From The Experience Economy to The Transformation Economy / Joe Pine / Ep. #246

Hi, I'm Joe Pine. Welcome to the Service Design Show, episode number 246. We've spent a good portion of the last 20 plus years understanding to differentiate, we need to move from services to experiences. But what if that's not the end of the journey? What happens when you customize an experience? and what does that mean for the business that we are really in? That's exactly the puzzle we're going to piece together in today's conversation.

Hey, if you're new here, welcome to the Service Design Show, where we invite the brightest minds in our field and explore what is truly needed to design great services that resonate with people, push businesses forward, and honor our planet. Our guest today is a voice that is absolutely fundamental to our field, Joe Pine. He's the co-author of the experience economy, the book that essentially gave us the language and the progression of economic value framework that I'm sure we've all used sometimes. When Joe talks, we listen because he has this incredible talent for spotting the next big economic shift. And just when we all still trying to get our organizations to master experiences, Joe is back to tell us that the world is already moving on. What you might not know is that this new idea was actually born inside the last two chapters of the experience economy. So he's been thinking about it for two decades. And as a fun fact, when Joe is not redefining our economy, he's a self-described average golfer, which as you'll hear becomes a central metaphor for us in this conversation.

So today you are going to learn about why it took 26 years for this sequel and what signals Joe sees that we are ready now for it. Why all the true transformations like me becoming a golfer are really about a change in identity, a practical framework called encapsulation to intentionally design transformations, not just hope for them. And finally, the crucial difference between time well spent in an experience and time well invested in a transformation. I encourage you to pay close attention to the story Joe shares about his golf coach. As long as the coach was just charging by the hour, he was frankly a commodity and he acted like one. The moment the goal became a transformation, the coach became a true guide with a completely different set of actions. So whether you are designing digital products or in-person services, this conversation challenges us to decide if we are just a service or a true guide. This is a conversation I've been really looking forward to to sharing with you. Join me for the deep dive with Joe Pine and I'll be waiting at the end with my closing reflections. My name is Mark Fontine and you are listening to the Service Design Show.

Welcome back to the show, Joe.

>> It's a pleasure, Mark. Thanks for having me again.

>> Again. Uh you're just keep coming back. Now it's it's my pleasure and honor to have you back. Uh we are going to talk about the book that is coming out really soon. Um a milestone moment. Uh I have so many questions. Uh but let's uh before we dive into the new book which is going to be called the transformation economy, right?

>> Correct.

>> And we'll unpack that in a second. We need I feel we need to start at sort of for me the beginning. Maybe it's not the beginning for you, but the book The Experience Academy for people watching the video, they see it uh on screen. Uh I have a signed copy here. It was a monumental book in my journey into service design. Um Joe, I would love to know from you. Uh the book came out in 1999. Like gosh, why do you feel it has stood the test of time so well?

Well, it's fundamentally because my partner Jim Gilmore and I didn't uh identify a fad, but a fundamental change in the very fabric of the economy that experiences were a distinct economic offering and therefore we'd have an economy based off of experiences. And a lot of people have told us since that we're so early on, but whenever you catch up to that fact, whenever you recognize it, then you see it all around you. And we saw it all around us back in the 1990s. I mean, obviously today, you know, you can't keep up with all of the experiences that are going on. Uh, and so, um, uh, it it just it it continues to sell, uh, you know, several thousand copies a year. It's in the one you see there on the screen is in its third edition. There's other ones are up here somewhere. And uh uh and because people continue to discover it uh continue to understand that they need to be in the business of staging experiences uh and particularly as they commoditize and more and more companies are commoditized every year. More and more companies have to differentiate themselves. More and more companies have to figure out how to stage experiences.

>> And uh one of the key elements, one of the key frameworks uh I want to test if that's actually the word you use for it for me was a progression of economic value. Can you sort of uh repeat for us again what does the framework look like and do you feel that it's still relevant, accurate or would you 26 years later have changed it?

Ha, I would not change a thing. Uh, it is a framework, regression of economic value, sort of the mother of all frameworks that describes macroeconomically what is going on in the world. Uh, and I've had people, you know, it's a progression. I've heard many people call it a ladder, right? Because you got these steps to go up. Uh and the way to think about it visually but it starts with the uh with commodities the basis the agrarian economy and then goods the basis of the industrial economy then services right obviously the service economy and then what we added is that I mean those are the three that all economists recognize although it's sort of important to note that for for some purposes anyway that that economists didn't recognize services as a distinct economic offering you know until the 17 1800s it was always just you know Adam Smith called services as um what was the race phrase he used it was um not it it was sort of like you use it wasn't the exact phrase useless or wasted right that that that all it does is get goods to market goods are the only thing that really matters um and uh because today most economists don't recognize experiences as a distinct economic power I say most it's like almost all of them right that's one thing I really wish before I die that they would and start measuring experiences is as a distinct economic offering because that is that fourth offering uh above services where you use goods as props and services as the stage to engage each and every individual in an inherently personal way. Creating that memory that's what the experience is and um there's there's really three dynamics to it that's important to understand. So one is uh commodification. Commodification is turning something into an economic offering. So, and and and so the dynamic going up there is these these four black arrows that say that you extract commodities of the ground from the ground and then sell them on the open marketplace. You make goods from the commodities from raw materials, right, and sell them to uh users. You deliver services on behalf of individual people where goods are are supported in that, right? the clients of those services and you stage experiences, right? Staging is important. Staging just simply means you're very intentional about every single thing that you do in order to create these impressions that you want um that engage people inside and create that memory. Then the the second dynamic is is uh commoditization, right? So commodification turns something into economic offering. And and note that we used to be responsible for economic offerings, right? When you're a farmer, you make your own crops and then or you you grow your own crops and then you make your own goods and and so forth and you do your own services, but then eventually we pay other people uh for that. So it's commodifying. Commoditizing is when customers no longer care that much about your offering, whatever it is. They buy they want to buy it at the at the cheapest possible price and the greatest possible convenience, right? That's commoditization and it drags you down, right? If you do nothing over time, your offer will be commoditized. Then there's finally commod customization, right? Customization lifts you up. Customization differential. Customization is how we discovered this pro progression of economic value for my first book mass customization uh which is about efficiently serving customers uniquely. you know, giving them exactly what they want at a price they're willing to pay. And I realized that if you customize a good, you automatically turn into service. And when asked one time, what does customization turn a service into? I I shot back that a customization automatically turns a service into an experience. And I went, whoa, that sounds good. You know, hold on a sec. I got to write that down. Right? That was that flash of insight, right? came from Providence to understand um that experience that customizing services you know if you design a service so it's so appropriate for a particular person exactly the service that they need at this moment in time you can't help but make them go wow and turn it into a memorable event right that's what an experience is and therefore experiences would be a distinct economic offering therefore we'd have uh an economy based off experiences the experience economy therefore we need to write a book on it.

>> Um, thank you for that summary and the recap again that that model is like printed in my head. I don't know how often I've used it in my agency days. One term that is uh important to unpack as well is you you mentioned distinct economic offering like can we double click on that like because that is important. What is a distinct economic offering?

>> Right. It is um uh it is something that uh we could also use the word product generically although often product refers to physical things but still it's a product. It's something that you as a company um design, create and make happen. I'm trying to think of a generic word, right, for that you for extract, make, deliver, and and stage, but you make happen uh and customers buy that from you, right? So economic offering basically means you sell something and a customer buys it.

>> Well, that was my summary all those years like it's the thing that your customers are paying you for. Uh

>> Exactly. You you you did that more eloquently than I did there, Mark. Thank you.

>> Yeah. Uh and that was the thing that sort of helped me to understand why something like Serbs design exists and then we saw a flora of all other design disciplines, social design, sustainable design. But for me like the progression of economic value was always the underlying the underpinning reason why service design exists and why experience design needs to exist and why probably we'll get something like transformation design.

>> And all those other sort of variants they are interesting and I get where they are coming from but it's not like yeah I don't know they are rooted in something else. Yeah.

>> Yeah. Cool. All right. Now, why you you told me in our preparation, you told me, okay, it's been 26 years since the uh experience economy came out and you felt that world is ready for the next chapter. I'm really curious like what were the signals? What made what gave it away that that we are ready for the next book?

>> Yeah. Yeah. There were a number of things. One is to understand that the next book is germinated in the first book, right? That that I that I continue to one of the things that I've always done is always asking what's next. I hate the word ultimate, right? That you ever see the word ultimate. I say no, there's always something else. What's next? What's next? What's next? So I ask the same question. Can experiences be commoditized? Yeah, it's called been there, done that. That's commoditized experience. Can you customize it? Yeah, you can customize an experience. And what happens when you customize? You design an experience that's so appropriate for this particular person. Exactly. The experience that they they need at this time, then you can't help but change it or turn it into what we often call a lifechanging experience, right? That life changing and and that's a transformation. And so the last two chapters of the experience accounting were on those transformations. And I have been asked now for like 25 years, when are you going to write the full book on it? And and you're right. I said, well, the world's not ready for it. What? I don't understand enough about it yet. And the world's not ready for it. And and it is it's it's um you know when I would work with clients on uh experiences and particularly ones that are immenable to transformations like healthcare companies right they would tend to get it and and and I probably work more with health care companies because research shows that the better the patient experience the better the outcomes and that's what it matters with transformations it's the outcomes but people are not used to selling outcomes and uh and and businesses and People as consumers are not used to buying outcomes. It's a very strange thing. We have always long been our uh it's part of that commodification issue. Uh we've always been our own general contractors, right, for transformation. So like if I want to get fit, I'll buy commodity I I'll hire organic produce, right, to to help me eat better. I'll buy physical goods, self-help books, maybe some barbells, some fitness equipment. I'll buy a service, maybe go to a, you know, a fitness center or I'll get a I'll get an app like a Fitbit watch or or an Apple Watch, whatever, to track what I'm doing and see how I'm doing, and or a ring maybe. Uh, and then and then the fitness center really is at the experience level. They'll go and I'll pay a membership fee and I'll go in there. Uh, and I'm trying to mix all this together and make this all happen. And guess what? It's really hard, right? It's really hard uh to do that. and across any spectrum uh that you that you want to name. Uh and so it's so people increasingly recognize hey you know if there's people that can help me do all that particularly you see the rise of coaching right where the personal trainer is a coach uh uh uh you got tennis coach golf coach all the sports coaches you've got life coaches you got executive coaches you got speaking coaches you got I'm sure there's sustainability coaches there somewhere there's integration coaching there's there's you know hundreds literally hundreds of different names for coaches that have risen over the last two decades Right. And that's that sign that people are getting ready and you see more and and more of that. I also saw things like I was I I helped uh it's a kind word to say I helped co-found but James Walman always says that of the world experience organization. He came to me and asked permission if he could do that, you know, create an organization. I said I'm waiting for somebody to come along and and create an experience organization because I didn't have the time to do it or the energy. And so, uh, one of the things in the in the campfires that we have in the, um, uh, uh, world experience summits that we've had three of now, uh, and, uh, and where you meet, you know, predominantly experienced designers, exactly your people, Mark, are in this this these events and almost to a person, everybody talks about transformative experiences. Everybody talks about wanting to not just design a memorable experience. They want to design a transformative experience. And that that was one of the last sort of factors that said, "Okay, yes, there's there's there's really something going on here because these people are thinking about it. Consumers more looking for it. You I think the time is right to now do it."

>> Interesting. Sign of times. Yes. And I would agree that there are, you said hundreds of different coach styles. I I think there's an infinite number of coaches, probably more different coaches than we have Adam. Yeah, for sure.

>> Uh so that that is if that if anything that's a sign for sure. One important thing uh that we need to understand is you already hinted upon this is the difference between an experience and a transformation. You mentioned okay customization of experiences. the next level becomes uh uh a transformation and then I it already slipped my mind but like how do you like what are the the characteristic differences between an experience versus a transformation?

Well, the the uh the key is that the experience tends to be uh ephemeral. Uh that is it doesn't last.

>> And now the memory of it may last longer. Uh and the and that's what you want is you want a longl lasting memory of that experience. But but a transformation the effect of it is the actual outcome that you have that you change in some way. Right? in particular there's there's an identity change of some way uh and it results in an effectual outcome that sustains through time right and that sustaining through time is really key uh because many companies uh that are putitively in the transformation business I always like the phrase old English proverb about being healthy wealthy and wise right healthy wealthy wise among others but those are all- down the plate transformation businesses and but very few of them work to make the transformation last They think, okay, let's use our our our fitness example that we talked about earlier, right? So, pay suppose you got tired of doing this all this stuff. So, you're going to hire a personal trainer, right? And this personal trainer knows that that he's in the transformation business. He comes to your home. He gives you all the right equipment. He gives you all the things to do. He he sits on you uh if you don't do, you know, what you're supposed to do. He berates you if need be. He uses all the psychological techniques that any coach has uh to to to get you to want to do that. And then you hit your fitness goal, right? And and what happens then is in most situations once you hit that I I'll say most generically an aspiration. You have an aspiration, you achieve that aspiration, people think, "Okay, that's done. You know, we can we can we can go on." No, it has to be sustained through time. It has to last. You know, if you if you go through all that fitness thing and then and the personal trainer leaves, but then, you know, 3 months later you've gained back 15 pounds, right? and you lost muscle tone, you weren't really transformed,

>> right? Even though you met your goal. So, you've got to get to that point where it is an integrated part of your your life. And that's that sustenance of it, the sustaining of it that that that requires a phase of transformation that I call follow through.

>> All right. Um, while you were sharing this, uh, the examples that you sort of give are very personal on an individual level. In my mind, I was seeing like the management consultants doing change management for organizations like that sounds like they're selling transformations. They are tr that's that's what they do. So

>> do you feel like the does the book and your way of thinking also apply on that scale or are you more focused on us the end consumer the people?

>> It it uh it is more focused on the end consumer but I talk about uh businessto business as well. In fact, there are four um uh varieties of of uh aspirants, right? So, and and I I'll make clear aspirin is the is what you should be calling your customers not directly with them but internally is understanding you know like like commodities have markets, goods have users, services have clients, experiences have guests, transformations have aspirants and so um there are four varieties. So one is the individual person um uh two is an organization of some sort. Three is a business and you have to differentiate the business from the organization. Uh and four is a community.

>> Right? So so you know you think of individuals and businesses are are singular entities. Uh organizations and communities have multiple uh people in inside of them. uh and and so you can have and there's examples of transformations across the board in the book um but a lot of this most of it is focused just as with the experience economy and then later we talk more about B2B experiences and so forth um but is on um you know individual consumers individual people as the as the primary aspirant but all the frameworks all the ideas all the principles apply.

>> And I think it's good to to think about individuals it I probably it's easier to extract what it means for a business or a community or an organization from that. Um, so you have this notion about time. Time plays an important role in services and experiences and transformations. Tell us more about the uh the influence of time.

>> Well, yeah, time is a critical factor. So, you know, in the experience economy, we've actually got these tables of all of the economic distinctions between these offerings. And so, you can go down, including what what you call the customers, like I just went through, what what you call the economic function, the commodification angle, and all that sort of stuff. Uh, and um you don't always want to like show a table to people or give it in a presentation. So, the easiest way to summarize is think about time. um is that what commodities, goods and services provide is time well saved. That people are paying you to do something they could do themselves, but they save a lot of their time if they pay you to do it. And it gets back to specialization of labor, right? You know, farmers with big farms can grow much more efficiently what I what what I could grow in a little, you know, farm in my backyard, for example. And they're saving me all that time growing those commodities. Uh I buy goods from you. you spe you you specialite you massproduce it or ideally mass customize it and you're saving me all the time to be able to produce it myself. I mean yeah I could make my own clothes but you know they wouldn't be very good either the quality is better. Same with services you know I I could change the oil in my car but who does that anymore? I mean literally who does that anymore? Uh yes we still often cook for ourselves but more often we want somebody else. I mean that was a this is a huge difference from now and 50 years ago is the amount of money that people spend having other people cook for them right it's a huge huge shift um so that's what uh commodities goods and services do what experiences are is time well spent that what people actually value is the time that they spend with you uh and you know in a place that you control in a place in an experience that you stage again intentionally um fame uh experience architect John Jy uh called experiential design the design of time and I love that it's the design of time uh and so you're designing that time to have a level of dramatic structure right that rises up to a climax and comes back down again that's what makes it memorable is that climax if you design your time to be flat right where not much happens it's not going to be memorable it's going to be merely a service right so that designing of time is the key.

>> Oh can I pause for a second here uh before we move into transformation so services that let's take with that time well saved. Uh I prioritize doing something else and I'm willing to part with my money to have somebody else to do something for me a service makes sense. um an experience um I can like the first thing that comes to my mind are is for instance entertainment going to the movies uh I'm not going for the movies to uh to save time I'm going there to enjoy

>> spend it to spend it actually to spend it

>> yeah to spend it exactly right what are what are some other classic examples of time well spent next to entertainment

>> well you've got uh you've got uh escapist experiences like going to play tennis or going golfing. Uh going to a I mean think about a rave for example uh or you know going to the beach. Uh you may want to spend time more of aesthetic experience at a beach or in a museum at a cafe an art gallery. Uh you have more educational experiences of places where you want to learn. Maybe you want to learn uh taekwond do or or karate uh or um you want to learn about art and so forth. and you take things like that. So all of those are places where you could spend your time.

>> And and you use other criteria uh to judge whether or not this is a good investment of your time and money. You're not looking for some for somebody who can change change your oil for the cheapest and the fastest way. Like you're not looking per say for the cheapest cinema or the cheapest museum, right? You you have other selection criteria, right?

>> Exactly. Exactly. And and it's primarily around um that the how you know the how how you want to spend that time and just get back to that. That's what it's about is like I I'd love to spend an hour and a half at a museum.

>> Yeah.

>> Right. And u uh or like maybe you want to go on a date. Where do you want to go a date? Well, we go have go to a cafe, right? Have a little sandwich and and and uh uh coffee or maybe a glass of wine or we want to go to the movies as you say or you know, hey, you know, the second date, let's go to an art museum. to see how you react to things and what you think about and and it's a great excuse for conversation, right? You don't have to think about what to converse when you're, you know, around art because everything around you sparks sparks a a thought, right? So, it's those are easy, you know, sort of decisions to make.

>> And and what do we get in return? And the obvious answer might be an experience, but that's not that's not what I'm looking for. Like um

>> what do we get in return if we invest our time? Yeah.

>> Yes. I mean there's there's so many ways to look at it, right? You could say you get the time well spent, right? You could say you get an experience.

>> Uh you also get a memory,

>> right? That you think about and you relive in that. You could talk about at a at a neural level say I get dopamine hits and so forth when I go through these things and uh that make me feel better. Uh many of the experiences um are um uh you are ones that make you feel differently or or do differently than you would otherwise before. Some of them is novelty. You get experience. I've never done that before and and we value novelty in our lives. So there's there's if you get down to it, there's a whole host of reasons, right? As there are coaches, types of coaches.

>> Yeah. So I can imagine doing things with my family um creates trust, relationships, bonding like that's the thing that you're getting it thing between air quotes that you get in return for paying for an experience.

>> right yeah okay

>> exactly

>> makes sense um still a lot of organizations aren't there yet but let's let's say okay some are and let's make the leap towards uh transformations So, we've unpacked experiences a little bit. What do we like? Time well saved, time well spent,

>> time well invested,

>> time well invested. So,

>> sounds like a nuance, but probably it's not.

>> No, it's not. The the point about investments is the building upon each other, right? the compound interest that you gain by doing this again and again or or each one a little better, each one a little farther and so forth that take you through a series of experiences that eventually enable you to achieve your aspiration. So again, back to the fitness center, you go to a fitness example, you go to a fitness center and you get on the machines and you do your reps, right? Uh and you come back again and do your reps again and you do your reps again and you feel that muscle tone gaining. You feel the pounds going away. You feel the definition right in your body. You you then you are every time you go or every few times you go, you're increasing the the uh weight on the on the on the machines and so forth. You're right. And you would you wouldn't be able to do if you haven't invested your time earlier at a at a lower rate. So, so it's really to see that investment in what you're doing that compounds over time and again uh and the end result allowing you to achieve the aspiration and then uh sustain it through time.

>> I I wanted to say like okay in that sense going to something like the cinema is not per se a transformation unless you want to become a movie critic. Right?

That's right.

>> Well, but but any experience and I literally mean any experience has the potential of transformation, the seed of transformation within it.

>> But is that like Yeah.

>> Well, so for example, I just read an article uh Michael J. Fox, you remember Michael J. Fox, the actor.

>> Absolutely.

>> Right. So he wrote he just wrote like his third or fourth memoir uh and uh he talked about back the movie Back to the Future and this review of Back to the Future says that Chris Martin of Coldplay became a guitarist because of the scene in the movie where he's playing Johnny be good right and from that moment on he he wanted to become a guitarist he became a guitar he became a famous right guitarist and uh uh and uh musician uh and he was transformed by a simple movie. I once uh spoke at the American Alliance of Museums and there there were like I don't know five 600 people in there all uh curators and general managers of museums and I asked for a show of hands about how many people felt that they were there today meaning you're in the museum business because of some experience you had as a kid in a museum and about 40% of the hands went up.

>> Right. Imagine that, right? That they were changed by an exper. So, it's the same way any experience has that potential of uh of transforming us the the the proverbial life-changing experience as opposed to, you know, the series of of of experiences.

>> And I I think a lot of us will recognize this. Um, every experience changes us like that is what shapes us. the experiences that we go through the final but I I do want to sort of push back on this at least that that's the push back I've been getting often is that um when we do service design you could also say like every service delivers an experience or so.

>> That's a potential too that

>> well it's inherent right if you if well um

>> not not by my definition we got

>> let's go yeah

>> all right so the word experience is very very expansive right it's why you know in Dutch you have two words for the experience right or labinous and and ivarin

>> yes

>> and um but so in English it's very expansive so yes there is that sense in which if I am conscious I am experiencing

>> right but it's a it's it's what some authors call a prosaic experience it's a uh it's almost an automatic experience right so yeah we're experiencing breathing but if we don't think about it are we really Right. So as an economic offering, so we have to define it as an economic offering because obviously like you mentioned, you know, having having um uh dinner with your family, right, is an experience, but it's not an economic offering, right? Your kids didn't pay you to cook the dinner.

>> Um, unless you live in a different household than I do, I use occasionally. Uh um so an economic offering is you know when they pay you for it uh is is again a memorable event that that it uh engages each person inherently personal way right so experience reaches inside you and engages you and creates a memory. So a lot of service design is explicitly designed not to create a memory in fact yeah to get out of the way. Yeah. The easiest way to turn a service into experience is provide poor service because then your customers remember it, right? The design of service is that flat line. Nice, easy, convenient. We don't want anything to happen. We want to get it done as as as quickly as possible because that's what customers want. In fact, I I'll mention also that as an aside that customers want goods and services to be commoditized, bought at the lowest possible price and the greatest possible convenience in order to spend their money and their hard-earned money and their hard-earned time on the experiences that they value. So, so it really is rises that level of of where you engage people and thereby create that memory. That's what an experience is. So, so every service has within it the potential for for that kind of experience but but it does but it doesn't happen that often just like most uh economic experiences we have don't rise to the level of transformation but it is possible to to to do that.

>> Yeah. So, I completely agree. Uh, and the example that you gave about Back to the Future, which I recently watched with my kids, the trilogy, who knows, maybe they maybe uh maybe uh they got transformed, right? But in that case,

>> maybe one of them is going to invent a time machine.

>> Who knows? Who knows?

>> One of your kids.

>> But the transformation there is also not a explicit uh economic offering, distinct offering. It would be a a byproduct a chance like it has the potential but as a business they haven't decided okay we're going to put this movie out there so that people start playing guitars right

>> right but there are movies that are made

>> specifically to transform mostly documentaries right you think about Al Gore's documentary on climate change right simply design I mean

>> you might say it's more designed to confirm what most people already believe rather than convince others but but you're obviously you're trying to convince people and even directors of of most any serious movie. They have a point of view that there is something that they want to get across

>> and they hope that at least changes some people some of the time, you know, in in some way.

>> But but as you as you alluded to earlier, we're all products of our experience. So every experience we do have does change us at least a little bit or or and and it's and it's so so the key then is how do you treat transformation as a distinct economic offering?

>> And that is that is the key, right? Because it's too it's too easy to say we have experiences everywhere, we have services everywhere and everything has the potential to transform us like but that's not the thing here. We are in the business of design. Design is about intention. Design is about direction and we are looking here how can you as a business as an organization provide something that people are willing to pay for

>> and actually buy by buy by this like that's that's the the intentionality is key.

>> Exactly. Intentionality is everything.

>> Intentionality is

>> so so and there's many ways to to think about it. Um, but the number one thing on on design intentionality is you can turn um almost any experience intentionally into a transformation through what I call encapsulation.

>> So encapsulation is taking that experience and putting inside of this capsule. All right. And the and the first part of the capsule is preparation is before they have the experience you prepare them for it. You get them to think about what might happen. You get them to greatly anticipate what's going to happen so it'll have a better effect on them. You may get them to think about, are there any areas in your life that this experience can address? They're going to talk about everything that you might want to change that you might want to think differently about. Or even if you don't explicitly terms in that, if you get them to think about areas where this experience could change them, just think about, you know, how has your health been lately and so forth and uh you know, how's your fitness you and and and so forth and then you and you give them the experience, then they're more primed for that uh to have a better experience. And then and then after the experience, this is the probably the most uh probably shouldn't say most important part, but I'll I'll say something else about it in a second, but but after the experience, what you want to do is have reflection where they look back at the experience now, right? The opposite of priming. Uh priming is often called pre-flection by the way by academics, right? So you have this reflection period where you're looking back, you're re revisiting the highlights. This helps cement memories as well when you reflect uh and get them to think about well, you know, there was something that really hit hit home for me right well, what was it what was this aspect oh, what do you think about that aspect well, you know, and and you get them in conversation or or personal solo reflection that gets them to realize you know, that is something that I want to change in my life and and and this is the point I wanted to make earlier reflection uh automatically retroactively enhances the value of your experience. Even if you don't intend it to be a transformation, even if you just want to cement the memories, you get people thinking about that experience, they'll remember those highlights uh and uh and they'll remember so the memories will be stronger and remember longer, right? The the half-life of the memory will last longer and that will increase the value of the experience. And then so you get them and and often they're they actually have changed as part of that experience and then you need the integration, right? So this is the fourth phase of of encapsulation. uh where after reflection you then need to help them integrate into their lives. You can't just leave them there alone. You need to do ongoing coaching. You need to go on doing guiding. I don't know if I made that explicit before, but the economic function of transformations is guiding.

>> You guide you stage experiences. You guide transformations. It often includes a number of experiences. Even after one where they've they've transformed, you you you take them through a number of experiences. Each one of those encapsulated. And so you get this fractal of encapsulated experience going. Uh and sometimes it's it's ones that that can last the rest of their lives. Other times they feel like, okay, no, I've I've done it. I've arrived. This is what I have and I'm and I'm going to be able to keep on keep it on an ongoing basis, sustain it.

>> Yeah. And guiding is super. That is again the critical thing here. I'm thinking we were talking about about golf. I'm taking golf lessons nowadays. So maybe one great.

>> Yeah. Well, ask me again in a year or so. But u but this is like the classic transformation. If I look at what you're describing in the capsules, like each golf lesson almost is a is a capsule where you sort of think, okay, what what maybe why am I here? Why what am I doing? What did we do in the previous lesson? Then you actually do the practice and then after the practice you watch the videos, your recordings of your swing cemented like your coach, your guide helps you to sort of point out a few things and then the integration like if we wouldn't have the integration an ongoing experience, it would just be I wouldn't say it would be entertainment but it wouldn't it wouldn't become uh an integral part of my identity. So at one point you might want to say

>> I'm not taking golf lessons. I am a golf player. Right. That is

>> beautiful.

>> Right.

>> Right. Exactly. It's it's beautiful. The the um first of all like when you watch the videos afterwards that is helping with integration. And when you go to the driving range and you think about the lesson, you think about what you're supposed to do. That is integration. Right? They're not with you during that but you're integrating that into your swing into your life. And you just made a beautiful statement, Mark, where this is this is what a transformation does. It allows you to say,"I am a golfer, right? All transformation is identity change where you go from X to Y. I was this, now I am that." Right? So I always I usually say I I I was X, now I am Y. I'm a math guy for backup, so I use variables, right? So So it's a beautiful statement. I am a golfer. Right? I I used to be a wannabe, now I am a golfer. Uh and uh uh and that that um allows is a statement of of identity.

>> Love it. Uh identity super important. One might ask um what are we transforming towards? So uh we h we know why we need services. We have things that we need to get done. We sort of know why experience says are there because some people have the luxury of being able to spend their time. Well, not everybody. I get that. But like if you get to the next stage and start thinking about your identity, we you could say you can become anyone who you want to be. Like you can become a golf player if that's what the thing you're uh you desire. But where is this leading to? Why? I don't know where.

Okay, so this is where it's leading to and this is in chapter two of the book. It's leading to what's called human flourishing. It's leading to you becoming who you are meant to be. That's my definition of of human flourishing, becoming who you are meant to be. Uh and there's been this renaissance in human flourishing in economics over the last 20 years, particularly with the advent of of positive psychology. uh but I what I do is I go farther and say that fostering human flourishing is the raise on debt of business. The reason business exists is to help customers flourish period and all the people capitalism is the greatest force for good that has ever been invented. the greatest force for flourishing that has ever been invented over the last uh you know 300 years is just the amazing amount of of uh growth that people can have and what they can do and how well they can live but there are many ills of it there are many uh things that is wrong with it and and I believe all of them come down to not recognizing that you exist to help people flourish and that profits are the measure of how well you fulfill purpose not the end goal of what you're trying to do, right? That gives you then an extractive mentality. We don't need we we can't be as as business people extractive and trying to addict people to our products, trying to um uh market to them in a way that that gets people who really don't need our products to be able to use it. No, we need to be positively uh going for people who can truly benefit that our offerings, whatever they are, will make them flourish. And and on the long term, not in the short term, hey, addiction works great. Uh but your problem is your your customers die, right? Or they, you know, quit cold turkey or they get really bad, you know, all that sort of stuff. Or or the or the government comes in, right? And and and depresses you. Um, and so so so the the the greater profits in the long term are going to become by fostering human flourishing. That's what all five economic offerings enhance human flourishing. But transformations do it most directly by understanding what your aspiration is and helping you achieve it. It's it's um interesting that you already mentioned capitalism because that was on my notes as well to to touch upon that subject because um right now and maybe that's always been the case but it's becoming uh very explicit right now that we are in an age where value extraction seems to be the dominant force instead of value creation.

>> yep.

>> And that's a problem.

>> That is a problem. Yeah. So, and a few people are flourishing. Um, but the rest of us um

>> No, no, no, no, no. That that is absolutely not true. Almost everybody flourishes more than they would otherwise. It's a if you look at the the living standards today than they were, you know, before industrial.

revolution when life was nasty, short, brutish and and and etc. Uh, there are many people that live live far better than we do, right? But that's mostly envy, right? You know, don't I mean, what does it matter if there's billionaires that live like that? So what? Right? The question is, how do you live with your family, with your life? How is your life doing, right? You don't have to look at billionaires and think we need to be like that. Uh, obviously, there are still very poor, destitute. There are war-torn areas and all the ills of of politics and uh, it basically comes down to the the the ills of human beings, right? Fallen, sinful man is the basic, automatic problem. But but when you focus on flourishing, uh, you're you're a positive effect in the world.

>> Yeah. And I think everybody here would be able to agree that the baseline for human flourishing has been rising and we're better off than we were >> well, at least 50 years ago. So I don't know.

>> Yeah. Um, okay. So transformations are about becoming who you were meant to be. I don't know. Did you ever get the question somebody saying like, but like, I I'm already there? Like, I I did you ever get that?

>> No, I've never I've never gotten that. Um,

>> I'm already happy with who I am or like, I don't know, like maybe a more um, een philosophy?

>> Right?

>> I I was going to say, you go back to Socrates then and I'll say then that's an unexamined life >> maybe. Yeah. But I but actually, I won't say I mean, there are there have been times in my life that I am largely satisfied and satiated and not really dreaming about anything else. Probably, yeah, you know, when the when the, you know, when the probably I was going to say when the kids were young. No, it's probably when they got out of the house is when you finally got satisfied.

>> All right, sorry, don't kids don't listen to this. Don't listen to this, but it just changes your life so much, right? Anyway, uh, you know, yes, there are certainly times in your life where you feel that way, but there's all I I believe that if you examine your life, there's always something that could be better. You don't have the absolute best relationship with your spouse that you could, with your with your kids, uh, than you could. You're not doing, you know, 100% of of of of what you could do at work or in your life. You're not as good a golfer as you would like to be, even to get down to to that. But I guess it's it's the the the trick and then I don't know, we're sort of drifting off more into a phil philosophical aspect of this conversation, but it's it's a matter of being able to hold the two truths in uh, in your hands, like being satisfied with how the situation currently is >> but also having sort of eagerness and uh, strive and ambition to improve the situation, nonetheless.

>> Yeah. Yeah. I I think it's beautifully put, Mark. In fact, it's it's very much um, you know, a Christian point of view, I'd say, because the Apostle Paul talked about being satisfied in whatever you're at, right? You just be happy in what whatever you're at. Uh, thank God for whatever your circumstances, but also be more kind, be more gentle, be more loving, be more, you know, and and so forth. So, I think this is an excellent way to put it. I'll probably use that from now on, Mark.

>> Again, >> please do. Um, okay, Joe. So if we sort of try to pull this back into uh, the daily reality of the people who are listening uh, with us to this conversation, what is the role of design in all of this?

>> Well, as you said, um um, it's you have to design uh, transformations. So I'll I'll go back to one thing um, that I didn't talk about earlier um, uh, is that there's actually four levels of experiences, right? Their levels of commodities, how much how refined they are. There's level of good and services and experiences, and I finally sort of like figured out and defined okay, there's four level experiences. So the minimum levels we talked about was memorable, and has to be memorable, but often experiences are more are more than merely memorable. They are deeply meaningful, right? We can have meaningful experiences. Memorable experiences engage us, uh, uh, and and and meaningful experiences connect with who we are, right? So they connect with who we are. They have a level that's the difference between our labist and ifaring, right? Basically, right? If I got it right, right? We have the laborous experiences, they engage us, create a memory, wonderful. We have the evaring experiences that are more meaningful and impactful on us.

>> Then there are transporting experiences, right? The third level. Highly transporting experiences are those that give us awe, that that give us euphoria and transcendence, that get us into flow, that go beyond that and really get us out of who we are in some way. Right? And I think experiencing awe is is the most important of those. Then finally, there are transformative. There are those that that can change us. And you can take a memorable, meaningful, and and transforming experience through encapsulation, turn it into a transformative experience. So you need experience design at all four of those levels, right? So transformations is fundamentally predicated on on experience design, transformative experience design, uh, in particular, and encapsulation. And then it's a matter of um, understand I I call it from two statements, understanding where your customer is coming from, who are they today, and what they become want to become, right? That individual from two statements, or or you know, I am X, I want to become Y, uh, that those identity statements allow you then to think about how do you now design the series of experiences that get them from where they are today to what they be want to become. Now go upwards and to the right, right? To to say that, but recognize that actually, you know, it's going to go like this, right? They're going to have a monotonically increasing transformation. It's going to have some ups and downs. And now you have to react to it, which is different with with experiences. You have to you have to sense and respond what's going on, reacting to it, because there will be times when they regress as well as progress. And how do you respond to that is going to be determined in how they act, whether or not they actually achieve that aspiration.

When listening to this, someone might argue, "But Joe, you're just describing education. This is what education does."

>> Is it?

>> Sure. Yes. Absolutely. A lot of this is based on what's known as transformative learning theory from Jack Mezero and David Cobb and and others. Uh, that's where encap they didn't call it encapsulation, but that's where encapsulation basically came from, particularly the reflection and integration, uh, parts of it. And and education again, is one of four, uh, I'll call them spheres of transformation, right? I alluded to before, healthy, wealthy, and wise, right? So wise is is the province of education. Healthcare is a province of of healthy, uh, financial quote unquote services, uh, is the province of wealthy, but but there's more than that. There there I what I say in the same chapter where I talk about human flourishing, I say it's not just about about being uh, healthy, it's about having health and well-being, right? And that well-being is really the end to which we want our health. Health allows us to have well-being in our lives. Uh, with being wealthy, it's about wealth and prosperity, right? Again, prosperity is the end to which wealth helps us do it. Prosperity is about having a nice life. I always love the uh, Hebrew word shalom, uh, for for it means peace, but as a greeting, it means have a nice life, right? That's what prosperity is about. And now wise, the province of education is about knowledge and wisdom, right? How do you gain the knowledge that you want as an end to having wisdom that allows you to decide what to do with that and how to act in the world? And then there's one more sphere of transformation that the old, uh, English proverb didn't have. Uh, and that is purpose and meaning.

>> And it's the most fundamental, purpose and meaning. Um, we can have nothing in the world. We can have less than nothing, as Victor Frankle taught us in his books, Man's Search for Meaning, if we have meaning in our lives, right? And that is the core, most thing that we need. And so and so any business and the transformation business, I think, is in one or more of these four spheres. They all intersect, they overlap, and where they meet in the middle is human flourishing. They help people, uh, flourish.

>> I would be curious what my golf instructor thinks of uh, the transformation economy. If he recognizes that he's in that business, he should be.

>> I should be.

>> Yeah.

>> So, I give you a little story on that, right? One is I I don't know what you go. I go to Golf Tech, which is a great program. They they really do. And my instructor, Oliver Derby, is mentioned actually in the book, right, as helping me uh, transform and how he does it. Uh, but I'll I'll go back many years ago, when even before the uh, experience economy was uh, published, but I understood it in transformations. I was taking some golf lessons with a local pro when we lived in Connecticut. And he, uh, said, um, uh, he sort of like, as I was taking this lesson, he asked me like, what do you do for a living? And that sort of thing. And I'd come to him like three, four, five times, maybe, and talked about business books. And I so I'm starting to write this book on experience. And oh, that's interesting thing. Um, and and then I mentioned the the transformation part, right? They said, there's one more this transformation. I said, you know, hey, and you're really in the transformation business, right? But you I buy you at the experience level because I'm buying for time, right? I'm giving you what, 35 bucks for an hour, whatever it was, way back when. Um, but you know what I really want is a transformation. I want to become a single-digit golfer. So I said, so this is just off the top of my head. This also came out. is just like, "Okay, so tell you what, I'll pay you half your your fee for uh, for your hourly lessons or half-hour lessons, but then when I get to be single-digit handicap golfer, I'll give you pull the number out of head, $5,000." Right? Again, 30 years ago, $5,000. And and you know what he did is he went like this. He leaned back and he looked at me. And I know what's going on his head is what I call triage. Uh, is that he was thinking, is this person in front of me capable of becoming a single-digit handicap golfer, right? And, uh, and finally said, "Okay, we we'll do we could do that and this is this is what we have to do." It's like, "I'm going to give you a set of things. I'm going to write them down. These are the things you have to practice. You need to practice three times a week. How many times you play, I don't care. I'm going to have to go out on the course and I'm going to teach you course management, go with you, etc." And these are things he never said to do before when he was fat, dumb, and happy to get my, you know, hourly fee. Once his income became dependent on my outcome, then then everything changed, right? It's a catalytic mechanism. And it also says that that's what we have to do with transformations too, is we need to charge for the demonstrated outcome your customers achieve, right? You with goods, you charge for stuff. With with uh, uh, excuse me, with commodities, you charge for stuff. With goods, you charge for things. With services, you charge for your activities that you perform. With experiences, you charge for time, right? Going to a movie theater, going to a theme park, sporting event, play, concert, you're paying an admission fee or membership fee. With experiences, you charge for outcomes. Completely changes everything. I'm sorry, yes, with transformations, you charge for outcomes, and it completely changes everything you have to do in order to get that money. And it greatly incre it's never 100%, but it greatly increases that your your customers get their their outcomes achieved.

>> Yeah, Joe, I feel we uh, we might need to do a follow-up episode because then we get into like, okay, let's say you want to get into this type of business model as a company, what do you need to do? And the word trust came up for me. Like, people people will actually need to trust you to spend $5,000 and be confident that you'll be able to get those results for them. Like it's a completely different >> Yes. >> Uh, value exchange and value-based pricing comes into uh, the sphere here. Super, super, super interesting. Um, I feel we are sort of getting uh, full circle. Uh, when is when when will we be able to get our hands on the book?

>> Well, the official pub date, February 3rd, right? February 3rd is the official pub date. Uh, you can pre-order it now. If you really want to get your hands on it, you have to buy it in bulk from the publisher, Harvard Business Review Press. So, feel free to do that, folks. You know, buy in bulk. You can get it now. Uh, but otherwise, they'll all ship on February 3rd, wherever you want to buy your book from. This episode should be coming out very closely to that date. So you might actually uh, want to use it as a launch launching podcast. It will be very cool. Um, so Joe, we love to end these conversations with a questions because questions are far more interesting than answers from our perspective. What's one thing you hope we'll be thinking about after listening to this conversation?

>> I hope that you'll be thinking about this question. What business are you really in? Right? What business are you really in? If you're listening to the Service Design Show, right? Chances are you're in the services business. But recognize that experiences are a distinct economic offering. Uh, and you probably are at least experiential in in many of the things that you're designing. But think about how you design experiences and then how do you design those experiences to become transformations to be transformative, and and and recognize that there is that possibility of being in the experience business and in the transformation business. And then it starts it starts with asking the word why. Why do your customers buy from you today? Right? What is that your your offering today is a means to an end. What's that end? And then ask why again? What's that end? And why that end? Until you get down to understanding that your customers have core aspirations. They're only buying you to help them flourish generically, but to help them achieve individual aspirations that they may not even fully understand themselves. Part of what you need is help them to understand where they're at and what they they they want to be. And recognize that there is that possibility of of creating far more economic value than you can with mere services.

>> I love this question, which business are you in? And one of the reasons why I love it so much is because it also challenges um, the existing organizations, the existing businesses. Why are you here? What is your, like you already had said, what the ex what the reason of existence is for these businesses, but I feel most of them are pretty stale. They're just here to extract value. But really, like challenge yourself. Why are you here?

>> Right. And be don't be extractive, don't be addicting, contribute to human flourishing.

>> And on that note, I want to thank you, Joe, for coming on again. Uh, I wish this book will stand the test of time just as well as Experience Economy did. Uh, looking forward to to reading it as well. So thank you. Thank you for coming on.

>> Thank you, Mark. It was a pleasure.

>> And just like that, we are almost at the end of the conversation. But for me, the thinking is just getting started. A huge thanks to Joe for being our guy today. The puzzle piece that really clicked for me was the link between transformation and identity. We are not just designing a service or an experience. We are guiding someone to a new version of themselves. That's a profoundly different job description. So how does this change our practice? For one, we have to get comfortable being responsible for outcomes, not just our activities, because as Joe said, our clients have aspirations they want to achieve, and we are the guides to help to get them there. If you enjoyed today's conversation, you can do me one big favor. Click that like button on this video and leave a short comment if you haven't done so already. Not to feed the algorithms, but to let me know whether we are on the right track by addressing topics like this. Finally, before we part ways, please take a moment to reflect and celebrate that by joining us today, you have directed your attention towards learning and growing as a professional. So from everyone who you are going to impact through your work, thank you for taking the time and making the commitment. My name is Mark Fontine, and I look forward to having you with us again for a new conversation on the Service Design Show. Take care and see you.