An offering of a higher order can supersede lower-level relationships. But the only offering that can displace a transformation is yet another transformation—one aimed at another dimension of self, or at the same dimension but from a different worldview. By worldview, we mean a particular way—often religious or philosophical—of interpreting one's own existence. We already see companies and their customers acknowledge rival worldviews—ideologies, if you will—as the legitimate domain of business and as differentiators of competing offerings. The question, “What's next?” therefore becomes highly personal. To answer it truthfully requires us sharing our worldview with you. Consider the fundamental nature of each offering:
Commodities are only raw materials for the goods they make.
Goods are only physical embodiments of the services they deliver.
Services are only intangible operations for the experiences they stage.
Experiences are only memorable events for the transformations they guide.2
Then reflect on our personal belief that
Transformations are only temporal states for the eternalities they glorify.
All economic offerings do more than effect an exchange of value in the present; they also, implicitly or explicitly, promote a certain worldview. In the full-fledged Transformation Economy, we believe buyers will purchase transformations according to the set of eternal principles the seller seeks to embrace—what together they believe will last.3
Like every other economic offering, transformations will be scrutinized, lionized, and criticized—but not commoditized. Still, they must be customized to remain differentiated. Imagine the most highly customized transformation possible. What would be so right for a particular person that it would transform that person into someone who needs no additional change? What would the ultimate customer-as-product be? The utmost would be perfection, the perfect human being. According to our own worldview, there can be no sixth economic offering because perfecting people falls not in the domain of human business but under the province of God, the Author and Perfecter of our faith. As the Apostle Paul said, “For by grace you have been saved through faith. And this is not your own doing; it is the gift of God, not a result of works, so that no one may boast. For we are his workmanship.”4 We believe that no one can be in the business of extending this offer; it is a free gift. It cannot be fulfilled as an economic offering supplied by mankind, but only as an atoning act of God. And so, we contend, transformations are the fifth and final offering.
When transformations finally constitute the preponderance of economic commerce, many businesses and individuals will claim to provide the ultimate offering and charge for revealing its secrets. In doing so, they will glorify whatever they view as ultimate. Since all commerce is moral choice, every business is a stage for glorifying something. Who or what does your business glorify? Your answer may or may not help you accept what is next, but it will certainly help guide what you do today.
Notes
Chapter 1
1. For a backstage tour of the technology of Walt Disney World, see Scott Kirsner, “Hack the Magic: The Exclusive Underground Tour of Disney World,” Wired, March 1998, 162–168, 186–189.
2. So pervasive had theme restaurants become that on April 15, 1998, online satirical magazine The Onion (www.theonion.com) posted a story with the title “Nation's Last Themeless Restaurant Closes,” ostensibly about Pat's Place in Dubuque, Iowa, being replaced by the town's seventh “Paddy O'touchdown's Irish Sports Bar & Good-Tyme Internet Grill.”
3. Steven E. Prokesch, “Competing on Customer Service: An Interview with British Airways' Sir Colin Marshall,” Harvard Business Review 73, no. 6 (November–December 1995): 103. For a response to this interview that incorporated the first publishing of the concept of experiences as a distinct economic offering, see B. Joseph Pine II, “Customer Service on British Airways,” letter to the editor, Harvard Business Review 74, no. 1 ( January–February 1996): 162–164.
4. Howard Riell, “Upscale Grocer Chain Grows,” Stores, March 1995, 26.
5. Russell Vernon, “Fighting Back—A Small Retailer Takes on the EEOC,” Retailing Issues Letter 8, no. 2, Center for Retailing Studies, Texas A&M University (November 1996): 2. See also Leonard L. Berry, On Great Service: A Framework for Action (New York: Free Press, 1995), 90–92 in particular.
6. See, for example, Louise Palmer, “There's No Meetings Like Business Meetings,” Fast Company, April–May 1996, 36, 40.
7. Tibor Scitovsky, The Joyless Economy: The Psychology of Human Satisfaction, revised edition (New York: Oxford University Press, 1992), 67.
8. “Household Data Annual Averages 2009,” Bureau of Labor Statistics, http://bls.gov/cps/cpsaat18.pdf. See also Julian L. Simon, The Ultimate Resource 2 (Princeton, NJ: Princeton University Press, 1996), 416 and 109. This book is a tremendous (and very possibly the ultimate) resource of data on how humans have fared with all the commodities discovered on earth.
9. For a summary background on the American System of Manufactures and the system of Mass Production, see B. Joseph Pine II, Mass Customization: The New Frontier in Business Competition (Boston: Harvard Business School Press, 1993), chapters 1 and 2.
10. Deuteronomy 28:11 (King James Version): “The lord shall make thee plenteous in goods, in the fruit of thy body, and in the fruit of thy cattle, and in the fruit of thy ground, in the land which the lord sware unto thy fathers to give thee.” Work (the fruit of thy body) here is clearly seen as extracting from animal (thy cattle), vegetable (thy ground), and mineral (the land) to make goods.
11. W. W. Rostow, The World Economy: History and Prospect (Austin: University of Texas Press, 1978), 52–53, cited in Alfred D. Chandler, Scale and Scope: The Dynamics of Industrial Capitalism (Cambridge, MA: Belknap Press of Harvard University Press, 1990), 4.
12. David A. Hounshell, From the American System to Mass Production, 1800–1932: The Development of Manufacturing Technology in the United States (Baltimore: Johns Hopkins University Press, 1984), 228.
13. “Household Data Annual Averages 2009,” Bureau of Labor Statistics, http://bls.gov/cps/cpsaat18.pdf.
14. Demian McClean, “Farming Ousted by Service Sector as Top Employer,” Cleveland Plain Dealer, October 21, 2007, citing the report “Key Indicators of the Labor Market,” issued by the United Nations International Labour Organization.
15. A great set of principles and frameworks for manufacturers to use in wrapping services around their goods can be found in Christopher Lovelock, Product Plus: How Product + Service = Competitive Advantage (New York: McGraw-Hill, 1994).
16. See, for example, “Big Mac Currencies,” Economist, April 12, 1997, 71.
17. Suzanne Woolley, “Do I Hear Two Bits a Trade?” Business Week, December 8, 1997, 112. Patrick McGeehan and Anita Raghavan, in “On-Line Trading Battte Is Heating Up as Giant Firms Plan to Enter Arena,” Wall Street Journal, May 22, 1998, said that the slashing of online commissions “threatened to lapse into absurdity” when Ricketts said this.
18. Stan Davis and Christopher Meyer, Blur: The Speed of Change in the Connected Economy (Reading, MA: Addison-Wesley, 1998), demonstrate that the markets for goods and services increasingly act like financial markets; that is, they're commoditizing. The authors then provide compelling strategies for living in such a “blurred” world. See especially 96–110.
19. The dual forces of service commoditization and manufacturers wrapping services around their goods have led to a blurring of the lines between the two, as in Davis and Meyer, Blur, and Michael Schrage, “Provices and Serducts,” Fast Company, August–September 1996, 48–49.
20. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, Modern Library edition (New York: Random House, 1994), 361.
21. This is why the best entertainers make astronomical amounts of money. See Robert La Franco and Ben Pappas, “The Top 40,” Forbes, September 21, 1998, 220–246.
22. Travis J. Carter and Thomas Gilovich, “The Relative Re
lativity of Material and Experiential Purchases,” Journal of Personality and Social Psychology 98, no. 1 (2010): 146–159. This builds on the earlier work of Leaf Van Boven and Thomas Gilovich, “To Do or to Have? That Is the Question,” Journal of Personality and Social Psychology 85, no. 6 (2003): 1193–1202.
23. “Economics Discovers Its Feelings,” Economist, December 23, 2006, 34.
24. “Relative Importance of Components in the Consumer Price Index, 2009,” Bureau of Labor Statistics, www.bls.gov/cpi/cpiri2009.pdf.
25. Prices for the higher-level offerings tend to increase not only because customers desire them more highly but also because those companies offering them may have lower relative productivity gains over time and create their offerings less efficiently. This is to be expected, because efficiency and productivity are tightly bound with the forces of commoditization. Until competition becomes more intense, there is little incentive for experience stagers to lower their costs.
26. Recall also the late economist Julian Simon's famous bet with Malthusian Paul Ehrlich to demonstrate whether or not the earth was running out of raw materials, retold by Simon in The Ultimate Resource 2, 35–36. Ehrlich and two colleagues chose five commodities and bet that the sum of their prices would be higher in 1990 than in 1980. They lost hands down to Simon. As Simon makes clear, the prices of commodities always decrease relative to those of goods and services over the long term, as do the prices of commoditized goods and services relative to their noncommoditized brethren and of course to experiences.
27. Nominal GDP was used because it uses actual prices and does not take inflation into account. As noted earlier, the inflation deflator does not accurately reflect the shift from goods to services (much less the shift to experiences). Therefore, real GDP does not accurately show the growth in services and experiences. Furthermore, the increased prices of higher-level offerings, as noted earlier, reflect, at least in part, higher demand and not only higher costs of inputs.
28. The employment and the GDP of experiential industries were calculated as follows to reflect an educated guess of which portions of certain services were experiences: retail trade (NAICS code 44-45; 20% of annual value); information (51; 50%); professional, scientific, and technical services (54; 20%); management of companies and enterprises (55; 33.3%); arts, entertainment, and recreation (71; 100%); accommodation and food services (72; 30%); and other services except public administration (81; 20%). For more, albeit dated, statistics on the rise of experiences, see the amazingly prescient report by James A. Ogilvy (now with the Global Business Network), “The Experience Industry: A Leading Edge Report from the Values and Lifestyle Program,” Business Intelligence Program Report, no. 724 (Fall 1985).
29. Economist Stanley Lebergott, in Pursuing Happiness: American Consumers in the Twentieth Century (Princeton, NJ: Princeton University Press, 1993), makes the point: “Consumers buy bazaars full of goods, but only to create the diversified experience they ultimately seek” (p. 3) and goes on to show with a wealth of data that these goods (and services, for that matter) that enable consumer experiences have seen tremendous growth in the twentieth century. See also Virginia I. Postrel, “It's All in the Head,” Forbes ASAP, February 26, 1996, 118.
30. Peter Guttman, Adventures to Imagine: Thrilling Escapes in North America (New York: Fodor's Travel Publications, 1997), describes these adventures, each of which Guttman personally experienced and photographed. The book also includes a detailed directory of outfitters to contact for each adventure.
31. Quoted in Tim Stevens, “From Reliable to ‘Wow,’” Industry Week, June 22, 1998, 24, emphasis added. Other sources for wowing customers include Paul Levesque, The Wow Factory: Creating a Customer Focus Revolution in Your Business (Chicago: Irwin Professional Publishing, 1995); Tom Peters, The Pursuit of Wow! Every Person's Guide to Topsy-Turvy Times (New York: Vintage Books, 1994); and, in a slightly different but exemplary vein, Ken Blanchard and Sheldon Bowles, Raving Fans: A Revolutionary Approach to Customer Service (New York: William Morrow and Company, 1993).
32. Bernd Schmitt and Alex Simonson, Marketing Aesthetics: The Strategic Management of Brands, Identity, and Image (New York: Free Press, 1997), provide a great resource for marketing an experiential brand.
33. Experientialize and sensorialize are not the most euphonious of words, but as Stan Davis and Bill Davidson point out in reference to the word informationalize, “We use it because it is more self-explanatory and complete, even though cumbersome. We suspect that ‘industrialize’ sounded equally unnatural when it first appeared.” See 2020 Vision (New York: Simon & Schuster, 1991), 207, n. 1.
34. Christian Mikunda explores how manufacturers in particular create experience places in Brand Lands, Hot Spots & Cool Spaces: Welcome to the Third Place and the Total Marketing Experience (London: Kogan Page, 2004).
35. So far removed are suburban and urban kids from the Agrarian Economy that just being on a farm is an experience! Indeed, staging farm experiences is the next big wave in agrimarketing. See Julie V. Iovine, “A New Cash Crop: The Farm as Theme Park,” New York Times, November 2, 1997, and Rick Mooney, “Let Us Entertain You,” Farm Journal, March 1998, H-8, H-9.
36. The initial term progression of value and its depiction were suggested to us by the late Rohan Champion when he was vice president of new services strategy at AT&T.
37. Of course, each economic offering has its own set of fixed costs to which margins contribute, such as a farm for commodities, a factory for goods, an office or outlet for services, and back to a farm for this particular experience.
38. See Eben Shapiro, “Discovery Zone Slides into Bankruptcy Court,” Wall Street Journal, March 26, 1996.
Chapter 2
1. See, for example, Colin Berry, “The Bleeding Edge: If You're Looking for What's Next in Online Technology and Commerce, Just Follow the Gamers,” Wired, October 1997, 90–97.
2. See also Amy Jo Kim, “Killers Have More Fun,” Wired, May 1998, 140–144, 197–198, 209.
3. The New Shorter Oxford English Dictionary, vol. 1, A–M, s.v. “entertainment.”
4. Stan Davis and Jim Botkin, The Monster Under the Bed: How Business Is Mastering the Opportunity of Knowledge for Profit (New York: Simon & Schuster, 1994), 125.
5. Judith Rodin, “A Summons to the 21st Century,” Pennsylvania Gazette, December 1994.
6. Although he didn't use the term edutainment, Philip Kotler, professor of marketing at the Kellogg Graduate School of Management, Northwestern University, made the first foray into making education entertaining that we're aware of in “ Educational Packagers: A Modest Proposal,” Futurist, August 1978, 239–242. There he introduced “the metaphor of classroom as theater” and encouraged “educational packagers” (as opposed to publishers) to be “like a Hollywood film producer” in providing a “multimedia experience” where “students are both instructed and entertained.”
7. Psychologist Mihaly Csikszentmihalyi refers to optimal experiences of this kind as “the process of total involvement with life I call flow,” in Flow: The Psychology of Optimal Experience (New York: HarperPerennial, 1990), xi. We here equate it with the escapist realm, but arguably it corresponds more broadly to hitting the sweet spot across all four realms.
8. Michael Krantz dubs those producing motion-based attractions and the like the “experience industry” in “Dollar a Minute: Realies, the Rise of the Experience Industry, and the Birth of the Urban Theme Park,” Wired, May 1994, 104–109, 140–142.
9. This is a slightly changed formulation from William Irwin Thompson, The American Replacement of Nature: The Everyday Acts and Outrageous Evolution of Economic Life (New York: Doubleday Currency, 1991), 35. It should be noted that Thompson is very much a critic of staged experiences, believing that they are replacing natural ones.
10. Kotler was prescient in this regard, discussing escapist experiences in “‘Dream’ Vacations: The Booming Market for Designed Experiences,” Futurist, October 1984, 7–13. Tibor Scitovsky, The Joyl
ess Economy: The Psychology of Human Satisfaction, revised edition (New York: Oxford University Press, 1992), makes the point that many affluent people pay for increasingly comfortable lifestyles, something that decreases the pleasure they receive from everyday experience. Those growing up in such an environment then “are prone to take up dangerous sports and become involved in reckless adventures. Could it be that, deprived of the simple pleasures by too much comfort, they seek compensation in pleasures which accompany excitement and threat? Perhaps the increasing violence of our increasingly affluent society can be similarly explained” (p. 74).
11. John Ed Bradley, “SWM, tall, handsome, 29, professional football player, seeks beautiful, intelligent young woman to help design dream house and create family equivalent of America's Team. Must like quiet evenings at home, either cruising America Online or admiring tropical fish tank. Must spend Sundays in crowded stadiums rooting for Dallas Cowboys. Dislike of 49ers and Redskins a plus, but not required,” Sports Illustrated, January 15, 1996, 80–90.
12. Steve Hamm, with Amy Cortese and Cathy Yang, “Microsoft Refines Its Net Game,” BusinessWeek, September 8, 1997, 128.
13. MIT professor Sherry Turkle, Life on the Screen: Identity in the Age of the Internet (New York: Simon & Schuster, 1995), discusses the tendency of computer-mediated reality to encourage people to take on multiple online personas. Some people do so to the degree that RL (real life) “can be ‘just one more window’” (p. 14).
14. Frank Rose, “Keyword: AOL,” Wired, December 1996, 299.
15. See William Powers, Hamlet's Blackberry: A Practical Philosophy for Building a Good Life in the Digital Age (New York: HarperCollins, 2010), as one example of those now articulating ways to escape the distractions of digital life.
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