Back in 1995, the economist and author, Chris Pine, published an article in the Harvard Business Review (HBR) entitled “Do you want to keep your customers forever?” In the article, Pine argued that the world was entering a new phase of economic evolution known as “mass customisation” (Pine, Peppers & Rogers, 1995).
The article was hailed as an instant classic, and its influence on business thinking at the time was far-reaching. Business leaders who took Pine’s message seriously increasingly focused on and became aware of the benefits of customising their services to individual consumers.
For instance, a retailer who may have once offered the same discount to everyone could now offer specific discounts to consumers based on their purchasing habits. A car rental agency could use a client’s previous buying preferences and experiences to inform future offers or suggestions on which vehicles to consider renting.
Since the 90s, the idea of mass customisation has taken hold, aided in large part by increased digitisation of commerce and a focus on data. In turn, the average consumer has benefited from a massive increase in customised incentives for purchasing (e.g. loyalty cards, charity tie-ins). In the world of online commerce, customisation saves consumers the pain of repeated form-filling and shopping-list construction by remembering their past purchases and preferences.
From mass customisation to the experience economy
Mass customisation represents the initial steps on a road that ultimately leads to what Pine calls the “Experience Economy.”
In 1998, he published an article in HBR with the title “Welcome to the Experience Economy” (Pine & Gilmore, 1998), followed a year later by the book The Experience Economy: Work is Theatre & Every Business a Stage.
Much like the previous HBR article, Pine’s keen insights into a changing business reality made business leaders sit up and listen. In the article and book, he and his co-author, James Gilmore, showed how businesses were again moving into a new stage of development – one where authentic experiences would determine success (or ensure failure).
In short, Pine and Gilmore proposed three key factors that would fuel the experience economy:
- Consumers will increasingly demand (and be willing to pay for) authentic experiences.
- Companies will increasingly feel the pressure to move from providing goods and services to rendering experiences in order to meet such demands.
- Companies will only thrive in an experience-based economy once they understand the nature of authentic experience.
In the years since the publication of The Experience Economy, the data gathered by countless surveys, think-tank studies, and other interested parties have confirmed most, if not all, of Pine and Gilmore’s predictions (and warnings).
For instance, as recently as 2018, a survey by PwC on the future of customer experience confirmed predictions made by Pine back in 1999:
- Industries such as airlines, healthcare and banking are most at risk of underwhelming their customers’ experience expectations.
- Bad experiences will ensure permanent abandonment of brands associated with such experiences (e.g. 60% of US consumers will stop supporting a brand they loved if they have had more than two to three bad experiences with that brand).
- Consumers will pay up to 20-25% more for a product or service if it also offers a more authentic and satisfying experience.
Employee experience: From benefits to personalised lunch menus
Pine and his colleagues’ insights have helped companies improve their consumer experiences and, consequently, resist economic calamities. It turns out that businesses that embrace the experience economy tend to be far more resistant to downturns than those stuck in a goods or service-based approach. (Pine & Gilmore, 1999)
However, organisations have only recently turned to the experience economy in trying to understand how they might improve employee engagement, loyalty and effectiveness.
When we look at typical attempts made by employers to engage staff and improve their loyalty, strong parallels with Pine’s observations about the experience economy emerge:
- Much as is the case with consumers, companies often start by trying to improve the delivery of goods to their employees. Examples include improved benefits packages, greater access to healthcare and subsidies for transportation.
- When goods-based strategies no longer provide the hoped-for returns of better engagement and greater loyalty, companies may upgrade to a service quality Here, the provision of quality and the mass customisation of services are seen as routes to greater engagement. Examples include making internal services more readily available (e.g. HR self-service portals), improving employee well-being programs by customising them to individuals and providing subsidised, in-house restaurants that cater to specific – often healthier – food preferences (e.g. the Google campus approach).
- Unfortunately, and just as is the case when similar strategies are applied to consumers, companies tend to come up against a brick wall when their customised services no longer differentiate them from their competitors. When that happens, employees become inured to their benefits packages and customised well-being options and may well look elsewhere for greener pastures.
This sort of progressive failure to engage can tie managers and HR professionals in knots. They may well wonder: how much more must (and can) we pay? How many more personalised chefs, gyms and day-care centres do we need to employ or build?
Such woes are further exacerbated by the growing realisation that the Millennial and post-Millennial workforce will have even more stringent expectations of their potential employers.
For instance, in a recent survey of Millennial spending trends, Eventbrite and Harris (2014) observed:
“For [Millennials], happiness isn’t as focused on possessions or career status. Living a meaningful, happy life is about creating, sharing and capturing memories earned through experiences that span the spectrum of life’s opportunities.”
How to improve the employee experience?
For many companies, the answer to this perplexing challenge often seems to be: “Throw more money at the problem!”
Unfortunately, in their rush to provide some measure of authentic experience to their employees, many companies simply end up copying the initiatives of the usual suspects famous for employee engagement, such as Google, Apple or Netflix.
But, if the experience economy teaches us one thing, it is that copying another company’s success formula is not only unlikely to succeed but also takes us that much farther away from truly authentic experience.
So, let’s return to the key insights that Pine’s experience economy laid out back at the turn of the millennium. Here are three key steps toward creating more authentic employee experiences:
- To render authenticity, companies have to understand their legacy and act in alignment with that legacy. In other words, they have to be true to themselves.
- Furthermore, they have to truly deliver on the brand promises they make to prospective employees in a concrete way. Therefore, they must be what they claim to be.
- They have to understand the actual experiential requirements of their talent pool. In other words, they have to understand their employees.
Building an internal experience economy: Being authentic
Just like companies that have moved away from a service-based economic model for consumers, businesses that turn such insights inward and create an employee economy based on experiences are likely to be future-proof in the face of changes in the world around them.
One organisation that has taken the experience economy to heart and applied it internally is the toy giant, Lego. The Denmark-based company has managed to leverage the experience economy to improve employee engagement in several key ways (Hakikat, 2018):
Being true to themselves:
Understanding their legacy as a family-orientated company that enables creative play, Lego allows employees yearly “play days” where colleagues can have fun together and be kids again.
Benefits and employee experiences also align with family well-being and the promotion of creative expression. For instance, Lego prioritises hiring younger, first-employment talent because their legacy is one of encouraging young people to create and explore.
Be what you claim to be:
In its brand promise, Lego claims to promote community well-being, encourage creativity and, much like their toy blocks where anything can be built, value individual uniqueness.
To deliver on this promise, Lego commits time and resources to support employees’ charitable work and causes. They provide greater leeway in terms of work style, appearance and individual expression than most of their industry peers.
To promote creative individuality, hierarchies are kept to a minimum, and regular contact across the layers in the company is encouraged. Employees are rewarded for experimenting with new ideas, and senior leaders regularly meet with teams to poll them on company initiatives and areas of improvement.
Understand your employees:
Because of their relatively youthful employee base, Lego has used frequent engagement surveys and town-hall talks to gather insights from their staff on not only business ideas but also on the future of the company.
Since many employees were childhood fans of the toys they produce, Lego sees this as an unbroken chain of understanding experiential needs – from consumers to eventual employees.
In the face of worldwide changes in work – brought about by the ongoing pandemic, emerging technologies such as AI, and the introduction of a Millennial workforce – companies will need to take a serious look at what kind of internal economy they want to create for employees.
Leveraging the benefits of an experience-based internal economy might just be an assertive step in the right direction.
Eventbrite & Harris. (2014). Millennials: Fueling the experience economy. Retrieved from: https://www.eventbrite.com/blog/academy/millennials-fueling-experience-economy/
Hakikat, E. (2018). Inside LEGO Group’s employee experience: 4 keys to success. Inside HR. Retrieved from: https://www.insidehr.com.au/4-ingredients-lego-employee-experience/
Pine, B. J. & Gilmore, J. H. (1998). Welcome to the experience economy. Harvard Business Review. Retrieved from: https://hbr.org/1998/07/welcome-to-the-experience-economy
Pine, B. J. & Gilmore, J. H. (1999). The Experience Economy: Work is Theatre & Every Business a Stage.
Pine, B. J., Peppers, D., & Rogers, M. (1995). Do you want to keep your customer forever? Harvard Business Review. Retrieved from: https://hbr.org/1995/03/do-you-want-to-keep-your-customers-forever
PwC. (2018). Experience is everything: Here’s how to get it right. Retrieved from: https://www.pwc.com/us/en/zz-test/assets/pwc-consumer-intelligence-series-customer-experience.pdf#page=10