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Why "economic distinctions" are important

Published by Tom Uhlhorn on
Why "economic distinctions" are important

Why "economic distinctions" are important

I first read the term "economic distinction" when I read an oft-quoted article by me, "Welcome to the experience economy" by Joe Pine and James Gilmore. First written in 1998, this article is the epitome of "antifragile" in its ideas in that it has only been made more pertinent with the rise of in the on-demand economy and startups like AirBnB and Uber and the currently-trending migration of Human Centred Design services from product-centric to experience-centric (e.g. the transition of roles such as "User Experience Designers" and "Service Designers" to simply "Experience Designers").

Simply put, Pine and Gilmore were right when they stated that the future opportunities for businesses, government, and NFPs to operate at-scale and sustainably lays in creating experiences instead of goods and services.

Within their article, they stated that this shift towards an "experience economy" implies that our very notion of "value" must shift with it. Whereas in the industrial era we had "value" bundled with a manufactured product and, as the world shifted into a services economy, "value" become an intangible set of benefits resulting from a process, so too are we seeing a shift in "value" from tangible goods and intangible services to something else, which we now call "experiences". With it, comes a whole new perspective on how an organisation can stand out and create value in an increasingly complex and globalised marketplace.

"Experiences" are the antithesis of "commoditisation"

If you have ever used a banking app, then you've used a Software as a Service (SaaS) product. SaaS is where a large portion of today's startup media focuses its attention, and where Australian unicorn darlings Atlassian have made their billions. SaaS can be a profitable venture and it's where a lot of business strategists see the future of their own venture/s, but it also leads to a number of problems, including:

  1. Ever-decreasing marginal costs mean that low-price services, at-scale, are often critical factors to a company's success, thus making disruption of already-scaled businesses difficult for new businesses to achieve;
  2. SaaS automates a lot of workflow, leading to more skeleton staffing and less jobs;
  3. The pursuit of SaaS efficiencies can lead to a lack of human interaction between customers and companies, thus leading to lower brand recognition and loyalty; and
  4. SaaS products often struggle to differentiate themselves, something that is apparent in the current NEObanking craze (where every other bloody brand looks the same).

These factors contribute to what I would argue one can call "commoditisation": the gutting of an offering's value to its core purpose so that it can compete primarily on price. Coles and Woolies did it to disastrous consequences (as you can read about in this blog), and it's only going to get worse as technology continues to enable incredible operational efficiencies.

There is a solution, however, in transforming your organisation's "economic distinction" from goods and services into experiences. Research shows that brands that redefine their value model to be one focussed on experiences are more likely to stand out in their marketplace (great for brand strategists) and more valued by their customers (which translates into higher customer value).

It's no radical concept. Disney have been doing it for years, Subway were on the right track when they coined the term "Sandwich Artists" for their front-of-house staff, and Nike's brand has been all over the experience economy since their transition from Blue Ribbon all those years ago.

Now, however, the saturation of markets and globalised competitive environment is putting more pressure on organisations and brands to find a way to sustainably conduct business that doesn't result in them spiralling into a price war. The transition of value from "goods and services" to "experiences" is a way to do this.

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