 In this episode we'll be talking about the difference between services and experiences. We'll be talking about the end of marketing as we know it. And finally, who is the Chief Experience Officer and why do we need them in the first place? If you're interested in these topics, stay tuned and here's the guest for this episode. Hi, I'm Joe Pine and this is the Service Design Show. If you're trying to design services that have a positive impact on people's lives and are good for business, then you've come to the right place. Hi, my name is Marc Fontijn and welcome to the Service Design Show. My guest in this episode is Joe Pine. Joe is a world-renowned author and management advisor who is spoken at the World Economic Forum, the TED conference and CES. Things he loves in life are golf and cigars and according to Joe, these two things go hand in hand together. In this episode we'll announce how you can win a signed copy of the experience economy and absolute industry classic book co-written by Joe. And in the next 30 minutes, Joe and I will be talking about the differences between services and experiences. We'll be talking about the end of marketing as we know it. And finally, we'll be talking about who's the Chief Experience Officer and why do we need these people in the first place? We post new videos on this channel on a weekly basis so if you don't want to miss anything, be sure to subscribe and click the bell icon to be notified when new videos are out. And if you'd like to learn how to explain what service design is without making it sound like brain surgery, make sure you check out the free course I've got for you. Click the link here or check the description of this episode. So that's all for the introduction and now let's jump straight into the interview with Joe. Welcome to the show, Joe. Thanks, Mark. It's a pleasure to be here. We've met in Amsterdam many, many, many years ago during a completely different conference, the Mobile Monday, Amsterdam. 2007 or something like that? Do you remember? I don't know. Must have been. It was a long time ago. I went to at least two or three of the Mobile Mondays. I remember one at the Red House, the Rode Hoot. Rode Hoot, right. Absolutely. So it's super nice to have you this time in a completely different context here on the Service Design Show and I have so many questions for you. When we were in touch, I already told you that you sort of inspired me to go into this field in the first place. So yeah, it's my honor. I'm already starting to blush here. So let's just move on into the show. That's a very nice face, Mark. Thank you. Joe, you're not a service designer per se, but I'm really curious if you recall your very first memory of service design. When did you hear about the term? Well, I'm not sure we used that exact term, but I'll mention back in 1990, IBM sent me to MIT for a year to get my master's degree. And it's where I started writing my first book on mass customization. I basically did it as my thesis at MIT and then worked it into a full book when I got out. And one of the things that I noticed in that entire class, we had a cohort of about 45 people that spent most of that one year together. So we got a master's degree and a concentrated amount of time. And most all of the examples that the professors talked about were manufacturing examples. And it was just sort of constant, all this manufacturing. And finally, with the head of the program there and given a manufacturing example, I sort of finally got tired of it. I raised my hand and I said, look it. All you do is talk about manufacturing examples when there's so many people here that are in the service business or in my case, in a service part of a manufacturing company, IBM at the time. And I had everybody raise their hands and said, okay, how many people here are actually more concerned about services than manufacturing? And it was over half of the class. It would open up their eyes. And I think that's what at first sort of struck me that we really had shifted from an industrial economy to a service economy. And so therefore we need to think about services and not just industrial design. Makes complete sense. We talked about Amsterdam a second ago. If people are watching this episode in the very first week that it's out, there's also, you'll be in Amsterdam to actually present masterclass, right? What's that about? Really, can you share really briefly what people can expect at this masterclass? Sure, sure. The masterclass will be April 26th in Hofdorf at the Office of Performance Solutions, which is a longtime friend of mine, Andre Veringa. And they do a great job at training companies to stage great experiences, particularly frontline personnel. And Andre wrote this book on reverse thinking a few years ago or maybe a year ago. And also sort of combining our concepts. I'm working on a new concept. I'm going from marketing to customizing, which is really reversing things. So we're calling it reverse customizing. And I'm going to spend a great amount of time talking about my ideas, Andre and his ideas. And I think they really mesh together very well. And then we're going to do a lot of interactions to help people to embrace these ideas and figure out then what they can do about them in their own companies. And I'll put all the relevant links down below in the description of this episode. So if people are fast, they can still hopefully sign up. I hope that there are still tickets left. And maybe if they take one of your books to the master class, you'll be able to sign them for them, right? Absolutely. Always happy to sign a book. And I hope to see people there at the master class. All right. Joe, time is flying by. So let's just dive into the topics that you've sent me. And I have so many questions related to them. You have a stack of questions and I have a stack of topics. Are you ready to start? Absolutely. All right. I would say that the first topic is a classic one. Let's start with this one. It's called services versus experiences. Do you have a question starter that goes along with this topic? Services versus experiences. I think the best one to do is to use your wild card. All right. And to ask the question, what is the difference? Right? What is the difference between services and experiences? And it's a crucial thing for people to understand that, and I'll go back a little further than that, just mentioned that we've gone, I already mentioned industrial and service economy. It really began with the agrarian economy based off commodities as the primary economic offering. Then we shifted into industrial economy based off of goods as the primary economy. Based off of goods is the primary economic offering. The latter half of the 20th century has only shifted into services as the primary economic offering. And today what we're doing is we've shifted into an experience economy, where experiences have become the predominant economic offering that experiences are what consumers and even increasingly businesses are looking for. So therefore, people need to shift from making goods and delivering services to staging experiences. And that's part of the key distinctions between them. Services are intangible activities performed on behalf of an individual person, but experiences are not just intangible, they're memorable. You have to create a memory inside of people. Services are customized, right, done just for that individual person, but experiences are in fact inherently personal. That no two people have the same experience, even if they're in the same place at the same time, because of who they are, because of the experiences that they had before that that primed them for this, because of their mood that day, all of these things means they have a different experience. So you need to reach inside of them and engage them with that memorable experience. Again, creating that memory inside of them. And there are other distinctions we could talk about. And the key one I think today have learned is really about time. It's about time. That services are about time well saved. Let's get in and out. Let's be convenient. Let's save my time. And by the way, people want goods and services both to be commoditized so they can buy them at the lowest possible price, the greatest possible convenience. So that consumers can save their harder-earned money and their harder-earned time to spend them on the experiences that they value. And so experiences are really about time well spent. That people value the time that they spend in there versus just wanting to get in and out. And so therefore the requirements for service design are very different than they are for experience design because experience design is really about designing time, designing the time that your customers spend with you. I hope that a lot of people are watching and listening to this episode already know this framework and are sort of curious. I'm a service designer. Am I sort of becoming obsolete? Or maybe the question that was on my mind when I was thinking about this topic, how does this actually impact me as a practitioner? So I'm a service designer. The distinction between services and experiences, what does that mean for me in practice? Well, first understand that services aren't going away any more than goods and commodities. It's just going to take fewer and fewer people to be able to produce them over time. They'll get more and more automated and jobs and growth and gross domestic product are shifting to experiences. But then also realize that experiences are built on top of services, which are built on top of goods and goods on top of commodities, the raw materials that begin it all. So even when you design an experience, you still need to design services in order to enable that experience. And that's where many techniques of service design can still be appropriate. Think about the Walt Disney Company, for example. You go into a Walt Disney theme park and you have a wonderful experience with all the attractions, but there's still parking services. There's still food services. There's still photographic services. And even to think about waiting in line, the experience of going into an attraction at Walt Disney is about time well spent that I enjoy that ride that I'm going on. But then there's the waiting in line in front of it. That is pure service, just getting from the outside to the inside and getting on that ride. So you can do service design techniques to be able to do that. Or you could also think about, well, how do I turn that service into an experience? Disney first did that by snaking the line so that you could do a lot of people watching and then by turning the waiting into a pre-show for the live experience. But still, that's good for about five minutes. That's not good for 15, 20, 30 minutes. And so they then use more service design techniques to come up with FastPass. FastPass allows you to go off and do something else and not wait in line and then come just five minutes before your time to get on the ride. So you can see how services and experiences can work together. You talk to so many companies. You see so many case studies. What have you found that is the biggest challenge for companies that want to make the cultural mental shift from service thinking to experience thinking? What is the biggest challenge in there? Well, you actually sort of identified the answer in the question. The biggest challenge is, in fact, mindset. People have the right mindset that they understand what business they're in, in particular, then being in the experienced business is different than being in the service business. In the service business, you want to spend as little time as possible with customers because they're costing you money. With the experience business, you understand that that's the value that you're in fact bringing, is that they're enjoying that time that they spend with you. Services are, again, about delivering our activities. So it's really focused internally on what we do and the activities that we execute in order to create the value for customers. With experience is the focus is on them. The focus is on the consumer and what I call the guest of the experience. Services that clients' experiences have guests. So how do we host them as a guest? How do we get them to spend their time? How do we design time again for each individual guest that we have in there? It all begins with that mindset of what business are we really in. Yeah, I'm making that decision. Are we a service company or are we an experienced company? Exactly. And you can do both, right? If possible, you can both provide your good services and experiences. But at least know for this offering, for this interaction with customers, which one is it? So, sort of the final thing regarding this topic, let's take a really common company like an airline. Do you perceive that as a... How do you perceive an airline? Poorly for the most part. And, you know, they are, they're obviously in the service business of getting people from point A to point B. But, you know, in fact, the very first publication anywhere of the term experience economy, which I discovered, or I coined after discovering it, in late 93 or early 1994. So, we were talking almost 25 years ago. Actually, it was 25 years ago, almost. And there was an article in the Harvard Business Review where they did an interview with Sir Colin Marshall, who was the head of British Airways. And he talked in there about how an airline should not be just a cattle car, should not be just getting people from point A to point B. It should be an experience. And I wrote a letter to the editor that they published where I talked about, yes, that's because we're shifting into an experience economy. You know, but over 20 years later, have airlines really learned? Well, not for the normal traveler. You know, you do have exceptions. You have airlines, and the Emirates Airlines, you know, sort of, particularly for their first class, but even for those in coach, they do uptick that to where it may rise to level experience. So, this first class has always been an experience, but it's, you know, it's hugely expensive, you know, sometimes in order of magnitude more than what you pay in coach. But for most airlines, for most customers, it's just still a cattle car. Okay. Let's leave it with that quote. At the end. And move into the second topic, and the second topic is sort of a preview or maybe looking back, depending on when you're watching this episode on your masterclass, and it's from marketing to customaring. A new topic for me. So, do you have a question starter that goes along with this one? Sure. Well, the question might be, how can we move from marketing to customaring? How can we understand the distinctions between marketing and customaring? Customaring is a new world. So, let's start with that. What is it? Yeah, it's actually a word coined by my partner and co-author of the Experience Economy. And as soon as he mentioned it, I glommed on to it that, and the reason that you think about it is that there are no markets. There are only customers. You know, markets as commonly conceived of in business simply do not exist. They're convenient fiction, masking the fact that we don't know who our customers really are. At an individual level. That's right, on the individual level. But that's my point is that customers are only on the individual level. They are only individuals. They are never a market or a segment or a niche or a generation or a persona or any other agglomeration of anonymous buy-dudes. A customer is a living, breathing, individual person. And if you're selling to businesses, a customer is an active, corporeal, individual enterprise. And we must therefore ascend to the proposition that every customer is unique. Every customer is undeniably, unremindedly, unalterably unique. And therefore we have to stop marketing and start customer. I think you scare a lot of people by saying this. I think we all try to understand customers on a personal level. But like you said, markets are a convenient way to think about it. But my question was, customering, how does that scale? Well, it can scale because of technology today. Because we have the technology to interact with millions and billions of customers on an individual basis. Over the internet, through our phones, we can identify who they are. We can understand their individual wants and needs. We can learn from them and therefore do things differently for them. One of the key distinctions with customering and other things you can look at that at least you like targeting. Because people say they want to target individual customers. But they target to better sell what they've already produced. What we actually change our offering in response to what we learned. I'll give you one of the best examples, which is a client of mine, which is Carnival Corporation. And Carnival Corporation, they announced at the Consumer Electronics Show last year, and they've now implemented or ramping it up first in the Princess Cruise brand and then other brands, where when you go online and book a cruise, they want to know you as an individual. So they ask you to upload your passport so they can have your picture, they have your information that they need when you're going through international waters. And then they send you what they call an ocean medallion. And this is an example of an ocean medallion. It's an IOT device. It's about the size of a U.S. quarter. And this now allows them to identify you wherever you are in the ship. When you embark onto the ship, you don't have to wait in line and show your passport three times in that. Instead, you just sort of walk at a slow pace online, not really having to stop, and every time you get near a crew member, your picture and your name pops up as well as your verification that they have the passport information. And then it pops up on their tablet and they just say, welcome, Mr. Fontine, please go ahead. And so you get on there and you have this in your pocket or on a pendant or on your wrist, then as you walk up your state room it has seven to eight thousand sensors in every ship. They're identifying exactly where you are, they see you approaching your state room and then just as your hand touches the door handle, complete the electric circuit, it opens just for you. You can pay for anything with it. And then they identify you and they'll deliver to you wherever you happen to be. They learn about your context. So they'll learn, for example, that when you're in the pool deck with your kids, your favorite drink is an iced tea, when you're in the bar with your buddies it's a mojito, when you're in the restaurant with your wife it's a glass of Shiraz. So same person understand your individual preferences and they basically morph the entire ship around you giving you personal experience invitations. So you create, again, designing time so that you create a mass customized itinerary for each individual person and family and other group on the ship. It's pure customary. You mentioned it, it's like mass customization all over but then on personal level, on our interaction level. Yeah, it is an extension of my original ideas on mass customization which are more operational and product and getting into all the dialogue with customers and understanding them individually and extending that even to how we understand the context of each individual customer that we have. So for me this is a pretty new concept. I can imagine you also have some questions regarding to this. What are the things that you're still trying to figure out relating to customary? That's an interesting question. I'm still trying to figure out how I've got a number of principles and how all the principles interrelate and how much of it do you have to do to really call it customary are some key things. One of the issues is for a long time a lot of it is vocabulary. You really have to change vocabulary. You have to stop talking about marketing and start talking about customer. Can I say things like customer are? Customer are, I guess it would be. There's some issues with vocabulary and how do we really make things parallel and definitions of that. So those are sort of things I'm still trying to figure out. I'm hoping to write it as a full book and have that published in the next year or two. I don't know if that's a preview but at least it's out there right now. A different question I had regarding to this it sort of feels like marketing is what the big corporations do. Smaller businesses, your local coffee shop they're already doing this right? Or are you still there certainly are many small businesses who know the customers by name they walk in, they greet them by name they know what their standard orders are, they know what their practices are and so forth and so yes they do practice customer, it's sort of craft customer and we do need mass customer we do need many companies to do that at scale and again we can know who they are, they carry around a device with them that identifies who they are there are companies like Neiman Marcus the department store for example where if you have the Neiman Marcus app on in your phone when you cross the threshold of the store Bing they identify who you are they can send an alert to your favorite sales associate that's identified in the system, they know your color choices your style choices, they know what you purchased before, they can send you a message say hey I'm over here in the department would love to see you I know exactly what this new dress that we have in would be perfect for you and that sort of thing so now you're providing that to every sales person even though they can't remember the thousands of people going through there whereas a local store can't be able to remember tens or scores or a hundred one of the questions I have regarding to this but we won't get to answer it in this episode is I guess trust is a crucial element in this aspect, sharing all these preferences with sort of big entities who you don't know sure, sure I guess trust is really a key element to actually making this happen I mean Mark Zuckerberg the CEO of Facebook just got grilled in Congress yesterday and I think again today he's getting that because of the issues of them sharing information that really should be private, you know Carnival when they do this they ensure you that your information remain private in fact if you lose this there's actually zero identification on this all it is is a number and that number identifies to you and that's in their ship board cloud that they have so you lose if there's no possibility of there being a data breach based off of that and you've got to guarantee customers that you keep the private information private that you won't sell to others but why does Facebook sell it? Because Facebook has the wrong business model Facebook business model is where their users are the product and they're selling the information about that product, those users to advertisers and when you go marketing the customer and you got to stop advertising you know advertising is just targeting people to sell them stuff you've already done instead you need to get into a conversation with them needs to be a two way conversation where every interaction you have with them is an opportunity to learn and because you learn about them you can better customize your offerings right now again not just the stuff we already have on the shelf but better customize your offerings to them because you do that they're going to benefit because they benefit and interact with you again as you get this very tight learning relationship that grows and deepens with each customer over time and that's how we create brand loyalty that's how we get our customers to want to come back to us whenever they're in the market you know and I think that's an appropriate use of the term market the place where buyers and sellers come together whenever in the market for something that you can provide they're going to come back to you once you've gone through this process on Carnival you're not going to go to another cruise company because Carnival already know so much about you and they're keeping it safe and they're using it to benefit you no one else just you it becomes a pull instead of a push mechanism exactly that's one of the chapters that's one of the principles is go from push to pull right quit pushing your stuff on customers and instead pull information from them final topic for at least this episode it's the topic that has been on the show recently but I'm sure we can say something new about this and this topic is the chief experience officer position the position of the chief experience officer a question started that goes along with this one well that was easy who are chief experience officers anyway who are chief experience officers we need a position that we've been promoting for over a decade because as we shift into the experience economy it's very clear that often companies need that concerted focus on it maybe eventually we get to the point where you don't need one I don't imagine the Walt Disney Company needing a chief experience officer because everybody recognizes that they're in the experience business but for those companies that are shifting into it it's a great way to be able to focus on how do we stage great engaging compelling personal and memorable experiences for each one of our individual customers so in fact we wrote an article for the American Management Association it's quarterly journal excuse me came out this winter and it was on the roles of the chief experience officer so I talked to a number of CXOs many of them are our own certified experience economy experts and about their jobs and what they're doing and we came up with a framework really a 2x2 matrix that identifies the four roles of the CXO and it's based on the operations of the company versus its offerings an internal and external focus and also again on the company and its customers again internal external so the key four roles and I won't outline the whole 2x2 but basically is that you need to be a catalyst internally to change operations and focus on experience staging you need to be a designer so here exactly is service design versus experience design you need to be an experienced designer to help create those offerings that are going to pull together the capabilities of the company you need to be an orchestrator where you basically are taking the operations and orchestrating them out towards the customer helping pull all of the elements together to be able to do that and then you need to be a champion you need to be a champion for the customer inside of the company to say that we need to focus on this customer and we need to create a great experience for each one of these individual ones and then actually so the 2x2 defines these four roles but there's a fifth role that it came to realize was very important and that's that of a guide because if you're changing from a service provider to an experienced stager that's a transformation in and of itself and you need to guide that transformation within the company and it may be that if you've done that so well that experiences are now embedded inside of every facet of the company then you can eliminate your role and say okay I'm done I'll go on to another challenge but until then I think in most companies the role of a chief experience officer is paramount and really shifting into the experienced business I've spoken to a few CXOs and it's really interesting to see where they fit or where they are placed within the organization so what I've been finding is that usually these people struggle somewhere in between operations and sales and the result is that their influence their power their real ability to create change is quite limited what is your take on that because we can talk about roles but how do we empower these chief experience officers whether they need to be in their company well they really need to be at the top they need to be at the same level as other C levels reporting to the CEO or COO maybe your president but they need to have that visibility up there and generally it is one that doesn't have tons of people out there that they are working through influence that they have a center of expertise around experience design for example and these other facets but they really have to work with the rest of the organization in some cases maybe that because it truly is an experience company that they do have operations reporting instead of a chief operations officer it is the chief experience officer because their operations are that would be great where you get to that point as well somebody I don't remember who in one of the previous episodes said that the CEO should be the chief experience officer well if you are a Walt Disney company that is absolutely true the CEO is the chief experience officer and so I like that sentiment because it says basically that we are absolutely an experience company so I have to be the chief experience officer because I am the CEO of an experience business and what have you seen you know what is maybe the biggest mistakes companies can make when they are creating this position of the CXO what is the big pitfall yeah well one pitfall is that they starve it for resources and so they barely have anybody that they can hire they don't have their own resources they are not going to have any influence another big pitfall is that they tell somebody okay you are the chief experience officer but they give them no definition they give them no portfolio that happens so often that is why we wrote this article there is no standard job description you don't know what it is your boss doesn't know what it is so here is a way to think about how you play in each of these roles and it may be that some roles aren't possible right now you focus on one or two of these and shift into the other roles but you know you have got to figure out what the job entails and what it is all about and then you can figure out how you can make that work in your own company chief experience officer if people want to dig further into this topic what are some recommended resources on this well the number one resource of course is our book the experience economy and originally came out in 1999 and we have an updated edition that came out in 2011 maybe we will be able to do a 20th anniversary edition next year as well but it really describes most of what we talked about where things are going what experiences are the distinction between services it mentions the chief experience officer but doesn't get into it so you should look up that article on and the AMA quarterly again American management association but it is on our website we have a sort of thinking tab that gets into what are our latest thoughts and one of those is on the roles of the CXOs if you are retailers I have got an article on there on the year of retail experiences and all the things that are happening in retail with the bankruptcies and so forth that is an industry where you really can see that you have got to be either time well saved or time well spent and if you are time well saved you are competing against the Amazons and the Walmarts and the carefors of the world and so if you have got a physical store you really better be time well spent so you can catch up on our latest ideas there and it also says where I am speaking like at this master class on customing coming up in a couple of weeks in the Netherlands I will make sure all the links are in the description for people who want to dig further into this topic we have two more things in this episode and one of them is like always is there a question you would like to ask us something that we can think about food for thought right so I would ask you like the question I always love asking businesses is what business are you really in I would ask that the same with you what design business are you really in are you really in the service design business or are you in the experience design business and if so you really need to understand those distinctions again you are going to be able to use what you have learned in service design but there are new things you have got to focus on there are new capabilities that you have and there is a wholly different distinct economic offering that you need to create if you are truly in the experience design business but was I supposed to answer the question or just ask it no the question is in which business are you leave a comment on this episode and let us know in which business are you now it's time for drum roll Joe I don't know if you have the book near I was looking here I couldn't find a copy the experience economy we are going to give away a signed copy it's becoming a tradition here on the show it's going to have your autograph maybe an autograph of a second person I don't know but the question is related to the second person so what do people need to answer to win make a chance to win a signed copy of the service of the experience economy you better not edit that out I'll leave everything so what's the question they need to answer the question is what's my co-author on the experience economy I almost said it earlier at the beginning because he actually gave me the term customary so I had to stop that and just say co-author that but who is the co-author in the experience economy I've been coming to the Netherlands for 20 years and I'm usually there 1, 2, 3 times a year for the last 20 years and I've occasionally had people ask me alright it shouldn't be a hard question you've got two weeks guys to leave a comment and we'll draw a random winner from the correct answers and notify you and this is like you're going to get a real cool unique example of the experience economy the only thing left to do for me is to thank you Joe for sharing all this being able to pick your brain there are so many more questions that I have but maybe we'll do a sequel episode number 100 who knows so thanks for being on the show Joe thank you Marc it's a pleasure to see you again even if virtually and to be on the service design show by the 100th episode it will be called the experience design show I'll need to get this URL before somebody else does that's the first thing I'm going to do after this episode alright thanks so what is your biggest insight based on what you've heard in this episode and in which business are you leave a comment down below and if you want to make chance to win a signed copy of the service economy book let us know who's the co-author if you know someone who might benefit from what we've just discussed in this video I'd really appreciate it if you could share this episode with them and don't forget to sign up for my free course on how to explain service design by clicking here or check the description for more details thanks again for watching and I look forward to see you in the next video