Six Certainties of the Service Economy that are Fallacies in the Experience Economy and Why It Matters

The world is firmly transitioning from the Service Economy of the 80s and 90s to the Experience Economy.

In 2021, Wills Tower Watson found that 92% of enterprise leaders say experience management is a priority. However, less than 10% of organizations have an actionable plan to make this priority a reality.

With an economic crisis looming, it has never been more critical for executives to understand their options when responding to a downturn in the experience economy.

"In the Service Economy, employees, suppliers, and customers are both costed resources and costed transactions."

In the Service Economy, employees, suppliers, and customers are both costed resources and costed transactions. During an economic downturn, executives seek to reduce actual and transaction costs. 1990's logic is that companies are creating and providing a service. If the service is adequate, they can safely reduce costs as long as the service level remains sufficient. This assumption is invalid in the experience economy.

"In the Experience Economy, employee, supplier, and customer experience is the most significant contributor to business economic value."

In the Experience Economy, employee, supplier, and customer experience is the most significant contributor to business economic value: Revenue, Market Share, Productivity, Innovation, and Customer Loyalty.?Tinkering with costs without understanding the effect on these experiences is playing with fire.

"Standard Service Economy cost-saving strategies can lead to the sudden demise of the organization."

Standard Service Economy cost-saving strategies like reducing travel, cutting training, increasing overwork, freezing or reducing headcount, and extending the span of control, can all lead to the immediate demise of the organization in the Experience Economy. An excellent example of this can be found in how the travel industry managed its costs during the pandemic. Their application of service economy thinking to constrain costs during the pandemic has led many organizations to the brink of bankruptcy in the recovery.

"In the experience economy, shrinking your way to greatness could capsize your relevance."

So why is it that in the Experience Economy, where enterprises live or die by their employee, supplier, and customer experience, the CX world is failing? I suggest this is because of continued faith in practices that were successful during the service economy but are no longer appropriate today.??

Digital Anthropologist and Experience Guru Aarron Spinley states, "It's time to think differently. But to do that, we first have to understand who we are, the pull of the future, the push of the present, and the weights of the past."

Even though we have invested in skilled EX and CX teams, they tend not to be connected to the business value of experience.?

To enable CX professionals to be more successful, you must jettison the weight of the past.

Six Common EX/CX Management Practices to Jettison In The Experience Economy

Let's look at six common CX fallacies from the service economy that we continue to pursue:

1. ROI and Time Value of Money are vital economic measurements.

ROI is a hangover from the Industrial Economy and the Time Value of Money from the Service Economy. Both are still useful but tragically over-rated because they are so poor at dealing with As-A-Service models and how consumers actually value experience.

The most crucial metric in the Experience Economy is The Money Value of Time.

The most crucial metric in the Experience Economy is The Money Value of Time. A concept introduced by Pine and Gilmore in their book, The Experience Economy. The amount of?money?customers willingly pay for any experience is directly proportional to the?value?they receive from the?time?they spend. Recent projects indicate that the same concept applies to employees and suppliers. When faced with a choice between 'time well spent' and 'time wasted,' humans always choose time well spent.

2. We measure Experience in transactions.

Experience is not measured in single transactions but cumulative moments over time. This is why NPS and CSAT surveys fall short as experience indicators. Quite frankly, what does your NPS score tell you?

3. Surveys are an accurate measure of sentiment.

Most surveys are poorly constructed, unscientifically fabricated, and with questionable reporting accuracy. A survey is only helpful if it is anchored in separate sources of empirical data.

In a 2022 survey by XLACollab of 250 enterprises, 88% used Customer Satisfaction surveys (CSAT) as the preferred method of gathering information. 77% found their surveys to be of little actionable use.

4. Customer satisfaction equals experience management.

These are two entirely different concepts. Customer Satisfaction is about the acceptance or rejection of a transaction. Did the agent solve your problem to your satisfaction? Customer experience is about how you make people feel. When they look back on their interaction, how will they remember it? Joe Pine says, "memories are the hallmark of the experience."

5. Experience is a constant baseline that we improve over time.

" A consistent level of service will generate an inconsistent set of experience results."

Human beings are self-programming sensors. So, they are constantly adjusting their expectations and reactions. This means that a consistent level of service will generate an inconsistent set of experience results. An adjustment is even more likely over time. We refer to this as the gravity enigma. Experience is subject to the gravity of expectations and, in extension, the gravity of perceived performance.

6. Experience management depends on understanding individual psychology.

We are in the scale business. An enterprise experience is based on anthropology and, specifically, digital anthropology. The role of the individual, while interesting, is unimportant. To be crude, as an enterprise, we don't care why Sally or Arthur feel the way they do; we care THAT they think the way they do. In fact, we are not so concerned with Sally or Arthur as individuals, instead, we care about everyone, LIKE Sally and Arthur. Experience management in an enterprise is a scale business.

What Now?

We need to look at our experience proposition(s). Each proposition needs to be designed and staged with a transformational and economic value for the employee, supplier, or customer. These propositions are everywhere. It could be a patient or nurse experience at an emergency room, a customer in a car showroom, or an IT service desk.

For each experience we decide to stage, we will need underpinning XLAs (Experience Level Agreements)

The XLA is an essential component of your experience management strategy because:

• An XLA focuses on how people experience outcomes.
• An XLA links the experience to the business economic value
• An XLA uses empirical experience indicators to gather and validate the sentiment
• An XLA focuses on doing what matters rather than doing what is expected or contracted
• An XLA considers the context of human wants and needs
• An XLA builds on operational data in SLAs and KPIs
• An XLA is built to deal with the gravity enigma of expectations and performance.

Success in the experience economy means a relentless focus on the economic value of an employee, supplier, and customer experience.

If you are faced with the need to cut costs, do not use the traditional approach of reducing cost inputs or cost drivers but instead approach it through the narrow confines of the value of time. Optimizing the "time well spent," you can improve productivity and, more importantly, maintain and improve revenue, market share, and brand performance.

This is key to surviving an economic downturn in the experience economy.

We must combine CX, UX, BX, and EX talent to achieve this.

Let's build on what we know, evolve beyond what worked in the service economy, and consider XLAs an essential linking pin in our toolkit to achieve integrated experience management across the enterprise.

"Build on what we know, evolve beyond what worked before, and consider XLAs"

This article contains adapted elements of an editorial in Enterprise Viewpoint.