Printed
with permission from TCI
Management Consultants. A group of senior-level management
consultants, offering strategic planning and marketing services
to a wide range of public and private sector clients.
The
Experience Economy Work is Theatre and Every Business
a Stage
by B. Joseph Pine II and James H. Gilmore
Harvard
Business School Press, Boston, Mass., 1999
ISBN 0-87584-819-2
Pine
and Gilmore are co-founders of an outfit called Strategic
Horizons LLP, an Aurora (Illinois) based company which they
describe as a "thinking studio dedicated to helping
businesses conceive and design new ways of adding value
to their economic offerings".
The
basic premise of their book is that society has entered
a new era where experiences are the economic offerings that
are in highest demand, and which thus generate the highest
value returns. Pine and Gilmore argue that the progression
of economic value has gone through three stages to date,
and that we are in the process of entering a fourth stage:
the experience economy. The earliest commodity economy was
concerned with the extraction of various substances from
the world around us. This type of economy dominated the
world of the hunter-gatherer, where the primary job was
extracting useful (and thus economic) materials from the
environment. Next came the manufacturing economy, where
the primary economic offering was the making of products.
This did not, of course, totally replace the commodity economy,
but rather added a new kind of economic offering to the
mix. Next came the service economy, where the offerings
of highest value were the delivery of intangible services.
(We have heard much about the service economy in recent
years as the 'post-industrial era'.)
Well
now, maintain Pine and Gilmore, we find ourselves in what
they call the experience economy, where the highest-value
economic offerings are experiences. (This assertion, incidentally,
has got to be taken on faith they provide no empirical
evidence in the book that it is true.) In the experience
economy, beyond merely providing services, businesses stage
memorable experiences for customers (who are thought of
as 'guests') that are entertaining and/or educational in
nature.
The
differences between these four different types of economy
are summarized in the chart below:
| Type of Economic Offering
| Commodities
| Goods
| Services
| Experiences
|
| Economy
| agrarian
| manufacturing
| service
| experience
|
| Economic Function
| extract
| make
| deliver
| stage
|
| Nature of Offering
| fungible
| tangible
| intangible
| memorable
|
| Seller
| trader
| manufacturer
| provider
| stager
|
| Buyer
| market
| user
| client
| guest
|
| Factors Influencing Demand
| characteristics
| features
| benefits
| sensations
|
Source:
adapted from chart on pg. 6
The authors argue that companies that recognize that they
are in the primary business of staging experiences are among
the most successful today:
"The
newly identified offering of experiences occurs whenever
a company intentionally uses services as the stage and goods
as props to engage an individual. While commodities are
fungible, goods tangible, and services intangible, experiences
are memorable. Buyers of experiences we'll follow
Disney's lead and call them guests value being engaged
by what the company reveals over duration of time...
The
company we'll call it an experience stager no
longer offers goods or services alone, but the resulting
experience, rich with sensations created within the customer.
All prior economic offerings remain at arm's length, outside
the buyer, while experiences are inherently personal. They
actually occur within any individual who has been engaged
on an emotional, physical, intellectual or even spiritual
level. The result? No two people can have the same experience
period. Each experience derives from the interaction
between the staged event and the individual's prior state
of mind and being." (pp. 11,12)
Pine
and Gilmore talk about how manufacturers should 'experientialize'
their goods, and how service providers can turn the delivery
of their services into engaging theatre. The quality of
the experience provided (meaning the extent to which it
is enjoyable, memorable, educational, useful, etc.) will
then determine the price that can be charged which,
the authors maintain, will be higher than what could be
realized for the good or the service by itself alone.
The
concept of manufacturers 'experientializing' their goods
is explained by the authors as follows:
"Many
goods encompass more than one experiential aspect, opening
up areas for differentiation. Apparel manufacturers, for
instance, could focus on the wearing experience, the cleaning
experience, and perhaps even the hanging or drawering experience...Other
industries might create the briefcasing experience, the
wastebasketing experience, or the mask-taping experience.
If you as a manufacturer start thinking in these terms
inging your things you'll soon be surrounding your
goods with services that add value to the activity of using
them and then perhaps surrounding those services with experiences
that make using them more memorable.
Any
good can be inged. Consider a simple baseball. The Rawlings
Sporting Goods Company of St. Louis, Missouri, exclusive
baseball manufacturer to the Major Leagues, introduced a
ball that makes play-catching more engaging. This "radar
ball" has a microchip in it that digitally displays
how fast the ball has been thrown after each toss. Retailing
for more than $30, consumers pay much more for radar balls
than regular baseballs, which generally go for less than
five dollars each. Information about a ball's physical speed
has long been available via radar guns, but those cost around
$1,000 and few little league, high school, or American Legion
teams own one. The radar ball makes it affordable to know
a kid's throwing velocity. But the real value lies in the
new social interaction generated between two people playing
catch. Rawlings used simple information technology to make
playing catch a richer experience." (pp. 16.17)
Many
business enterprises, fully embracing this concept of the
experience economy, have taken to providing themed experiences
for their customers (or guests). The authors present five
principles that in their view are critical to the staging
of a successful themed experience for a customer:
1. an
engaging theme must alter a guest's sense of reality
2. the richest experiences use themes that fully alter one's
sense of reality by affecting the experience of space, time
and matter
3. engaging
themes integrate space, time and matter into a cohesive,
realistic whole
4. themes
are strengthened by creating multiple places within a place
(for example: "The five biomes of the American Wilderness
Experience (an entertainment attraction in Ontario, California)
leverage this principle. The change in scenery from Redwood
to High Sierra to Desert to Coast to Valley extends the
story introduced by a video and simulated ride. It puts
the guests in motion in the experience." (p. 51)
5. a
theme should fit the character of the enterprise staging
the experience
Once
a company realizes that it is in the business of staging
experiences, there are four forms of theatre that it should
consider using to do this. Pine and Gilmore have invented
a portfolio approach to classifying these different forms
of theatre, according to two dimensions: the first being
whether the performance is stable (the same each time) or
dynamic (changing each time), and the second being whether
the audience itself is stable or dynamic (i.e. likely to
provide feedback and input that must be incorporated into
the performance) to guests. This generates the following
categorization scheme:
These
four types of theatre all have their place in the business
world:
1. platform
theatre: this is the traditional theatre that most people
think about as a staged performance, where the script doesn't
vary, and the performance is done in front of an audience
which has little of no input into the performance this
type of theatre is used in company presentations, advertisements,
etc.
2. street theatre: In street theatre, which has traditionally
been the domain of jugglers, mimes, clowns, etc. the script
is stable but the audience is dynamic. This type of theatre
should be considered for public meetings, staff presentations,
product launches, etc.
3. matching
theatre: "Matching theatre, exemplified by film and
television, requires the integration of work outcomes from
one disconnected time frame to another. The end product
results from piecing together distinct portions of work,
performed at different times and often in different places,
into a unified whole. The producers of matching theatre
must concern themselves not only with the quantity of material
lying "on the cutting room floor" but with the
alignment of all those pieces, the way they should be linked
together to complete the entire performance.
Workers
should thus perform matching theatre whenever they strive
to improve the quality of the same basic outcomes... At
a higher level, companies should embrace the techniques
of matching theatre whenever the same customers interact
with that company often with the same workers
over and over again. Here, work must be matched across time.
Consider a sales representative calling on the same customer
on a periodic basis. What occurs during a visit should match
the impression left during the previous visit as well as
match episodes to be performed in future visits. If, for
example, the sales rep wants to give the impression that
he is professional, qualified, knowledgeable, and helpful,
then every visit must reinforce at least one preferable
all of these impressions, while no visit should contradict
them." (pp. 129-131)
4. improv
theatre: that is, the process of "winging it",
which demands certain skills in terms of thinking on one's
feet, responding to new and changing demands from the 'audience'
etc. this type of theatre can be useful in a company
context in terms of creative thinking , telephone interviews
and solicitations, etc.
The authors end the book by discussing the next logical
conceptual position in their framework (commodities, goods,
services, experiences...) Eventually, they maintain, experiences
will become like commodities (a situation that is currently
exemplified by the expression "been there, done that"),
and individuals will seek out the next level of economic
offering. This next level, they say, is that of transformations,
where the customer literally becomes the product. Companies
will then be in the personal transformation business. For
example:
"Another industry with the potential to get into the
business of eliciting transformations is higher education.
Consider the Harvard Business School. Its vast intellectual
resources professors, classes for both graduate and
undergraduate degrees, executive education programs, the
Harvard Business Review and Harvard Business School Press,
and various and sundry newsletters, videotapes, CD-ROMs,
Web sites, 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...
Such
transformation offerings will emerge across almost every
industry that today views itself as part of the service
sector." (p. 168)
The
Experience Economy contains much thoughtful analysis, and
is quite a philosophical statement on the nature and role
of the business enterprise. If a little preachy at times,
and if the categorization of businesses into the entertainment
economy framework is a little forced in some cases, it nevertheless
remains on balance a very insightful assessment into current
business trends across many industries.
