Monday, May 04, 2020

Experience-led Transformation in Today’s Experience Economy: Part 1

B. Joseph Pine II, Leading Authority on the Experience Economy
Strategy / Innovation

The worldwide response to COVID-19 has devastated many sectors of the global economy. And it is those enterprises firmly in the Experience Economy – eg, bars & restaurants, theatres, sporting events, museums, malls and the high street, and especially tourism, including not just destinations but airlines, hotels, ride companies, and so forth – that have been most hurt, for it is precisely in such places where people gather outside of home, work, and place of worship.  

But that does not mean it’s the end of the Experience Economy! Far from it. People are social beings and will always crave social experiences where they are with and around fellow human beings. Buying experiences, as research shows, still makes us happier than buying things. And the time of individual human beings is still the most precious resource on the planet. That is why consumers want goods and services to be commoditized – bought at the cheapest possible price and greatest possible convenience – so that they can spend their hard-earned money and their harder-earned time on the experiences that they value. (All this applies to B2B companies and employee interactions as well, for all workers are first of all people – period.)

In fact, digital experience stagers – eg, entertainment streaming, gaming platforms, and all manner of video sharing for consumers, employees, and business customers alike – are among those most gaining from global quarantining. People are not in any way giving up their experiences; they’re just shifting them from public to familial, from out there to in here, from physical to digital. And experience stagers are responding with all manner of quarantine-driven digital events, including informal concerts, virtual cocktail parties, broadcast plays, coaching, webinars, behind-the-scenes content, and on and on the list goes. 

Foreseeing the Recovery

What will it take for not just the Experience Economy but all sectors of the global economy to come back? From my understanding, recovery first requires a diminishing of infections to slow down the coronavirus’ spread. Second, we need workable treatment(s) so that more and more of the infected can recover. And third, herd immunity to prevent further outbreak, most likely in concert with a vaccine. 

But for many enterprises, that is not enough. Some (large and small) will simply not make it, particularly if they were limping along before and already missed the bifurcation of increasingly commoditized goods and services on the one end and engaging, memorable experiences on the other. And all enterprises dependent on a physical presence need to understand that many effects of the current coronacrisis will not just linger but fundamentally change customer behavior. 

There are many consumers who never ordered anything online, for takeaway, or for store pickup who now do so regularly. Many people who once thought “zoom” a fun word to describe fast-moving vehicles, or a technical word for a camera function, now use Zoom for church congregating and coffee klatches. Businesspeople discovered that, yes, a lot can be accomplished without physically traveling to a far-flung location. And many workers realize that working from home can work out quite well, at least for many tasks, much of the time. (Remember two years ago when IBM told its workers to stop telecommuting and come into the office? I was one of the first telecommuters at IBM way back in 1991-3, and I was amazed at how much more productive I could be.) 

At least a few industries will undergo important makeovers. A significant percentage of the shift to online ordering, and in particular takeout meals and “contactless” delivery, will remain. Telemedicine will finally become a normal way to interact with nurses and doctors. Remote schooling will become far more acceptable (and accessible), particularly in higher education. Queueless waiting will become prevalent at theme parks and other such experiences filled with lines. 

In all such cases what’s basically happening is that the future is sliding into the present or, with a nod to science fiction writer William Gibson is becoming more evenly distributed. 

Think about physical retail. I wrote a digital article for the Harvard Business Review a few years ago called "Shoppers Need a Reason to Go to Your Store — Other Than Buying Stuff" where I looked at the shift from physical to digital shopping. To make the case that retailers should be not just merchandisers but experience stagers I noted:

“While the U.S. Census Bureau puts e-commerce’s share of the U.S. retail market at less than 10% as of the first quarter of 2017, online sales are growing at almost 10% per year. Should that trend continue – and it appears to be accelerating slightly – online retailing will account for nearly 20% of the total in 2025, over 30% in 2030, and about 50% in 2035.” 

Well, guess what – that trend just accelerated immensely! (Amazon is reportedly operating at Christmas levels.) While much of in-store retailing will bounce back, some of it never will. That 2035 date for a 50/50 split just slid a heckuva lot closer to the present as online buying becomes more evenly distributed throughout the population. 

Envisioning the Response

So what should you as an enterprise – particularly one that has been hard hit by the coronacrisis – do in response? First, be human. Inspired by Katrine Thamdrup and Mathias Birkvad, strategic planners at ad agency & Co Denmark, who wrote that in this first, emergency phase companies should "demonstrate citizenship", being human simply means to act in the most human way possible – with empathy, for the greater good, in helpful ways – with customers, employees, communities, nations, and the world. That’s what so many experience stagers are doing via the quarantine-driven digital events mentioned above. They aren’t necessarily trying to monetize all that activity right now when people just need to be socially present while physically distant (“social distancing” being a great misnomer). If any of these new formats is of lasting value, then deriving economic value will come soon enough. 

In many ways COVID-19 has accelerated the pace of change from physical to digital. All enterprises especially those dependent on a physical presence need to understand that many effects of COVID-19 will not just linger but fundamentally change customer behavior. To learn more about why experiences will continue to be the most important criteria for enterprise-level success download our POV.

 

Continue this blog series here.

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