Content area
Full Text
B. Joseph Pine II and James H. Gilmore: B. Joseph Pine II and James H. Gilmore are co-founders of Strategic Horizons LLP in Aurora, Ohio, (www.customization.com). They prepared this article from information in their latest book, The Experience Economy: Work Is Theatre & Every Business a Stage (Harvard Business School Press, 1999, Boston, MA), in which readers can find the complete treatment of the 3-S Model outlined in this article.
In a previous Strategy & Leadership article, we argued that goods and services were no longer enough to compete in today's increasingly commoditized world; companies had to move beyond goods and services to stage experiences and guide transformations[1]. Experiences (memorable events that engage customers in inherently personal ways, like going to a theme park, visiting a museum, or engaging in sporting activities) and transformations (a series of experiences that change the customer in some fundamental way, like toning up at a fitness center, resolving problems with a psychiatrist, or improving one's business through a consultant) are distinct economic offerings built on top of services, goods, and commodities.
In earlier work, we also made the case that mass producing one's products and processes would not cut it in an increasingly turbulent competitive environment[2]. Instead, companies must mass customize their goods and services to create offerings more relevant to the wants and needs of individual buyers, differentiate their goods and services from the sea of look-alike competitors, and thereby increase the value provided - and thus the price charged - to users and clients. Now let us relate these two seemingly disparate lines of thought by revealing what we call the progression of economic value, where we see that customizing a good turns it into a service, customizing a service turns it into an experience, and customizing an experience turns it into a transformation. (See Exhibit1.) Therefore, businesses that wish to prosper in the emerging experience economy should first get their act together by mass customizing their goods and services.
Determining exactly what customization to implement is no easy task. Which features or benefits of the offering should be customized, and which should be left standard? Where across the value chain would buyers most prize customization? What key leverage points would provide the greatest bang for the...