Joe Pine popularized the term experience economy over twenty-five years ago. In this episode, we get an update on how you can use experiences to make your customers love you and never want to leave.
B. Joseph Pine II, an internationally acclaimed author, speaker, and management advisor. Among his many appearances, Joe has spoken at the World Economic Forum in Davos, Switzerland, at TED in California, South by Southwest in Austin, Texas, and the Consumer Electronics Show in Las Vegas.
Joe specializes in helping people see the world of business differently through his many ground-breaking books, inspiring speeches, and intensive work with individual clients. He’s most well-known for his best-selling book The Experience Economy, which first came out in 1999 and has twice been named one of the 100 best business books of all time. In 2020 The Experience Economy was re-released in hardcover with a new focus on Competing for Customer Time, Attention, and Money.
Narrator: Welcome to Cracking the Cash Flow Code where you'll learn what it takes to create enough cash to fill the four buckets of profit. You'll learn what it takes to have enough cash for a great lifestyle, have enough cash for when emergency strikes, fully fund a growth program, and fund your retirement program. When you do this, you will have a sale‑ready company that will allow you to keep or sell your business. This allows you to do what you want with your business, when you want, in the way you want.
In Cracking the Cash Flow Code, we focus on the four areas of business that let you take your successful business and make it economically and personally sustainable. Your host, Josh Patrick, is going to help us through finding great thought leaders as well as providing insights he's learned through his 40 years of owning, running, planning, and thinking about what it takes to make a successful business sustainable and allow you to be free of cash flow worries.
Josh Patrick: Hey, how are you today? This is Josh Patrick. And you're at Cracking the Cash Flow Code.
And my guest today is Joe Pine. Joe is the founder of Strategic Horizons. And you can find him at strategichorizons.com. But, more importantly, he's the author of The Experience Economy. Gosh, I forgot when that book came out, but it was way ahead of its time. And as we know, today, experiences are way more impactful than stuff. So, instead of me talking about my impression of experiences, let's bring the expert on and bring Joe on.
Hey, Joe. How are you today?
Joe Pine: I'm doing well, Josh. How are you?
Josh: I'm well. Thanks so much for joining us.
So, let's talk a little about the experience economy. I mean, I went to one of your programs out in Colorado, it had to be 10 years ago, if not longer.
Joe: Colorado was 2005. At Keystone, I think, right?
Joe: Yep, yep.
Josh: It's only seven or eight years ago. At any rate, I've always found your work really interesting. So, how did you guys discover that experiences trump stuff?
Joe: Well, we have to go back to early 1994 for that. You know, my first book that came out, working at IBM, was called Mass Customization, about how you efficiently serve customers uniquely.
And after I left IBM, and actually became a number one client for the first couple of years as they went back to do a lot of executive education for clients and IBM's consultants, I was doing a class on it one day, a full‑day workshop, and I said something that I'd often said which is that mass customizing a good automatically turns it into a service, right? If you if you help somebody define exactly what they want, right? Design what it is you're going to do. Then, you get that information back into operations to create something new for them. Well, then, you don't put an inventory as you do with goods. You deliver it on demand. You've got the intangible activity of helping people figure out what it is that they want. And all that means that it really is the service, right, of helping people figure that out and then defined and delivering it exactly to them on an individual basis.
And so, I said something to that effect and one of the consultants in the back of the room was sort of a smart aleck and, you know, he raised his hand and he said, “Well, you talk about service companies that mass customize. What does it turn a service into?” And I shot back that, “Mass customization automatically turns a service into an experience.” And as soon as I said it, I said, “Wow, that's good.” Right? “Hold on a sec. I've got to write that down.” And I wrote it down. And I started thinking about. And I realized, it was true that if you design an experience that's so appropriate for a particular person, exactly the experience that they need at this moment in time, then you can't help but make them go “Wow!” and turn it into a memorable event, turn it into an experience.
So, if that's true, then, experiences, as a distinct economic offering, means there'll be an economy based off of experiences, right? Today, we call that the experience economy where it becomes the predominant economic offering where it supplants not just the stuff, you know, that we've had since the Industrial Revolution but the services that came to the fore in the latter half of the 20th century.
And, originally, when I talked about it, I said that, you know, like when we published the book in 1999, it was when the book originally came out, we updated it in 2011 and re‑released it last year in hardcover with a new preview on competing for customer time, attention, money.
But back in 1999, we talked about the nascent experience economy, the forthcoming, the emerging experience economy. But now it's here, right? It's clear. Even the fact that the physical side of the experience economy was dead in the water for the last 15 months because of the COVID pandemic, you saw the tremendous desire for those experiences and how much we missed those experiences because we do prefer them over stuff. That's where we've shifted our spending to because that's where we recognize the value is, that we want those experiences.
Josh: Well, the truth is we remember experiences and we don't remember stuff.
Joe: Right. Right, exactly. It was called-- memorability is the hallmark of the experience. If people don't remember that interaction with you, then you didn't stage an experience.
Josh: Right. And if you don't stage an experience, you're likely to have a pretty wobbly customer, I would assume.
Joe: Yes, yes. The chances that they want to stay and come back with you are, you know, lessened greatly when you don't create that experience within them.
Josh: Yes. I mean, like we're about to get our deck redone. And the experience that I've been having with our contractor has not filled me with warm, fuzzy feelings.
Joe: And that is so often the case, right? But it's not that hard. You know, with contractors, you know, and service businesses like that, the number one thing to understand is that when you want to stage an experience, your work is theater. And that's not a metaphor. I mean, work as theater. I literally mean work is theater that, whenever you're in front of customers, you're on stage and need to act in a way that engages the audience. And so, that's what it takes. You know, it takes focusing on not just the what, right, the activities, the functional things you have to do like build a deck. You know, like pound in nails. Like, give you a proposal or give an invoice and so forth. It is how you go about doing those things, right. That's what can turn any mundane interaction into an engaging encounter.
Josh: Yeah, I think, Dan-- was it Dan Sullivan would talk about front stage and backstage activities?
Joe: Yeah, a lot of people do. The first time we ever saw that applied to business actually was in Dean MacCannell's book, The Tourist. He was a USC professor. And if I remember right, that book came out in like 1976. I’d have to double check that, but it's been around for a long time. And he introduced the notion of front stage and backstage for businesses, you know, particularly in tourism because he noticed that a lot of tourism companies like to give you a backstage tour. And people love that, right? They get to see backstage. It lends another-- we wrote another book on authenticity. And it really does allow you to view things as authentic when you when you see behind it's why. Like, even in restaurants where they don't have the, you know, the drop ceiling. They actually see all the pipes and everything through there. It has a level of authenticity to it. So, it's similar to that. And so, people love that.
But one of the things MacCannell said was, “If you let people into your backstage, you need to back‑backstage because you still need a place.” This is important for businesses to understand. You still need a place where people can decompress, where they can take off, you know, the mask, so to speak. And I don't mean that derogatorily at all. But they cannot be on, right, is the way to think about it, right?
Now, you've done a lot of speaking and worked with clients. And you know that, when you're in front of the clients, you're on. There's a little bit of adrenaline there that's going on. And you need a place to decompress. Particularly, if you're like me who's basically, you know, an anti‑social introvert, you need that back‑backstage to be able to decompress and give you the energy to come back out about on stage.
Josh: Yeah. I was just thinking about the chef's tables that exist in a lot of kitchens today.
Joe: Yeah, yeah. Exactly.
Josh: You know, high‑end restaurants? I've got to assume that, when that first started appearing, that the people cooking in the restaurant weren't thrilled about that.
Josh: Because having been on the line myself and run a food service business, I can tell you that there are things that go wrong about every 45 seconds and the language is not always the cleanest that comes out when that happens.
And it is that they know they're being watched, right. And, therefore, they're on stage.
I love quoting-- there’s this famous stage director out of the UK, Peter Brook. And he wrote this wonderful little tome called The Empty Space. And the opening line of it, he says that, “I can take any empty space and call it a bare stage. And a man walks across this empty space, while someone else is watching him, and that's all that is needed for an act of theater to be engaged.” In other words, the simplest definition of acting is somebody else watches you work, right?
Joe: So, when people are watching you work, you're on stage. That applies to chef’s and other workers in the kitchen. It applies to retail associates that are merely straightening merchandise. It applies to a guy doing your deck with you, looking out the window on how it's going. You know, a mechanic working on your car. Whatever it might be, you're on stage when people are watching you.
Josh: Yeah, or just keeping you informed of what's going on. I mean, that's my issue with this contractor is he was supposed to have started a month ago and he has yet to reach out to us to say, “Hey, here's where we are.” I have to reach out to him. And, frankly, it's annoying.
Joe: Right, exactly.
So, the annoying part, though, is also something I like to say that the easiest way to turn a service into an experience is revive poor service because then your customers remember, but that's-- you know, you don't remember the annoyances, you want to remember the good things.
Josh: Yeah, yeah, absolutely.
So, Joe, you guys have-- I mean, you've written books and you've done programs. And then, recently, you started a certification program. So, when someone gets certified, first of all, talk about the experience of going through your certification which, I assume, would be interesting. Second, why would somebody want to do that?
Joe: Particularly, if you do the price, you'd ask, “Why in the world would somebody do that?”
So, it's always been a four‑and‑a‑half‑day immersion in the experience. So, the public courses. My partner, Jim Gilmore, and I co‑authored The Experience Economy and Authenticity, are there personally with you. And we do private courses for companies where Jim or I will do it alone, but you get access to us directly. You get four and a half days with us, plus dinners and so forth. And you get immersed in our frameworks, and in our exercises, and in our techniques, and our examples. We give you a workbook that lists, you know, every example that-- or most every example that we talk about that shows you not just the exercises but how to go about teaching them to others which is the primary thing with a certified experience economy expert that usually you're either a consultant that is working with clients who wants to do this, or you're an internal center of expertise around experiences, or you're, you know, even the CEO of the company who really becomes the chief experience officer as well to be able to infuse experiences throughout.
You truly become the expert. You get every question that you could possibly want answered. You get to learn what others are thinking of that are in that course with you, as well as access to our network of 300‑plus certified experience economy experts around the world.
You know, I always say the greatest compliment we get is that many people, including our certified expert number 001, who is an independent consultant, pay us out of their own pockets for this because they find the value in it. And we've had-- you know, of those 300 people, at least 50 or more have paid it out of their own pocket to be a certified experience economy expert.
Josh: So, how many of these people go and help other businesses? I mean, let me ask the question in a different way. When I talk about experience economy, people might say, “Yeah, interesting. Why would I want to do it?” So, when you go talk to somebody and they're considering what you do, what is the return on investment or the return on effort?
Joe: Well, the number one thing that I always point to is that it enables you to forestall the forces of commoditization. If you look at any industry, commoditization is like the law of gravity, right? It drags you down year after year. If you do nothing else, where you keep doing the same things you've always been doing, then you will be commoditized, right? It's just the natural force of things. And so, you need to get out of that.
The only way to decommoditize is to differentiate, right? And differentiation means innovation. Now, if you're a goods manufacturer, you could certainly innovate in goods and keep ahead of that commoditization curve, right. It's hard to do for a long time but, as long as you keep innovating - you look at Apple’s and other companies, then you're able to do that while still selling physical goods.
Secondly, you can innovate in services, you know. And it was when goods became commoditized that manufacturers started getting into more and more of the services. You know, not just warranty services but financial services of financing the goods as well as then helping you use those goods. IBM, my old employer, for example, got it. You know, it was a huge manufacturer but it got into service by helping you manage your data center by integrating your hardware. Eventually, into management consulting, and so forth. And all of those are services that help them differentiate, again, themselves. Where, today, you know, the lion's share of IBM's revenue and even a greater amount of its profit is from services, not from goods.
Well, then, the third thing you can do is you can go beyond that and get into the experience business. Again, whether you’re a goods manufacturer, whether you’re a service provider, you can differentiate by how you do what you do, again, by coming up with places where people can experience your offering. And one of the things we suggest to companies, you know, is a great place to start, is in marketing. It’s creating marketing experiences. Experiences that do the job of marketing by getting people to experience your goods before they buy it because then the chances they will buy them go up. So, it is all about that differentiation of decommoditizing.
And I always say too that not every company has to shift to experiences but there isn't a company in the world that wouldn't benefit by it. And I come back to Apple, right, the goods manufacturer. Well, guess what? They got into tons of services including like, you know, iTunes and that sort of thing and App Store, but also into experiences with the Apple Stores.
In fact, you know, I can still remember when Steve Jobs announced that Apple was going into retail in, I want to say 2006, but somewhere around there, and he got lambasted in the business press because people said, “You're a designer and manufacturer. What are you doing get into retail? Are you going to pick off your channel partners? And you're going to fail at it because you don't know how to do it.” But they’ve succeeded very much because they took an experience mindset. They said, “We're not just going to create a store. We're going to create an experience where everything in here is live, where people can, again, play with it, and use it, and experience it before they buy.” And that has proven that they're actually the number one retailer in the world today.
Josh: Yeah. The interesting thing about experiences is that, if you want to move your company to an experience‑based company, where you're providing experiences for your customers, you have to think about your processes before you do it. And you have to design systems to become an experience‑based company.
In my opinion, probably, the king, queen, and emperor of this is Disney. I mean, you know, Disney, if you've ever gone out and studied Disney, you'll find out they micromanage every little piece of the park. And they do that so they can manage the experience for their guests.
Joe: Right. Yeah. Well, you're exactly right. I always called Disney the premier experience stager in the world. And one of the key things that you're pointing to is their intentionality, right. They intentionally designed everything. They intentionally manage everything. They intentionally manicure everything to give you a distinct set of impressions that create that experience in your mind.
Josh: Yeah. I mean, this was a zillion years ago, back when I had my vending company, and I went down and I did their quality management course. And they went and they talked about their parking lot and why they charged $5.00 to park. And I came to find out that, if you go to the Orlando property and you lose your car, they know where it is, by what time you came in the park--
Josh: --and what hotel you were staying at. You know, who thinks about those things?
Joe: Right. They understand that that's a key element, that, you know, you sort of ruin your day, if you can't find your car at the end of it and it takes you a half hour or 45 minutes to figure out where you are. And so, they intentionally designed how we're going to park people where we know, based on when they come in, exactly where that car is and can take ‘em right to it. That's all you’ve got to know.
Josh: Yeah. You know, one of the things about designing experiences is you have to design systems to support the experience. And, in my experience of doing that, there's two things that happen when I design an experience. My customers, most importantly, know what to expect and my employees, people working with me, know what the definition of excellence is so they can do it. Does that make sense?
Joe: Yes. Yes, with one proviso. I mean, they absolutely know what they have to do, right? That's why you need to direct them to act.
Have you ever, Josh, had franchise businesses?
Josh: I have talked to franchise businesses. I've never owned one myself.
Joe: Right. Well, one of the things I always recommend to franchise businesses, they always have these service standards, right? That you got to follow these service standards to be able to qualify, right, and continue to qualify or we can take your franchise away. And one of the things I've recommended to franchise businesses, and it very much applies to the processes that you're talking about in any business, is to separate out the what versus the how standards. That “here is the what you need to do” but then talk distinctly about the how’s because that really puts that emphasis on the theater that they have to create, on the impressions that they're making in people's minds. And, again, on that intentionality.
One of the basic acting techniques is called act with intention, right, which is knowing the how you're doing something and the why of it, not just what it is. You know, the stage direction may say, you know, “knock on door” but how you knock on that door is very important to your character, to the plot, and so forth. And the same thing with any business that you're talking about.
Now, the one proviso, I would say, is that you don't necessarily want-- and with an experience, you don't necessarily really want customers to know everything that's going to happen.
Joe: That you want a part of theatre as a dramatic structure. You want a dramatic structure that rises up to a climax and comes back down again, right?
If you go to a movie and you already know how it's going to end, well, it's not going to be a great movie, right? You're not going to be immersed. It’s an engagement. Now, this sort of depends on the experience that you're providing.
But even in services, what I encourage them to do is think about creating suspense and anticipation, right, where they don't know exactly what's going to happen or how. And that allows that dramatic arc that prevents it from being just a mundane flat experience to one that, again, rises up and comes back down again. And that's how memories are created.
Josh: Yeah, absolutely. You know, I think the why is really an important piece which comes to one of the values that your company has because, if you do that and you tie your values in there, then the why's become more impactful and the experience is actually more consistent and will be more well received by your tribe because they know what you're about. You can't be all things to all people has been my experience.
Josh: So, keep using the word experience too much today.
At any rate, Joe--
Joe: Well, that’s a very expansive word.
Unfortunately, Joe, we are out of time. And, you know, I'm going to hope that some of our blue‑collar business owners are saying, “I want to become certified, so I can take this experience stuff into my business and make it a whole lot better.” So, how do people find? And, if they want to find out more information about your certification, what would they do?
Joe: Right. Well, you've got it right there in the screen. You can go to www.strategichorizons.com. And you can, there, find out about our certification course. And I should mention that we do, because of the pandemic, have virtual options, that we have done a number of times since that started.
We've got a virtual course coming up the week of August 16th, where it's not a full day. It's five half days. You know, like four to four and a half hours that we do it in. So, you can find that out there. And the virtual’s half the price of the physical course.
And you can find my bio and all of our information on books and articles. And there are many articles that even apply to individual businesses, individual industries that you can find on the website as resources as well as own thoughts post.
And then, you can also follow me on twitter @joepine, or connect with me on LinkedIn /joepine, and I'll respond to and connect with anybody who wants and love to talk about this stuff.
So, I've got two things I would like you to do. One is please go and give this show an honest rating and review. It's really, really important. You go to iTunes, you go to Spotify, or wherever else you listen to the podcast and please leave us an honest rating and review. If you love as you can say as well. If you hate us, I hope you don't, but you can say that too.
And the second thing is my second book is out in the wild now. It's pretty easy to get. It’s at all the normal places you get books. You can also get it at our website which is www.salereadycompany.com. And if you buy the book there, we have a whole bunch of bonuses that you get free. And for the first 50 people, who buy the book on this site, I'll give you a free 20‑minute coaching session.
So, this is Josh Patrick. You're with Joe Pine. We're at Cracking the Cash Flow Code. Thanks a lot for stopping by. I hope to see you back here really soon.
Narrator: You've been listening to Cracking the Cash Flow Code where we ask the question, “What would it take for your business to still be around a hundred years from now?”
If you've liked what you've heard and want more information, please contact Josh Patrick at 802-846-1264 extension 102, or visit us on our website at www.sustainablebusiness.co, or you can send Josh an email at firstname.lastname@example.org.
Thanks for listening and we hope to see you at Cracking the Cash Flow Code in the near future.