Proposed definition

The Experience Economy consists in focusing on the value generated by the exchange experiences between partners rather than reducing the value to the selling and buying of products and services. Products and services are still part of the market, but considered as vectors of experience.

Discussion

Below is an extract from a thought paper that George Pór of CommunityIntelligence has written for a "big 5" consulting firm. It refers to the book called "The Experience Economy".

---

The high profit margins that innovation leaders can extract from their markets have a shortening shelf life. Knowledge flows with the speed of light and makes competitors faster to catch up, bring to market matching or better products at a lower price. No industry is exception; commoditization drives prices down, capabilities and customer expectations up, everywhere. Let’s take the example of information and communication technologies.


We may not get all the industry-specific abbreviations but the gist of the story, which is this: distributed and web-connected processes displace less efficient ones in commerce and industries, thus both reducing waste, and jeopardizing the viability of companies that are slow or too incremental in their approach to innovation. If information and communications technologies are bellwether industries, indicators of the shape of things to come, then it’s better to gear up to widespread commoditization and its impact on every industry, now.

The usual antidote to commoditization, marginal differentiation doesn’t work anymore. As customers grow smarter and have more information power at their fingertips, what differentiate one market offer from another in the same price range, is the quality of experience in buying and using it. A memorable, positive experience makes me a more likely future buyer of one company’s services vs. of another. But even a memorable experience tends to fade out over time. In search of an even higher-value market offer, two Harvard economists discovered “transformation.” See table below.

Transformation as market offer refers to the enhanced capability that using a product or service causes. Since its method of supply is sustained through time, being a successful “transformation elicitor” requires an ongoing relationship appreciated and nurtured by both the seller and the buyer. Pine and Gilmore write: “No one can commoditize the most important aspect of a transformation: the unique relationship formed between the guided and the guide. It is the tie that binds.”

The highest value of all offers in business to business transactions, is the transformation that increases the buyer’s capacity to respond to commoditization with radical innovation which may commoditize the product of its competitor.

Technology companies, technology integrators and consultancies have a chance to re-configure themselves as providers of integrated innovation-boosting services. Most of the big consultancies already do that. The differentiator will be the strength of the customer communities that they will build around those services.

There's more information about "New Competitive Landscape" and how to generate powerful transformational offers in The Experience Economy. If and when there's enough interest, I'll be happy to share my copious notes from the book.

---

Continue discussion here