The Interview: Having an Experience with Joe Pine

Interview: Introduction

ChainLink: Joe, please tell us a little about yourself.

Joe: Well, I've always been a bit of a geek. Worked on computers since elementary school in the 1960s, obtained an Applied Mathematics degree, went to work for IBM analyzing the performance of computers. But I soon found I liked being a generalist more than a specialist, and so angled myself toward jobs where I could have influence over a wide breadth of activities. I left IBM over ten years ago, and as co-founder of Strategic Horizons LLP, I still work on influencing a wide breadth of companies. My personal mission is to figure out what is happening in the business world that few executives or managers have yet to see, and then develop ideas and frameworks to help them understand what's going on and what to do about it.

ChainLink: You have authored and co-authored several books. What motivated your first book, Mass Customization?

Joe: It began with a project at IBM where I managed a group that brought customers and business partners into the development process of the AS/400 computer system. As we cycled customers through Rochester, Minnesota — even in the depths of winter — to help us debug the system, enhance its capabilities, and ready applications for its announcement, I realized that every one of these customers was unremittingly unique! They all wanted to use the system in different ways, while we had designed a multipurpose minicomputer for a large, homogeneous marketplace that simply didn't exist.

So, moving to Strategic Planning, I happened upon Stan Davis' 1987 book Future Perfect, where he coined the term "mass customization". He talked about how technology was bringing down the cost of customization, and then eventually we'd be able to give customers exactly what they wanted at a price they were willing to pay. I realized that's what we needed at IBM, and when the company sent me to the MIT Sloan School of Management to get my master's degree, I dedicated that entire year to working on the subject, eventually turning my thesis into the book Mass Customization: The New Frontier in Business Competition, which came out in 1993. What was an oxymoron seventeen years ago and a new frontier eleven years ago is now the imperative for companies in industry after industry.

Interview: Section 2

ChainLink: Obviously, your thinking has evolved over the years to The Experience Economy. How did that come about?

Joe: In speeches, workshops, and executive education sessions, I had often said how mass customizing a good automatically turned it into a service. If you look at the classic economic distinctions, goods are standardized, while services are customized — done just for a particular person. Goods are inventoried after production, while services are delivered on demand. Goods are tangible and service intangible — and part and parcel of mass customization is the intangible service of helping customers figure out what they really want.

So in one session this guy raises his hand and says, "You talk about service companies mass customizing as well. What does it turn a service into?" I immediately shot back that "mass customization automatically turns a service into an experience!" Never said it before, never thought of it before — but I knew it sounded great. So I said, "Hold on a second. I have to write that down " And as I thought more and more about it, I realized it was true — and that meant that experiences must also be a distinct economic offering, as distinct from services as services are from goods.

And that meant that as goods and services increasingly become commoditized, we would move to an economy based on experiences — The Experience Economy. Today, so many pundits and politicos express dismay at the offshoring of service jobs (particularly in the technology sector), but that's simply the natural manifestation of ongoing economic development, repeating the same patterns the Agrarian and Industrial Economies went through before. Companies need to understand that goods and services are no longer enough; competitive advantage — and, at the macro level, new wealth creation — comes from conceiving and commercializing new experience offerings.

ChainLink: Technology and experience plays out in such things as games—that's an industry that's doing well—we've come a long way from Monopoly. But it's like a convergence of technology, games, and experiences and a $10 billion industry and growing—and you can charge more money—lots more money for these games. Is that the concept we are talking about here?

Joe: Absolutely! Games have become incredibly more experiential — engaging more of the senses (including haptic technology) with better narratives and more immersive environments. We end up being so engaged we spend much more time playing the games!

That's a key distinction between services and experiences — time. For any company, ask if you want to spend more time with your customers, or less. Do your customers want to spend more time with you, or less? If the answer is less, then your service is rapidly commoditizing — and you may be doing it to yourself. If the answer is more, you have the opportunity to stage an engaging experience that will draw your customers in and get them to spend more.

Interview: Conclusion

ChainLink: How does it get away with that?

Joe: Because of the experience! A different kind of consulting company, we guide companies to transform themselves into premier experience stagers. The place the founders, Gary and Leigh Adamson, created in Keystone exemplifies all of the principles of experience design, and so just being there sets the transformation process in motion.

Indeed, Starizon views itself as being in the transformation business — charging not for the activities it performs but for the demonstrated outcomes the client achieves. In the last two chapters of The Experience Economy, we showed how experiences will eventually become as commoditized as goods and services, and therefore that companies will have to go beyond the experience to guiding transformations — where the customer is the product. Not just consulting companies, but healthcare, fitness centers, spas, publishers, and most every B2B supplier should understand that whatever they're selling today is but a means to an end. Sell the end, rather than the means, and you'll be much more economically rewarded.

ChainLink: How does one go about doing that?

Joe: There's basically a three-stage process for any transformation. One, diagnosis — understanding customers' aspirations and the gap between that and where they are today. Two, staged experiences — designing the exact set of experiences that will close the gap. And three, follow-through — ensuring that the transformation takes hold, and that the aspiration continues to be met over time. That's where most consulting companies fail today — no follow-through! And of course key to all of it is customization, for it is customizing the experience that turns it into a transformation!

ChainLink: Let's come back to mass customization for a minute. I think people have postponement and mass customization confused... I was happy you mentioned this in your book. Can you clarify the differences for our readers?

Joe: Mass customization is efficiently serving customers uniquely. It involves producing on demand by scheduling modular resources to fulfill individual customer orders. Postponement is merely one method for achieving that, building "vanilla stock", putting it in inventory, and then postponing the completion of the product until a customer order comes along.

The key to low-cost, high-volume customization is modularity, meaning an architecture defined by a linkage system and what modules can connect into it. Whether postponement is used or not, either the product itself or the process by which it is produced must be modular for it to be mass customized.

ChainLink: I look at many companies that are not coming up with good product or process innovations. They look like trouble on the way. Any warnings or final thoughts for these companies?

Joe: One method for discovering where to innovate that I always encourage companies to use is customer sacrifice mapping. Customer satisfaction is all well and good — but all it does is measure how well we've trained customers not to expect too much. Customer sacrifice mapping goes beyond expectations to examine the gap between the ideal offering individual customers want and what they have to settle for today. Examining this sacrifice will identify dimensions of customization along which companies can innovate for competitive advantage.

If you don't innovate in terms of product or process — or experience! — then you will be commoditized.

ChainLink: Thank you!

About the Author

For more than two decades, Ann Grackin, Chief Executive Officer, has been on the frontlines of the Supply Chain Management technology and e-commerce frontier, leading global strategy and technology implementations in the high technology, semiconductor, automotive, textile, and apparel industries.

ChainLink Research is a bold new supply chain research organization dedicated to helping executives improve business performance and competitiveness.