The Experience Economy
Customers do not buy products or services any more. The differentiator is the experience. We are in the middle of the Experience Economy.
In this two-part series, we explore the triggers and the implications of the Experience Economy
3 Triggers of the Experience Economy
The rise of intangibles: Once e-commerce grows, technology standardises how the transaction is processed. The differentiation is created by the intangible elements like trust, brand, patents, leadership. We have been told, what gets measured gets done. Yet the intangible elements make up most of the value created by a firm. We don’t know The differentiation is in the intangible elements like data privacy, speed, trust, brand promise, sustainability etc. Can the seller be trusted to safeguard my credit card information or the data. Does the packaging use recycled paper and the social impact of the business are all intangibles that are shaping the buying decisions. Value is created through the intangible elements. The difference is the human being who creates the difference through the choices.
The customer is better informed: The customers are increasingly looking at the leadership practices and choices as closely as business outcomes. The ethical use of the personal data that the company collects matters to the consumers as the Cambridge Analytica case proved. When the customer becomes more aware, they want to know if the product has used fair labour practices. Once e-commerce grew, technology standardised the transactions.
Whether you buy a product or a service, you buy something and get what you paid for. The differentiation was really in the intangible elements. Could the seller be trusted to safeguard my credit card information or the data. Does the packaging use recycled paper and the social impact of the business are all intangibles that shaped the buying decision. Value is created through the intangible elements. The difference is the human being.
3. From hierarchy to networks:
Leaders can no longer expect that employees are only a factor of production and the 'business of business is to serve shareholders'.
In the post-pandemic world, the home is the new workplace. The societal issues and political choices are in our face all the time. Businesses cannot look away and say that the societal issues are a distraction.
The shareholder is part of the same society where the employees and customers operate.
Virtual Whistleblowing now leverages the power of social media to force us to pay attention to issues that would have remained invisible even a few years back.
Read: The rising power of employees
Networks are everywhere
This week at the Adobe Summit 2021, I heard Malcolm Gladwell. He describe the emergence of networks as the new way of working. Hierarchies are closed systems and disciplined. The centralised power structure present in a hierarchy ensures better execution. Hierarchies work well in a world that is stable.
Networks are open, flexible and decentralised. They are adaptable and responsive but often have limited success because the energy is often diffused and so are the outcomes.
In a connected world when speed matters, networks emerge. During the Covid crisis in India, a global network has emerged who the average citizen is turning to when they are gasping for breath. People are turning to informal networks to get advice, medicines or support. Networks are chaotic but when speed is of the essence, the people turn to networks.
Education is moving from a hierarchical system to a more diffused network model. A model that has remained unchanged for centuries is being questioned in a world where students of all ages are attending classes on video. Technological, political and socio-economic shifts are widening the employability gap that academic institutions are struggling to bridge. Employers are replacing academic degrees with their own credentials.
Startups in the EdTech space are creating new models of learning. The lines between entertainment and skill building are getting blurred in the Experience Economy. Networks have a way of blurring boundaries. But that is the world we have stepped in to and there is no going back.
In the next part of this post, I will explore how the Experience Economy will evolve in a world where networks and hierarchy co-exist.