance is not just about search algorithms but about organizing the world’s information in a way that feels effortless for users.

Redefining Value.

As another critical pillar, MAG 7/FAANG has mastered the art and science of leveraging those readily available technologies in innovative and concentrated ways to enhance customer and stakeholder value. In fact, MAG 7/FAANG’s focus on customer experience introduces a new model of value creation that is structural, systemic, and cultural rather than superficial, functional, and episodic. This means that MAG 7/FAANG has embedded the ethos of customer-centricity into their leadership, organizational, operational, and commercial DNA, making it difficult for competitors to decode and replicate the specific drivers of their success. In the MAG 7/FAANG context, it’s not just the "technology stack" that drives their differentiation and value but their commitment to Customer Excellence, which includes the data-driven insights, cultural alignment, and leadership conviction needed to be in a continuous and perpetual state of improvement on behalf of the customer experience. This alignment creates advantages that are durable and resilient to the inevitability of technological commoditization because they are rooted in a fundamental reverence for customers and a commitment to helping them live their best lives.

Capturing the MAG7/FAANG Magic. 

The MAG7/FAANG supercycle is an unparalleled chapter in economic history, demonstrating the transformative power of technology-driven value creation. But technology by itself is no longer enough to differentiate—it has become a commodity accessible to all. What sets outliers like MAG 7/FAANG apart is their ability to use technology in a way that humanizes interactions, builds trust, and delivers consistent value to customers. Fortunately, the MAG7/FAANG “secret sauce” of leveraging technology in service of customer experience excellence and innovation  is accessible to any company willing to take the hard but infinitely rewarding road to becoming a Customer Excellence Enterprise. However, a general lack of understanding of customer experience as a source of value creation has led many companies to marginalize it as a discipline, making it a superficial layer rather than an organic component.

In the spirit of trying to catch some of the MAG7/FAANG “lightning in a bottle”, breaking the legacy thinking related to customer experience involves adopting tech like AI, data analytics, algorithms, and automation to anticipate customer needs, deliver seamless experiences, and create deep emotional connections and positive cognitive responses. As with any strategic move, this transformation begins at the top, with leaders clearly stating their intent, building conviction, and modeling behaviors to shift their company’s perspective on customer experience. It must no longer be seen as a cost center, an operational afterthought, or a nice-to-have but as a strategic pillar essential to elevating financial performance, creating deep differentiation, and generating sustainable competitive advantages.

To learn more you can get started by downloading a 29-page preview, connecting with us as partners on the journey, and ordering “The Customer Excellence Enterprise: A Playbook for Creating Customers for Life” at all major booksellers.