> "The secret of staying afloat in business is to create something people will pay for."
> — Thomas Edison
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I. The Problem With How Most People Think About Value
Let me be unequivocal about something and I am always unequivocal, because ambiguity is the refuge of the unconfident. When I walk into a firm, or any space where a transaction is about to take place, I am not merely purchasing a service; I am purchasing a complete and total experience that either affirms or destroys my desire to return, and the firms that have not yet grasped this fundamental truth are already dying, even if they haven't had the decency to fall down yet.
The man who first gave language to this truth was Michael J. Lanning, a former Procter & Gamble executive who later consulted with McKinsey, and his definition of the value proposition is:
> "Essentially, a value proposition is the entire set of resulting experiences, including some price, that an organization causes some customers to have."
Notice what he is saying, he is not talking about your product, he is talking about the experience, the totality of sensation and impression that you cause a customer to have, and whether that sensation, weighed against every other option available to them in this ruthlessly competitive world, constitutes a superior deal.
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II.Comfortable Lies
Now, most firms would define their value proposition as:
- Trusted advisors
- Long-term history
- Good reputation
- Technical expertise
- Knowledgeable personnel
- Latest technology
- Committed to customer service
I will be honest with you, because not a single item on it describes what the customer actually feels.
They are comfort blankets or reassuring phrases that firms wrap around themselves so they don't have to do the harder, more demanding work of actually examining what it feels like to be their customer.
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III. The Four Pillars
The experiences a customer will have with your firm generally revolve around three domains that any serious business thinker will recognize:
1. Quality
2. Price
3. Service
But I want to add a fourth.
4. Intellectual Capital
Your firm's intellectual capital is not merely the knowledge housed in your employees' heads; it is your social capital, your network of associations, alumni, vendors, alliances, and joint ventures aka the entire ecosystem of how your firm adds value to the world.
and I point to Google as the most instructive example, because 97 percent of its revenue comes from advertising, yet the services that built its cultural dominance like Google Earth, Google Books, the entire infrastructure of organized human knowledge were all designed to serve users, not advertisers, which is a lesson in generosity and vision that most firms never bother to learn.
The Japanese have a term for it, atarimae hinshitsu, which means quality taken for granted, and what it tells us is something I have always believed about excellence: the moment your quality becomes merely expected, it is no longer a differentiator, it is simply the price of admission, the minimum required to even be in the conversation.
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IV. The Moments of Truth (MOT)
Karl Albrecht, the founder of the Total Quality Service movement, gave us a concept I find endlessly useful, which he called the Moment of Truth:
> "Any episode in which the customer comes into contact with the organization and gets an impression of its service."
The term itself comes from bullfighting or the hora de verdad, the third and final hour, the killing of the bull. I would argue that the stakes are, over time, just as final and just as fatal, because each moment of truth is a pebble placed on a scale, and that scale is always, always tipping in one of two directions:
MOMENTS OF MAGIC ←————————→ MOMENTS OF MISERY
~~Neutral experiences~~ are, as Albrecht rightly notes, the rarest outcome. Human beings are pattern-recognition machines, and they will almost always walk away from an interaction having felt something and what they feel in those accumulated moments is what determines whether your firm survives or quietly dissolves.
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> "When the moments of truth go unmanaged, the quality of service regresses to mediocrity."
> — Albrecht & Zemke
No MOT should ever be taken for granted because your customer does not experience your firm in aggregate; they experience it moment by moment, and each moment is either building something or eroding it.
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V. The Experience Economy
Now I want to talk about where all of this is heading, because Joseph Pine II and James Gilmore articulated, in their extraordinary book The Experience Economy, a hierarchy of value that I believe is the most important framework in modern business, and it goes like this:
1. Charge for stuff → you are in the commodity business
2. Charge for tangible things → you are in the goods business
3. Charge for activities you execute → you are in the service business
4. Charge for time customers spend with you → you are in the experience business
5. Charge for demonstrated outcomes the customer achieves → you are in the transformation business
Most professional firms like accountants, attorneys, financial planners, consultants etc think of themselves as service providers and stop there, which is, a failure of ambition and a failure of imagination, because the firms that will dominate the next fifty years are the ones that understand they are already, whether they know it or not, in the transformation business.
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VI. The Personal Trainer
Consider the difference between a fitness center that charges for membership and a personal trainer who charges for results. The latter earns more, selects clients more carefully, performs a more rigorous upfront analysis of each client's expectations and willingness to change, and takes personal responsibility for the demonstrated outcome, which is why they command premium pricing and why their clients do not leave.
This is the model I believe every professional firm should internalize completely and without reservation. They dont offer the service, they offer the transformation, and transformations, as Pine and Gilmore define them, are effectual in that they have a lasting consequence that extends far beyond the moment of consumption, far beyond even the memory of the experience itself.
> "With transformations, the customer is the product. The individual buyer essentially says: 'Change me.'"
And when someone says change me to you, you are in the business of touching someone's soul, and there is no commodity in the world that can compete with that and no disruption that can pry a client loose from a firm that has genuinely transformed them.
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VII. The Conclusion
I have spent my career in design understanding one thing above all others: people buy feelings.
Your firm's value proposition is the total, accumulated, felt experience of what it means to do business with you, and if you are not actively designing that experience and managing every moment of truth, then you are not building a firm.
The firms that will matter are the ones bold enough to ask themselves who their client becomes because of them.
That is the only value proposition worth having.
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This essay draws on the frameworks of Michael J. Lanning's Delivering Profitable Value, Karl Albrecht's Total Quality Service movement, and Pine & Gilmore's The Experience Economy.
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