Experience Innovation is a Key Strategy for Service Businesses

by John Bessant

Experience Innovation is a Key Strategy for Service Businesses

Right now there’s a bit of a struggle going on in the UK and it’s not about Brexit. There’s great concern in the arts world that a wonderful picture, J.M.W. Turner’s ‘The Dark Rigi; The lake of Lucerne’ (1842) may disappear from the UK (where it is currently in a private collection) and find its way overseas. The Arts Minister Rebecca Pow thinks that the export of the work would be a “terrible loss to the whole country” and has placed a temporary ban on its movement.

One of the consequences of this battle is that people are, once again, paying attention to the picture and its content. Valued at £10 million, the masterpiece was completed at the pinnacle of Turner’s career and it forms part of a series of paintings of the mountain at different times of day. You can see why there’s a fuss – it’s beautifully rendered, captures the wonder of an alpine sunrise, draws you into a world you feel you’d love to explore further.

Which is precisely what it did when it was exhibited in London. People were drawn to ask where it was painted and motivated sufficiently to visit to see for themselves. Pretty soon copies of the painting were appearing in newspapers and magazines, fanning the flames of interest and prompting a wave of travel towards Lucerne, at that time a small lakeside town in Switzerland.

It inspired, amongst others, a certain Thomas Cook who was looking for a new offering for his growing travel business. Originally a printer and Baptist lay preacher he’d built his original business organising day trips; his first didn’t run too far (the relatively short hop from his home town of Leicester to nearby Loughborough) but in 1841 it gave birth to his travel business. Four years later and he’d clearly tapped into a rich potential market; his trip to the seaside at Liverpool was booked by 1200 people and he had to repeat it two weeks later for another 800 happy travellers.

Cook began to extend his trips across the Channel and by 1863 had seen the possibilities of offering people the opportunity to see Mount Rigi for themselves. In doing so he pioneered what effectively became the package tour, organizing not only the travel (by road, rail, boat, even mules) and accommodation but also providing guides to help conduct the tour.

Mind you his tour was not for the faint-hearted. In her diaries an intrepid young woman, Jemima Morrell described in detail a world of 4am alarm calls, 20-mile hikes and other challenges – not least of which was also being able to dress for dinner every evening in the hotels in which she stayed! But she clearly felt it was worth it for the experience.

“The days spent on foot, or by the sides of mules, afford the greatest satisfaction …..It was then that, away from the life of the city, we were taken into the midst of the great wonders of nature and seemed to leave the fashion of this world at a distance … It was an entire change; the usual routine of life was gone. All memory of times and seasons faded away and we lived only in the enjoyment of the present.”

Thomas Cook TOursThomas Cook’s ideas changed several things. From the point of view of Switzerland it helped transform a poor rural economy into a travel destination; today the Swiss Alps are one of the world’s most popular tourist destinations.

Cook also created a system-level innovation, much as Henry Ford was to do with the motor car fifty years later. Putting together a successful package tour involves much more than simply arranging travel and tickets. Cook pioneered the complex logistics, arranged for integration of different travel and accommodation options, provided a system of coupons (the fore-runners of traveller’s cheques) to help pay for goods and services, developed a network of guides and other support staff and printed brochures not only as sales tools but as a way of engaging customers in imagining and dreaming about the journey they were about to embark upon. In doing so he can rightly be considered one of the founding fathers of an industry which today is worth over $7 trillion.

But perhaps his real contribution was to offer an early example of what is called ‘experience innovation’; his efforts helped stage an experience which – to judge by Jemima Morrell’s diaries – was hugely valued. It was much more than simply travelling to a destination.

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As Joe Pine and James Gilmore point out, the risk with services is that they quickly become commoditised. There are relatively few barriers to entry, there is no deep scientific knowledge barrier, they are often short-lived, being created and consumed simultaneously. Building a successful service business is hard and even when an innovation is offered it doesn’t take long for others to copy it. Imitation levels the field once again and so there is strong downward pressure in the industry; very quickly any service becomes a commodity with price as the main basis of competition.

Experience EconomyOne way of meeting this challenge is to move away from commoditization, towards gaining strategic advantage through creating memorable experience. Experiences are not simply labels attached to products or services; they result from careful planning and organising – they are ’staged’. And just like in a theatrical performance what goes on when the audience is in the house is the tip of an iceberg; weeks of preparation, rehearsals, scenery building, lighting design, hundreds of elements need to be brought together to enable the experience. As Pine and Gilmore put it …. “leading-edge companies—whether they sell to consumers or businesses—will find that the next competitive battleground lies in staging experiences.”

Examples of such experience construction can be seen in many places; it underpins the enduring magic of Disney’s theme parks, and it runs through the core of performances by Cirque du Soleil which go far beyond the conventional visit to the circus. Companies like Lego and Adidas realise that their products and brands are intimately connected with experience, particularly the storytelling which they and their customers engage with around those artefacts. First Direct’s continuing success in maintaining high customer satisfaction levels owes much to the way they have transformed a transaction-based activity like banking into a valued experience.

Importantly the customer plays an important part in experience innovation. There is a spectrum of engagement from passive consumption through to active participation. In Jemima Morrell’s case she certainly wasn’t a passive passenger being moved from London to the shores of Lake Lucerne; rather she was actively involved and her input helped shape the experience.

And there’s a second dimension to such innovation – the degree of connectedness which the consumer feels to the event they are participating in. Being a part of what is happening rather than sitting passively on the periphery is important. In Jemima’s case being part of a group sharing the experiences was an important aspect of the experience construction.

So experience innovation needs to build on engaging customers, co-creating experiences with them and building a community around them. It’s also hugely about storytelling, something Thomas Cook and his team understood well. Part of the process was to engage the potential customer early on through the use of brochures, first introduced in 1865. These were far more than simple travel itineraries; they captured the promise of exotic lands, of different sights, sounds, smells – building a dream in the minds of customers long before they’d left the comfort of their armchair to set out on their journey.

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There’s a challenge in all of this. Staging a memorable experience is one thing – but being able to repeat the trick is another. Succeeding with experience innovation as a strategy doesn’t necessarily mean always finding even more jaw-dropping mountains to observe. But it does depend on maintaining the sense of engagement, connectedness with a community and feeding that community with stories.

Globe Theatre

The Globe Theatre in London began as a dream of film producer Sam Wanamaker to re-create Shakespeare’s open-air theatre on the banks of the river Thames. But from its earliest days it was much more than a building project; his enthusiasm drew hundreds of active supporters into the story. And when it opened for business thousands more could participate in a rich experience, they were transported back to 17th century London, in a noisy open-air theatre where the bulk of the audience (the ‘groundlings’) would jostle and move about inches from the stage on which the actors were performing.

But the Globe has moved on – it has had to. Its core repertoire is limited; Shakespeare only wrote around forty plays and not all of them are great. The company has worked on new ways of staging these, and also added a new space (the Sam Wanamaker playhouse) where they could offer other plays particularly Jacobean drama performed under candle-lit conditions). They’ve extended their work into the educational space, providing the opportunity to draw young people in and laying the foundations for a growing community of theatre lovers. Through different media their performances and educational activities reach around the world. And they have founded a vibrant membership community who not only attended performances, share in the educational work but also volunteer for the huge range of tasks the theatre involves. Their success over the past twenty years is not luck or based on a single performance; it comes form community building, storytelling and experience innovation.

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Back to Thomas Cook – and a sad tailpiece to his story. The business which he founded grew to become one of the world’s biggest leisure travel groups, with sales of £7.8 billion, 19 million annual customers and 22,000 employees. But in September 2019 it collapsed, leaving 150,000 holidaymakers stranded and requiring a huge government-backed effort to repatriate them all at a cost of £100m. The reasons for this will be debated over many years but one clue may lie in the difficulty of maintaining an experience innovation strategy in a commoditised sector where low cost carriers, hoteliers and others live on a knife edge.

Amongst the casualties were the 555 high street travel shops and their staff; fortunately these have been taken over by a family-based company from the north of England, Hays Travel. Their business model seems to reflect some of the themes we’ve been looking at – seeing the process of selling travel as one of story-telling, co-creation, and community building around customised experiences. In an online world they stress face-to-face contact, building relationships with their clients and helping them put together the dream holiday – and share in the experience as they return full of their stories.

So while Thomas Cook might be disappointed that his name is no longer above the shops he might still be proud to see that his model of experience innovation lives on…..

 

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John Bessantjohn-bessant_400x400 has been active in research, teaching, and consulting in technology and innovation management for over 25 years. Today, he is Chair in Innovation and Entrepreneurship, and Research Director, at Exeter University. In 2003, he was awarded a Fellowship with the Advanced Institute for Management Research and was also elected a Fellow of the British Academy of Management. He has acted as advisor to various national governments and international bodies including the United Nations, The World Bank, and the OECD. John has authored many books including Managing innovation and High Involvement Innovation (Wiley). Follow @johnbessant

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