What the transformation economy means for startups
By Min Chen | It seems like only yesterday that the business media was abuzz with talk about the experience economy–a system offering value to the consumer in the form of memories and Instagram posts rather than goods or services.
Not only is this concept old news, as it was first detailed in Harvard Business Review’s ‘Welcome to the Experience Economy’ article more than two decades ago, but we’ve already entered into a new paradigm–the transformation economy.
Throughout history, we’ve moved steadily up the progression of economic value, from the days of our agrarian, commodities-based economy to the rise of the Industrial Revolution’s goods economy. Here we are, four stages later, facing the pinnacle of economic value: self-actualization.
Our cognizance of economic value can be understood within the context of human needs. A banana as a commodity fulfills our most basic need for food, which is why it rests at the bottom of the value pyramid. As our tastes become more sophisticated, we begin to experiment with combining ingredients to make banana bread, eventually selling them in bakeries as goods.
When that’s no longer enough, the market responds by providing services to deliver banana bread right to our doorsteps. After we grow tired of having everything handed to us, we start paying people to teach us how to make banana bread so that we can experience creating something with our own hands.
Experiences decline in utility after we’ve ‘been there and done that,’ so now we want more. We want the banana bread to challenge us, move us, and shed light on our understanding of ourselves. That’s a lot of pressure to put on a loaf.
Transforming the consumer begins with introspection. Startups have the invaluable opportunity to shape their identity from scratch to fit this economic system, but crafting the message goes deeper than ‘get fit fast’ or ‘help make the world a better place.’ Rather, it relies on an intimate understanding of the target audience and effectively pinpointing and communicating the mission statement to them.
Start by questioning why the company does what it does, which will determine how the product or service will transform the consumer. As Simon Sinek shared in his book Start with Why, “people don’t buy what you do, they buy why you do it.”
What the business does and how it operates all work to support this core belief (the ‘why’) because it’s the whole reason the business exists in the first place. In a world where the consumer has countless solutions at their disposal for every problem, a company with a purpose that pushes them to reevaluate their own is one that will stick.
In other words, convincing consumers to buy the product because it offers the latest features may be enough to make a sale, but it’s not enough to change their purchasing habits and encourage them to come back time after time.
For example, SolarCity can sell their roof tiles as cost-saving, but it’s much more powerful to sell their products as a path to the new normal–an energy efficient (and chic) future. If the consumer subscribes to why the company does what it does, then they’ve necessarily transformed their way of thinking to align with that mission.
After the transformation has been determined, the next step is to design a set of experiences that will enable it to happen for the consumer. Take the case of fitness apps. Most will offer content around timed workouts or training methods, but a user who has downloaded such a tool is likely seeking meaningful personal transformation, such as adopting healthier lifestyle habits or having the accountability to meet their goals.
Thus, the experience of fitness instruction can evolve into transformation if the app also offers personalized guidance through tracking the individual’s record or if it connects them to a community of local fitness enthusiasts.
Lastly, it’s essential to follow through the promise of transformation by setting the consumer on the right track for long-term success. Only then can their transformation be truly felt and their lifelong connection to the company be made. Regularly checking in or soliciting feedback will improve how the business operates and allow the consumer to see the value the transformation has created in their lives.
While aspirations toward self-actualization are universal and lifelong, transformation in itself is profoundly personal and touches us at certain points in our lives, which requires companies to be dynamic in their approach.
Min is Jumpstart’s Editor in Chief.