Yesterday's Innovation is Today's Commodity

During business school, we were required to read a book that changed my entire thinking of marketing and business in one week. It was The Experience Economy by Pine and Gilmore. The book was about the economic progression of revenue based on historical and future trends. They illustrated how business has grown by layering on new things to a commodity to give more value and, in turn, garner more revenue. It all started with a commodity, where you trade goods for money. Next, someone took the commodity, refined it and made it a product which made the commodity more valuable. Then, someone took the product and put a service around it creating even more value for the product because it come prepared without any effort from the consumer. Finally, and this was the point of the book, that companies were starting to build “Experiences” to expand the product and service. This evolution was driven by two core reasons, the continual rising of consumer expectations and the continuous need for companies to grow incremental revenue. Both of which are at an extremely accelerated pace in today’s business environment. 

The poster company for this evolution was Starbucks, building off the trend of drinking coffee at a location, to delivering an experience that went beyond simply drinking coffee and made it into a cultural moment. 


It’s definitely a great book to read to get the foundational elements of how things have evolved over time, but it was written in 1999. We’re in a completely different world now. A digitally transformed and connected world. One where a staged experience is a combination of physical, human and digital. One where experiences build on top of one another. One where expectations of experiences are evolving at the speed of culture. One where competitive forces are coming from all directions, not just your assumed vertical. This changes everything. The entire idea of the “experience” has gone from a singular moment to a connected series of moments that not only build on top of each other, but create occasions of active sharing for the consumer.

The entire idea of the “experience” has gone from a singular moment to a connected series of moments that not only build on top of each other, but create occasions of active sharing for the consumer. 

Now instead of just looking at ways to charge a premium for an experience, companies are being forced to look at their business models in a way they have never done before. They are looking at ways to not only monetize incremental services and experiences, but are also looking at adjacent opportunities to drive net-new revenue, ways to reduce cost on current services, and bravely removing services or products that aren’t as profitable as they once were. The digital transformation that has intersected with the Experience Economy, is creating a new industrial revolution. Where we have to look into the future than in the past leveraging the new tools of the trade. 

Starbucks has continued to do an amazing job in this new reality with their smartphone app & loyalty program and mobile ordering, expanding the experience beyond the store. They have been at the forefront of their consumer experience and found ways to monetize these new services. By leveraging these new tools, they have expanded their business model from providing a coffee experience into an entertainment company, a financial services company, and a philanthropic organization that has created a holistic brand that their consumers continue to reward with their share of wallet all while finding net-new revenue streams and reducing costs and consumer pain points. 


This new business environment needs a new outlook on how to do business. As mentioned in the Experience Economy, rising consumer expectations is a driving force in the evolution of value exchange. Whereas services offerings rise, the expectations of these offerings become the price to entry over time. And now, we have to expand our aperture to view consumer expectations across verticals. What happens at Uber may change expectations at McDonalds and so on. This is true now more than ever, except the speed at which the expectations rise is like something we’ve never experienced. The permeation and evolution of digital technologies will only continue to drive the expectations. Companies and brands need to harness this power for success and create a culture of brand experience innovation and iteration. This is the only way to stay on the front end of this trend and the only way to continuously exceed your consumer needs. 

Companies and brands need to harness this power for success and create a culture of brand experience innovation and iteration. 


As seen above, building off the Experience Economy model, we can now see how digital transformation provides organizations a framework for planning to stay ahead of the consumer expectations and needs. The more digitally mature an organization is, we can assume it’s better at exceeding consumer’s unmet needs. This relays to the organization having better consumer experiences and higher opportunity for increased revenue or reduced cost and consumer pain points. 

However, this model is a continuous evolution that needs focus and attention on an ongoing basis. Just because a company comes up with something successful today, doesn’t mean that same tactic will be successful tomorrow. Yesterday’s innovation is today's commodity. Organizations have to embrace a culture where innovation and iteration is core to their business model. It can’t be a bolt on strategy that is looking for one off successes, but something that the entire organization is striving toward. Those organizations that rest on their laurels will be swallowed up by the speed of culture, the speed of technology, and the speed of rising consumer expectations. Think Tesla v Kodak. One has innovation at it’s core, the other failed to identify and iterate on consumer’s unmet needs. 

Yesterday’s innovation is today's commodity. 


So why should I care about this for my organization? It sounds like hard work. 

Digital Transformation in the context of business modeling has two main goals. 

  • Reduce cost through efficiencies 
  • Increase revenue through incremental and adjacent offerings. 

The basic idea of economic progression for value exchange from The Experience Economy still holds strong, however the elements of that progression have shifted a little:

Fulfill the Brand Promise: The power of a brand is becoming a key driver to future success based on many different factors. This will only become more true as we evolve as a brand-lead economy. To take points of consumer interaction to truly fulfill on a brand promise will only make the brand more powerful while identifying the moments that can be monetized or made more efficient. 

Remove, Don’t Add: Adding services and experiences to established offerings at this point could create a cluttered relationship with your consumer and dilute your true value. We live in a transaction based world, where the new luxury is one of saving time and reducing friction. Your brand experience should do both, while maintaining a core focus on your product and service. By continuing to layer on, you will only create a complex organization to manage and communicate. 

Learn and Evolve: Living in a digitally connected world gives us the opportunity to measure everything about our brand and consumer. Make sure that you’re measuring the right things and evolving your offering and experience based on current and future trends. 

Leadership: Consumers have had a tremendous amount of control over brands since the proliferation of social media and Web 2.0 - Web 3.0. But, some companies are using those same opportunities to gain back the leadership position with amazing bottom line results. Getting ahead of your consumer’s needs and understanding their unmet expectations will give you a leg up on the consumer and put you in an authoritative and leadership position.  

Optimize Met & Solve Unmet Needs: The success of any company is knowing how to best serve their consumer. However, we can’t rest on our laurels. The future success depends upon how accurately we can predict and solve for our consumers unmet or unknown needs. Building an environment of evolution and iteration will allow you to become successful in this new reality. 

The world has changed tremendously in the last 15 years. The elements of the Experience Economy still hold strong, but it has shifted the way we need to look at the definition of an experience, the speed of rising consumer expectations, and how revenue is generated for our organizations. There is tremendous opportunity for organizations to embrace innovation and iteration at it’s core to deliver on the brand promise through experiences that expand beyond a single moment. All while continuing to identify new unmet needs within their consumer base.  

How is your brand set up for success in this rapidly changing world? Where will your business model take you? How will it need to evolve?