Authors of
The Experience Economy: Work Is Theatre & Every Business a Stage
B. Joseph Pine II and James H. Gilmore co-founded Aurora, Ohio-based Strategic Horizons LLP, a thinking studio dedicated to helping businesses conceive and design new ways of adding value to their economic offerings. They are authors of The Experience Economy: Work Is Theatre & Every Business a Stage (Harvard Business School Press, 1999). This best-selling book demonstrates how companies — across myriad industries — are finding their goods and services commoditized while customers increasingly desire experiences — memorable events that engage customers in an inherently personal way.
Gary Muszynski asks:
You write in your book, The Experience Economy, that experiences and transformations are distinct economic offerings above and beyond commodities, goods and services. Do you view this progression as evolutionary and if so, toward what end? And what is driving or pulling the shift?
PINE: We do see this progression as a “natural” one, insofar as markets are free and businesses within those markets seek to create value for those who buy their offerings. Consider the changing nature of commerce over time: commodities are extracted and made available to manufacture goods; goods are then used to deliver services; services provide a platform to stage experiences; and finally, experiences become the means to guide transformations. This progression can be seen in industry after industry as well as in country after country around the world.
GILMORE: Automation is a significant driver — on the supply side — in enabling these shifts from one genre of output to another. On the demand side, consumers and B2B buyers increasingly desire experiences and transformations. While these genres of output are less tangible in form than commodities, goods, and services, they nevertheless offer more tangible value because experiences and transformations are inherently personal. They more directly appeal to individual needs and wants.
So that’s why you also emphasize customization in The Experience Economy?
PINE: Indeed. Customization to and for individual customers is another way to understand the progression: customize a good and you automatically turn it into a service; customize a service and you automatically turn it into an experience; customize an experience and you automatically turn it into a transformation. It is the antidote, if you will, to the rampant commoditization seen in goods and services today.
GILMORE: But let’s be clear in all this that we’re not economic determinists. The shift from one genre of output to another only occurs as human beings use their God-given talents to create new offerings that meet specific human needs. Frankly, since The Experience Economy was published six years ago, too many businesses have merely taken to making their marketing more experiential in order to sell more of their existing goods and services. That’s fine. But at some point businesses need to apply themselves to conceiving, devising, and offering experiences as wholly new output and a new source of direct revenue.
How much then do such paid-for experiences currently comprise the economy today? How about transformations?
GILMORE: Despite my admonition for more experiential output, an abundance of new economic experiences has already emerged. We’ve gone from the dotcom frenzy of untold freebie businesses to seeing more and more enterprises selling time online, from Everquest to Match.com. Retailers are finding ways to charge for events. For example, consider the cooking classes offered at Central Market grocery stores or Viking Culinary Arts stores. New forms of tourism and adventure are ever emerging. Go google terms like “medical tourism” and “ESL tourism’. Long-established experiences like lodging, treated in the past as merely services by too many hoteliers, have finally come to be designed “almost universally — as venues for creating engaging experiences. Some established experiences, funded solely through advertising, now face competition from for-fee alternatives. Witness Sirius and XM satellite radio.
PINE: Make no mistake about it; a vibrant Experience Economy is emerging. And as more experiences arrive on the scene, people will look to gain more meaning and purpose from the experiences they consume. This in turn will lead to the rise of more transformation offerings. Look at it this way: the four largest industries in the world — in terms of impact if not GDP — are the experience industries of entertainment and tourism on the one hand, and the transformation industries of education and healthcare on the other.
Is this mostly an American phenomenon or does The Experience Economy also describe what is going on in the global economy with non-U.S. businesses? Is there a uniquely American element to the Experience Economy?
PINE: The United States certainly leads the way, but all developed countries are shifting into the Experience Economy, and virtually all undeveloped countries have a thriving tourism sector.
GILMORE: The small nation of New Zealand has become a big source of new experiences, not just bungee-jumping but zorbing and canyoning.
PINE: The Kiwis even have a Minister of Lord of the Rings to promote film tourism around the movie trilogy that continues to this day!
GILMORE: Look, there’s a reason The Experience Economy has been translated into twelve languages. Businesses and nations around the globe recognize that goods and services are no longer enough to maintain prosperity.
How can this way of thinking (about experiences and transformations) help business leaders alter the way they do business today? And why is this critically important?
PINE: Recognizing experiences and transformations opens up possibilities for creating new lines of business. One is no longer limited to selling just goods and services. But to take advantage of the opportunity, business leaders do need to direct efforts in new ways. Creative energies need to be devoted to the research and development of new experiences, not just goods and services. Responsibility for experience innovation should not just be handed to the Chief Marketing Officer, which only results in experiential marketing. Firms should think about instituting a Chief Experience Officer, or CXO, position. Then experiences may emerge in the way we envision.
So what are you hoping that people take away from The Experience Economy?
GILMORE: We hope we’ve made the case that experiences represent a fundamental shift in the very fabric of advanced economies. And we hope many will feel compelled to participate in the shift by founding new enterprises that create the next generation of economic prosperity.
You two are working on a new book. Could you please tell us a bit about it? When it will be available?
GILMORE: The book we’re working on focuses on the subject of authenticity. In a world filled with staged experiences, we think people will increasingly desire “real” offerings. Authenticity, therefore, is emerging as a new consumer sensibility, a new purchase criterion. Think of it this way. The rise of the Industrial Economy led to the emergence of cost, or affordability, as the dominant purchase criteria among consumers. Could one afford this or that? With the Service Economy, quality, or performance, became the primary consideration. Does this or that work well? And now, with the Experience Economy, people want real, or authentic, offerings — which we define as conforming to one’s self-image. Is it me?
PINE: We’ve been working on the book for years, and we’re just about done with a rewrite of the original manuscript. We wish the book were done, but it’s more important to us that the new book proves to be enduring, like The Experience Economy has proven to be. Look for it to appear sometime in 2006.
