The output generated by those who act on farms and in factories has long been the result of theatre performances, invented worlds distinctly different from other facets of everyday living. A two-hour performance of King Lear and the overnight performance of FedEx both compress time. Both—arguably one more than the other—also help us see the world differently. But which one? Today, successful businesses, like good art, must engage the audience. If you treat customers no differently than what they receive from run-of-the-mill competitors you cannot shift up the Progression of Economic Value.
The Experience Economy liberates theatre from the area behind the arched proscenium. The staged performances of government-subsidized playhouses, community theatres, movie studios, and theme parks will continue to face rising competition from unexpected sources—not only from restaurants and cafes as well as computer games and virtual worlds, but also from banks and insurance companies, airlines and hotels, and from every street corner and retooled mall. For every business is a stage.
CHAPTER 9
The Customer Is the Product
EVERY BUSINESS CAN INDEED BE a stage for offering economic experiences. Whether selling to consumers or companies, firms must recognize that goods and services are no longer enough; customers now want experiences. But to what end? Experiences can offer enjoyment, knowledge, diversion, and beauty, but more than the desire for such memorable qualities drives the Experience Economy. For not all experiences are fun, enlightening, distracting, or breathtaking.
Why, for example, do people pay good money to join fitness centers, where they expect to experience physical pain? Why do they pay $200 an hour to a psychiatrist, in whose office they may re-experience mental anguish? Why do tens of thousands of men pay admission to attend an event sponsored by the Christian organization Promise Keepers, whose goal it is to change men's behavior? And why do young managers leave well-paying jobs to spend tens of thousands of dollars on business school? There seems to be only one answer to all of these questions: to be affected by the experience.
The experiences we have affect who we are, what we can accomplish, and where we are going, and we increasingly ask companies to stage experiences that change us. Human beings have always sought out new and exciting experiences to learn and grow, develop and improve, mend and reform. But as the world progresses further into the Experience Economy, much that was previously obtained through noneconomic activity will increasingly be found in the domain of commerce. That represents a significant change. It means that to obtain what we once sought for free, we now pay a fee.
This pattern can be seen in many spheres of our culture. We see people seeking spiritual growth outside the bounds of their local, traditional place of worship. Promise Keepers is one example. Another is the rise of spiritual directors, what one writer calls “personal trainers for the soul.”1 Troubled families no longer confine their search for help to other family members and friends in their religious or social community. They often seek advice from media personalities such as Dr. Laura Schlessinger or Dr. Phil McGraw, as well as from the numerous books and tapes now available that include recipes for self-improvement. In education, businesses increasingly establish their own institutions of learning, no longer able to rely on public schools to graduate educated students. Likewise, more families pay to send their children to private school for fear that public schools won't get the job done. The changing nature of labor also drives the demand for new kinds of economic experiences. Along with the decline of the Agrarian and Industrial Economies there has been a great decline in the number of people who support themselves by doing hard, physical labor. Many of us now pay to get and stay physically fit in venues outside the workplace. It is, after all, people with desk jobs, and not meatpackers and bricklayers, who most often visit health clubs after work.
But what are people really after as they enter into all these pursuits? Experiences, yes. But there is more than that: we want to transform ourselves, to become different. While experiences are less transient than services, the individual partaking in the experience often wants something more lasting than a memory, something beyond what any good, service, or experience alone can offer. People who buy memberships in a fitness center do not pay for the pain but for ongoing exercise regimens that will increase their physical well-being, helping them go from flabby to fit. Likewise, people return to psychiatrists as long as they see improvements in their mental or emotional well-being. People head for business school because they want to affect their professional and financial well-being. Exercise routines, counseling sessions, learning courses, and religious excursions are actually means of eliciting something that is more desirable, and more valued, than the experience itself.2
In the healthcare industry, patients want more than pharmaceutical goods, medical services, or even a hospital experience; they want to go from sick to well. The same goes for management consulting. A struggling company wants something beyond informational goods, advisory services, or even educational experiences: it wants to grow. Companies clearly value an offering of economic growth more highly than they do the goods and services, or even isolated experiences, that still form the basis of much of the consulting industry. Even now, project methodologies (bound copies of physical goods), project team facilitators (on-site management services), and intervention programs (multidisciplinary experiences) command far lower fees than offerings such as systems outsourcing deals, which promise large-scale change.
As economic activity shifts further and further away from goods and services, those companies that stage experiences alone—without considering the effect these experiences have on the participants and without designing the experiences in such a way as to create a desired change—will eventually see their experiences become commoditized. The second time you experience something, it will be marginally less enjoyable than the first time, the third time less enjoyable than that, and so on until you finally notice the experience doesn't engage you nearly as much as it once did. Welcome to the commoditization of experiences, best exemplified by the increasingly voiced phrase “Been there, done that.”3
The Progression of Economic Value Revisited
Experiences are not the final economic offering. Companies can escape the commoditization trap by the same route that the other offerings can take: customization. When you customize an experience to make it just right for an individual—providing exactly what he needs right now—you cannot help changing that individual. When you customize an experience, you automatically turn it into a transformation, which companies create on top of experiences (you've heard the phrase “a life-transforming experience”) just as they create experiences on top of services and so forth. As shown in figure 9-1, transformations are a distinct economic offering, the fifth and final one in our Progression of Economic Value. A transformation is what the out-of-shape person, the emotionally troubled person, the young managers, the hospital patient, and the struggling company all really desire.
By staging a series of experiences, companies are better able to achieve a lasting effect on the buyer than through an isolated event. It is the revisiting of a recurring theme, experienced through distinct and yet unified events, that transforms. As multiple experiences emerge and compete for guests, companies staging these events will begin to realize that any experience can become the basis for a new offering that elicits a transformation.
Let's return to one of our favorite experiences: the birthday celebration. As more and more companies compete with the staged birthday events offered by Chuck E. Cheese's, Gameworks, Dave & Buster's, and the like—not to mention such locally produced experiences as New Pond Farm—this genre of experience will undergo commoditization, resulting in lower prices for single birthday events. Eventually, some experience stager will realize that shifting to birthday transformations would increase customer value and thereby forestall commoditization. What might such a company—a transformation elicitor—do? Well, rather than focus simply on only this year's party, it might guide
parents through multiple birthdays as the child grows, and it might concern itself not only with staging the party but also with selecting gifts, inviting guests, and encouraging after-party behaviors. Gifts, for example, could be aimed at a child's developmental needs. Guests might serve as professional role models, from spheres of life in which the child already shows interest—or in which the parents wish to encourage him. To help birthday children become more conscious and appreciative, the transformational birthday offering might include thank-you notes, with pre-engineered templates and stamped envelopes.4 And most important, each year's birthday party would be treated as an incremental event in the overall management of childhood development. Such birthday guides may or may not emerge from the current birthday experience circuit, but they may just as well come from a toy manufacturer (leveraging its child development expertise), a parenting magazine (which understands child rearing as a parenting issue), a sports management firm (with a portfolio of potential role models), or a tutoring service (building on its customized curricula).
Figure 9-1: Completing the Progression of Economic Value
Perhaps martial arts teachers were the first experience stagers to realize the transformational power of their offerings. Many parents allow, encourage, or even force their children to join such programs as karate, kung fu, and tae kwon do. Many parents do it because they lack the skills or desire themselves to instill the proper respect and self-control in their offspring, others to complement and support what they see as their disciplinary responsibilities. Masters of martial arts promise not only to teach the skills of their ancient pursuits but to provide a set of rules by which students must live. As the business manager of one such establishment declared, when parents come for enrollment they're saying, “Fix my kid.”5 Many parents, however, want to limit the extent of this influence. In a Forbes story on the phenomenon, the writer reports that some parents seek out Christian or Jewish martial arts masters “to avoid schools they think may introduce their youngsters to Eastern mysticism.”6
On a more material front, consider the food industry and the way dining experiences might progress into transformational offerings. Nutrition management may be the next shift, where grocery stores or restaurants (or more likely, start-ups from unanticipated sources) compete against Jenny Craig, Weight Watchers, and others by making healthy food interesting and exciting to eat. Aiming all four realms of an experience at improving a guest's nutritional intake, the entertainment realm could make eating decisions fun, the educational realm might emphasize the personal effect of eating properly, the esthetic could encourage the proper pace and amount of eating, and the establishment might provide a place to escape the temptation to relapse into old behaviors. All ingredients, foods, food services, and dining experiences could be managed by a single transformation elicitor, paid not on the basis of the food itself, the service surrounding the food, nor even the experience enveloping both but for measurable improvements in cholesterol levels, fat, weight, and similar health measures. Other restaurants might guide transformations by aiming to refine people's tastes or to enhance a couple's relationship. These are all viable strategic alternatives available to those who today consider themselves to be in the business of making or serving food.
Similarly, when all bookstores add coffee and espresso bars and perhaps even reading rooms—where one pays to read in places specifically designed to maximize the reading experience—companies will surface to offer reading transformations. People would pay these establishments to guide them through intellectual pursuits by identifying books and other materials worth reading, followed by observations and perhaps even examinations—not in a traditional schoolish sense but as a new learning alternative to make sure people got the right ideas. Booksellers and publishers alike struggle to find ways to compete with online merchants such as Amazon.com (and with commoditizing e-books). Why not make this offering transformational by actually charging a premium to recommend what employees should read (via mass customized recommendations) as a means to wisely advance organization-wide intelligence?
Another industry with the potential to get into the business of guiding transformations is higher education. Consider the Harvard Business School. Its vast intellectual resources—professors, classes for undergraduate and graduate degrees, executive education programs, the Harvard Business Review and Harvard Business Review Press, and various and sundry newsletters, videos, blogs, various websites, and other teaching resources—make it a perfect enterprise for transforming individuals into business executives prepared to face any strategic challenge. To do so, though, it would have to extend itself beyond selling book and magazine goods, information services, and educational experiences to viewing its business as changing customers. And for all those colleges and universities jostling to reach the top of the various rankings now promulgated in the press, this is the route to take. One such institution of higher education that recognizes this is the London Business School. Here's what former dean John Quelch told Fast Company magazine:
We're not in the education business. We're in the transformation business. We expect everyone who participates in a program at the London Business School—whether it's for three days or for two years—to be transformed by the experience. We want people to look back on their time here as something that significantly influenced their career and possibly even their entire life… One nice thing about declaring that we're in the transformation business is that everyone here—from custodians to deputy deans—has become much more motivated. People are eager to take part in having an impact on the students who come here.7
Such a mindset will emerge across almost every industry that today views itself as part of the service sector. Healthcare providers will shift past performing fee-for-service procedures to charging fees based on making or keeping people well. Architects will not only make the “leap from ‘how it is designed’ to ‘how it feels,’ ” as Anna Klingmann describes the shift to experiences in her book Brandscapes, but also embrace a “changed perception of architecture, when the aspirant, rather than the artifact, is the subject of investigation.”8 Airlines and hotels will increasingly work on transforming business travelers into well-rested road warriors equipped for the next day's battles. Tourism companies will likewise get into the personal and family transformation business, for as psychologist Jeffrey A. Kottler points out, “Travel offers you more opportunities to change your life than almost any other human endeavor.”9 And, to complete only a short list of what's to come, computer service companies and system integrators will transform customers with well-running equipment into enterprises that use the equipment to run their businesses well.
And why not? Their competitors—management consultants and outsourcing firms—are already making the move to offer transformations. Many understand that customers no longer want tangible reports, intangible analyses, or memorable workshops that yield recommendations on what they should do. They're a start, but none by itself makes the customer a better company. One analyst notes that hiring a big consultant “is like going to your chiropractor. One hundred eighty-two visits later you still have to come back.”10 Rather, consulting customers aspire to become better businesses, and they want to engage consultants who yield the sustained outcomes they desire. An InformationWeek editorial notes, “CIOs say they're wide open to forging such deeper, ‘outcome-based’ partnerships, where their vendors share in the risks and rewards of major IT implementations and upgrades.”11
Or consider the Philips Lifeline medical alert offerings, which encompass aspects of goods, services, experiences, and transformations. At the core of its offerings for the “personal response industry” lies a variety of devices (monitors, watches, and pendants); when a user presses his device, a signal goes through the telephone line to a twenty-four-hour monitoring center. There, trained monitors call back to assess the nature of the incident and, if necessary, dispatch an appropriate person—friend, relative, or public emergency personnel—to handle the situation. Fewer t
han 5 percent of the calls require emergency assistance, the ostensible reason for the service. Rather, most people call because they feel isolated or lonely, and talking to someone at the center makes them feel better. But in the final analysis, most customers—that is, those who are paying Philips—are relatives of the person using the device. What they are really buying is peace of mind.
What people really seek from hospitals is to be healed. Mid-Columbia Medical Center (MCMC) in The Dalles, Oregon, excels at this, drawing people from more than twenty states to its Celilo Cancer Center, where it presents a portfolio of offerings revolving around the five ways people heal: biologically, socially, intellectually, environmentally, and spiritually. Biologically, it offers state-of-the-art treatment, being the second site to offer intensity-modulated radiation therapy (IMRT). Socially, it has healing gardens for patients to enjoy with their families, as well as numerous social events. Intellectually, MCMC offers a medical library to provide patients and their families with all the information they need on their cancer situation, including information about alternative therapies. Environmentally, it places sculptured gardens on the grounds, looking out onto the Cascade Mountains. And spiritually, it added a meditation room inside and a labyrinth outside as places for people to spend time in meditation or prayer. Mid-Columbia's premise for devoting one-third of its space to such “nonfunctional” places is that it is beneficial to take patients from being stressed to relaxed, for it found that studies showed that most health issues are stress related. It therefore creates the most stress-free environment possible to accompany its treatments, including soothing harp music in the lobby, relaxation classes, massages, and steam baths. It truly considers itself to be in the transformation business.12
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