7. Virginia I. Postrel, “It's All in the Head,” Forbes ASAP, February 26, 1996, 118. To give her full credit, Postrel further states, “Increasingly, people aren't just buying goods and services. They're buying experiences.”
8. The New Shorter Oxford English Dictionary, vol. 2, N–Z, ed., s.v. “wisdom.”
9. There are other versions of this sort of intelligence progression, such as Haeckel's Hierarchy, named after Stephan H. Haeckel of the IBM Advanced Business Institute, which includes intelligence itself as a level between information and knowledge. See Vincent P. Barabba and Gerald Zaltman, Hearing the Voice of the Market: Competitive Advantage Through Creative Use of Market Information (Boston: Harvard Business School Press, 1990), 37–58.
10. The word computer originally referred to the people who made calculations for weapons delivery during World War II.
11. For example, a special issue on “Knowledge and the Firm” was published by California Management Review 40, no. 3 (Spring 1998).
12. Diane Senese, in “The Information Experience,” Information Outlook, October 1997, 29–33, discusses how “information professionals” can “enjoy a unique role in preparing [their] corporations for the experience economy” when they “re-imagine [their] roles” as helping corporate customers in “experiencing knowledge.”
13. Michael Schrage writes of the need to view technology from the standpoint of its effect on relationships, as opposed to information, in No More Teams! Mastering the Dynamics of Creative Collaboration (New York: Currency Doubleday, 1995).
14. John Dalla Costa, Working Wisdom: The Ultimate Value in the New Economy (Toronto: Stoddart Publishing Co., 1995), 24.
15. Taichi Sakaiya, The Knowledge-Value Revolution, or a History of the Future (Tokyo: Kodansha International, 1991), 20–21.
16. Ibid., 235.
17. Ibid., 57–58.
18. As consultant and author Robert H. Schaffer says, “For a consulting assignment to be considered successful, delivering a report with the ‘right solutions’ or installing a new system is not sufficient. The project must actually yield measurable bottom-line results for the client and, equally important, the client must develop the ability to sustain those benefits.” From Ian White-Thomson and Robert H. Schaffer, “Getting Your Money's Worth,” Chief Executive, November 1997, 41. See also Robert H. Schaffer, High-Impact Consulting: How Clients and Consultants Can Leverage Rapid Results into Long-Term Gains (San Francisco: Jossey-Bass Publishers, 1997).
19. Celerant Consulting, www.celerantconsulting.com/index.aspx.
20. Quoted in Daniel Lyons, “Skin in the Game,” Forbes, February 16, 2004, 78.
21. Erving Goffman, The Presentation of Self in Everyday Life (New York: Anchor Books, 1959), 20.
22. Harold Clurman, On Directing (New York: Collier Books, 1972), 154–155.
23. Quoted in Samuel Hughes, “Lucid Observations,” Pennsylvania Gazette, October 1996, 28. One of the places within a place Lucid furnished for student-actors to rehearse was the Hill House Pit Stop, a student-run convenience store that competed with the likes of WaWa Food Markets, located within Hill House and managed by one of the authors in his junior year.
24. This section is based on James H. Gilmore and B. Joseph Pine II, “Beyond Goods and Services: Staging Experiences and Guiding Transformations,” Strategy & Leadership 25, no. 3 (May/June 1997): 18. These four universal elements—origination, execution, correction, and application—derive from the same framework behind figure 7-1, Four Forms of Theatre, known as the Product-Process Matrix (see chapter 7, n. 24). The figure-eight pattern in this framework is a fractal, a pattern detectable at any level of analysis, where the level of analysis used here is the most general.
25. Henry Petroski, The Evolution of Useful Things (New York: Vintage Books, 1992), 86.
26. Gary Hamel and C. K. Prahalad, Competing for the Future (Boston: Harvard Business School Press, 1994), 133–134. Note that the words of Jesus they quote are not found in the Acts 1:8 passage they cite but in Mark 16:15.
27. We provide a model for doing so, Here-and-Now Space, in chapter 9 of Authenticity: What Consumers Really Want (Boston: Harvard Business Press, 2007), 179–218.
Encore: Exit, Stage Right
1. Peter Haynes and Dolly Setton, “McKinsey 101,” Forbes, May 4, 1998, 130–135.
2. This articulation of the Progression of Economic Value was inspired by James Brian Quinn in Intelligent Enterprise: A Knowledge and Service Based Paradigm for Industry (New York: Free Press, 1992), who on p. 7 used the exact formulation given here for goods, except in choosing the word product instead.
3. Issues have arisen already from the demand some individuals place on perpetuating biological life. See Andrew Kimbrell, The Human Body Shop: The Engineering and Marketing of Life (New York: HarperCollins, 1993), and Margaret Jane Radin, Contested Commodities: The Trouble with Trade in Sex, Children, Body Parts, and Other Things (Cambridge, MA: Harvard University Press, 1996), for thoughtful preludes to what lies ahead. Let us point out that these issues concern what should be permissible to buy and sell, and not what can be. While statecraft and other nonmarket forces may strive to restrict the supply of such economic commerce, only individual soul searching and changed human hearts will eradicate the demand.
4. Ephesians 2:8–10a (English Standard Version).
Credits
Every business a stage, and all our thoughts and words merely play to bring this reality to light. Many men and women have exited and entered our working lives, each playing a part in this particular written production. Like many speeches on Oscar night, the following credits are sure to leave out someone who deserves proper thanks. Still, we do want to acknowledge those who have lent their hands, heads, and hearts to this endeavor.
First, the infancy of the ideas in this book emerged about a year after Joe left IBM, while Jim was still working at CSC Consulting & Systems Integration. While speaking on the subject of Mass Customization at the IBM Advanced Business Institute, Joe shared the often-mentioned point that mass customizing a good automatically turns it into a service. An astute audience member raised his hand and asked, “You say companies can mass customize services as well. Into what does customization turn a service?” To which Joe intuitively replied, “Mass Customization automatically turns a service into an experience.” Instantly, Joe recognized the significance of his response, and later that evening he called Jim. “Guess what I said today! … Now let's go figure out what it means.” After many months of thinking, reading, and discussing, we concluded that experiences were indeed distinct economic offerings, just like goods and services. So to that unknown IBMer we owe a very large debt for asking the question that demanded not only an immediate answer but ultimately this entire book.
We are also indebted to CSC and the IBM Advanced Business Institute, particularly Dave DeRoulet, Gary Cross, and Roger Kallock when they were at the former, and Al Barnes when at the latter, for supporting (both intellectually and financially) our research into first Mass Customization and then the Experience Economy. Many partners we worked with at Pricewaterhouse Coopers's Diamond Advisory Services, where we were once Diamond Fellows, also provided great support, particularly Mel Bergstein, Jim Spira, Barry Uphoff, Chap Kistler, and Chunka Mui. Diamond's Rachel Parker scoured the depths of government statistics and helped us interpret just how the shift through successive economies played out in the numbers. In this, the updated edition, Lee Kaplan of LEE3 Consultants ably performed this task. Lee really dug into the most recent government data and showed us what was going on. Thank you, Rachel and Lee for going to school on the data when we were unwilling!
People at a number of companies loved these ideas while they were still being formulated, invited us to work with their organizations, and applied them in their relationships with their own customers. Although many of these people are no longer at the companies that embraced the Experience Economy, we still would like to thank in particular ARAMARK (especially Lynn McKee), Scudder Ke
mper Investments (especially Mark Casady and Lin Coughlin), Hillenbrand Industries (especially Fred Rockwood, Chris Ruberg, Brad Reedstrom, Brian Leitten, and Rob Washburn, among others), enable (Mort Aaronson), Lutron Electronics Co., Inc. ( Joel Spira and Mike Pessina), CompuCom (Ed Anderson), ChemStation (George Homan and Russ Gilmore), UCLA Executive Education ( Jim Aggen, Grace Siao, and again Al Barnes), Penn State Exec Ed (Al Vicere, Gini Tucker, Maria Taylor, and Bob Prescott, among others), and the U.S. Chamber of Commerce's Institutes for Organization Management (Maggie Elgin and Nancy Turnbull). Companies that through our work with them helped us further understand experience staging after the first edition was published include LEGO Systems A/S (Mark Hansen), The Walt Disney Company (Scott Hudgins), Risto Nieminen (Veikkaus Oy), the Carlson Companies (Marilynn Carlson N elson and Curtis Nelson), MGM Resorts (Felix Rappaport), Microsoft (Nadine Kano), Chick-fil-A (Dan Cathy and Jon Bridges), Duke Corporate Education (Cheryl Stokes), Exhibitor Magazine Group and Exhibitor Learning Events (Lee Knight and Dee Silfies, respectively), Gallery Furniture ( Jim McIngvale), HelmsBriscoe (David Peckinpaugh), Marriott (Mike Jannini and Steve Weisz), and Whirlpool ( Josh Gitlin). The late Rohan Champion deserves special mention for pushing his former employer, AT&T, to shift beyond its commoditized services, and it was Rohan himself who first thought of expressing experiences and transformations in the form of a progression of value.
A number of individuals soldiered the discoveries we made along the way and influenced how we extended our thinking, including Jim Utterback of the MIT Sloan School of Management; Shlomo Maital of MIT and Technion University; Marvin Zonis of the University of Chicago; David Reed of SAP Labs; Mark Dehner of Land as Art; Jim Rogers of Advance Management Group; Lou Carbone of Experience Engineering; Stephan Haeckel of Adaptive Business Designs; Randy White of White Hutchinson Leisure & Learning Group; Larry Keeley of the Doblin Group; Dave Wright of Maxwell Technologies; David Anderson and Stephen Fraser, then of GATX Corporation; Hugh Martin, then of The Hartford; Alan Hald, a founder of MicroAge; John Sviokla of PricewaterhouseCoopers's Diamond Advisory Services; Jeffrey Rayport, formerly of the Harvard Business School; Tim Gallwey, author of the Inner Game books; and Mark Hatch of TechShop. Individuals who have helped extend our thinking since the first edition include Robert Stephens (the Geek Squad), Chip Conley ( Joie de Vivre Hospitality), Waynn Pearson (Cerritos Public Library, retired), Don Taranto (TST, Inc.) and Ed Goodman (Spiral Experiences, LLC), Maxine Clark (Build-A-Bear Workshop), Gary Adamson (Starizon Studio), Sonia Rhodes (Sharp HealthCare), Jeff Kallay (TargetX), Steve Dragoo (Service Solutions Consulting), Doug Johnson (General Growth Properties), Amy Sanders (American National Bank of Texas), Mark Greiner (Steelcase), Albert Boswijk (European Centre for the Experience Economy), Pat Esgate (Esgate & Associates), Dave Norton (Stone Mantel), Rick Worner (Oppenheimer & Company), Conny Dorrestijn (Shiraz Partners), Sanna Tarssanen (Lapland Experience Organization), Ann Marie Fiore (Iowa State University), Toon Abcouwer and Rik Maes (University of Amsterdam), Jon Jerde (The Jerde Partnership), Bob Rogers (BRC Imagination Arts), Doug Wilson (Hillenbrand Industries), Chris Voss (London Business School), John Sherry (University of Notre Dame), Rolf Jensen (Dream Company), and Gosia Glinska, Jeanne Liedtke, Marian Moore, Phil Pfeifer, and Elliott Weiss (all at the Darden School at the University of Virginia). Our respective fathers, Haydn Gilmore and Bud Pine, both reviewed drafts of the initial manuscript and provided valuable encouragement and feedback, and Julie Pine helped formulate the first description of how each economic offering differed from the others.
We must also do justice to a number of thinkers and authors who were amazingly prescient in identifying some of the trends we discovered, some long before us and all unbeknownst to us until we started researching the Experience Economy. Back in 1970, futurist Alvin Toffler included a chapter in Future Shock titled “The Experience Makers.” Even before that, in 1959, sociologist Erving Goffman, in The Presentation of Self in Everyday Life, applied the principles of theatre to work and social situations. In the 1970s marketing professor Phil Kotler of Northwestern University foresaw how education and travel would become more and more experiential. In 1995 Gerhard Schulze wrote of the “experience society” in Die Erlebnisgesellschaft: Kultursoziologie der Gegenwart (which we still hope someone someday translates into English). More recently, professors Mary Jo Bitner of the Arizona State University, Raymond Fisk of Texas State University–San Marcos, and Stephen Grove of Clemson University have done the most in researching and promoting within academia the notion of experiential environments (which Bitner calls “servicescapes”) and taking a dramaturgical perspective on service offerings. In many ways, the best writers on services point to the shift to experiences, most notably Chris Hart, Christopher Lovelock, Leonard Berry, Earl Sasser, James Heskett, and Leonard Schlesinger. Brenda Laurel of the California College of the Arts applied drama to computer interactions in her wonderful book Computers as Theatre. Jay Ogilvy, cofounder of the Global Business Network, wrote The Experience Industry, a 1985 report for SRI International, demonstrating that demand for “vivid experiences” already drove marginal growth in the U.S. economy. There are surely others whom we should be mentioning, and we hope that they receive due recognition for their parts in predicting and describing the rise of the Experience Economy.
A number of people, while they did not necessarily write or discuss with us views directly related to the subject of this book, significantly influenced our thinking about a range of issues that could not help manifesting themselves as we wrote. Those full of wise saws include Stan Davis, Edward de Bono, Joel Barker, Don Peppers and Martha Rogers, Michael Schrage, the late Peter Drucker, George Gilder, James Brian Quinn, Taichi Sakaiya, Virginia Postrel, Larry Downes and Chunka Mui (again—again), Donald Norman, David Gelernter, Joel Kotkin, Grant McCracken, R. C. Sproul, and the late masters Henry Morris and James Boice. And we learned most of what we know about theatre and how to apply its principles to work from the writings of such performing arts authors as David Mamet, Peter Brook, Richard Schechner, Richard Hornby, Michael Kearns, Michael Shurtleff, Eric Morris, Thomas Babson, Anthony Rooley, Charles Marowitz, David Kahn and Donna Breed, Harold Clurman, Richard Olivier, and especially Sally Harrison-Pepper, through whose work we gained a greater understanding of street p erformance—that form of theatre that Jim has venerated since his more youthful days of watching a Pantaloon named Robert Armstrong perform on the streets of San Francisco as Butterfly Man.
Of course, the idea of this book would have quickly faced mere oblivion without a number of people contributing across a wide range of disciplines. Our agent, Rafe Sagalyn, helped find us exactly the right publisher and provided guidance at many important junctures in the writing. Many at Harvard Business School Press enthusiastically supported us from the beginning. Nick Phillipson first rallied enthusiasm for the project. Our wonderful editor, Kirsten Sandberg, pointed out the many deficiencies in early drafts and pushed and cajoled us to make each draft better. Also, Sarah Merrigan and Morgan Moss greatly improved the final manuscript through their meticulous editing. And Carol Franco was an unswerving champion of our ideas ever since her involvement in publishing Mass Customization many years ago. So much of what we've thought has been published first in the Harvard Business Review that we want to thank our longtime editor, Steve Prokesch, as well as Tom Richman, Cathy Olofson, Regina Fazio Maruca, and Nan Stone. Personal editing assistance with the manuscript and industry analysis were provided by, respectively, freelancers Robin Schoen and Chris Roy, while Word Plus Project Support of Cleveland created the original graphics for many of the figures; our thanks to Petra Haut, Tim McCluskey, and the late Ruthanne Fait. We do greatly appreciate the encouragement and support of Courtney Schinke Cashman in producing this updated edition.
Of course, we would have been sans figures, sans manuscript, sans business, sans everything were it not for our managing partner Doug Parker, who handles many of the day-to-day aspects of running our business and took on even more
thankless tasks in order to provide the time, energy, and focus we needed to write. He also marshals all of the marketing activities that keep us in business. We owe Doug a great debt of gratitude. Scott Lash, also a partner in Strategic Horizons LLP, performed many tasks essential to completing this work, including researching a number of the companies we highlight, and does so much that we appreciate in the company.
And thank you to our families—Julie, Becca, and Lizzie Pine; Beth, Evan, and Anna Gilmore—for living through our fixation on all things experiential and giving us the time to write, and to our parents—Bud Pine and the late Marilou Burnett Pine and Norman Burnett; and Haydn and Marlene Gilmore and the late Jean Gilmore—for their loving support and guidance throughout our lives. Finally, we acknowledge the providential work of a triune God, who placed all these people in our footpaths and gave us the curiosity and capabilities to discover what He first made clear.
About the Authors
B. JOSEPH PINE II and JAMES H. GILMORE are cofounders of Strategic Horizons LLP, an Aurora, Ohio-based thinking studio dedicated to helping enterprises conceive and design innovative ways of adding value to their economic offerings via mass customizing, staging experiences, rendering authenticity, and guiding transformations. They are coauthors of Authenticity: What Consumers Really Want (Harvard Business School Press, 2007) and coeditors of Markets of One: Creating Customer-Unique Value through Mass Customization (Harvard Business School Press, 2000). Mr. Pine, who also wrote Mass Customization: The New Frontier in Business Competition (Harvard Business School Press, 1993) and Infinite Possibility: Creating Customer Value on the Digital Frontier (Berrett-Koehler, 2011), is a Visiting Scholar with the MIT Design Lab as well as a Senior Fellow with both the Design Futures Council and the European Centre for the Experience Economy, which he cofounded. Mr. Gilmore is a Batten Fellow and Adjunct Lecturer at the Darden School of Business at the University of Virginia as well as a Visiting Lecturer in Apologetics at Westminster Seminary California.
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