What if your customers aren’t looking for better products and services, but for a way for themselves to become better? While the experience economy remains important, Strategic Horizons cofounder B. Joseph Pine II argues that it’s not enough to acquire and retain customers in today’s competitive environment. He sees the next wave in business as one focused on offering outcomes to customers – and that might even mean only getting paid when customers succeed. He shares how this model might actually reduce risk, what it means in a world of AI and mass personalization, and ways that companies can truly deliver on their promises. Pine is author of the book The Transformation Economy: Guiding Customers to Achieve Their Aspirations.
ALISON BEARD: I’m Alison Beard.
ADI IGNATIUS: I’m Adi Ignatius, and this is the HBR IdeaCast.
ALISON BEARD: Adi, what was your New Year’s resolution for 2026?
ADI IGNATIUS: We do more predictions than resolutions. I have lots of predictions, but I guess my ongoing resolution for the year is to launch a book project.
ALISON BEARD: Ooh, that sounds exciting. I can’t wait to read it. Mine was a little bit simpler. It was trying for a dry January, which I mostly stuck to, though I had a sneaky glass of Prosecco two weeks in. But the point is that a lot of people are setting aspirational goals right now, not just in January, but all year long like you, because increasingly that’s what we want to spend our money on, not products or services or even enjoyable experiences, but on bettering ourselves, whether that’s losing weight or learning a new language or figuring out how to do something like writing a book.-
ADI IGNATIUS: Well, and now having said this publicly, the pressure is now on to actually achieve that. So wittingly or unwittingly, I have put more pressure on myself to achieve it.
ALISON BEARD: Yeah. I use that strategy too. I told anyone who was listening that I was trying not to have wine in January. But our guest today thinks there’s a huge business opportunity in helping people not do it themselves through willpower or techniques like the one you just talked about, but through structures that help them transform. So he’s talking about everything from health and wellness businesses to nonprofit educational institutions to financial services firms.
He wants leaders to start thinking more holistically about what they can do for customers to help them achieve meaningful goals, not just selling them what they make or supply, but supporting them along the way. And here’s the kicker, only getting paid if they’re successful.
ADI IGNATIUS: So that sounds interesting. It also sounds really expensive and it sounds really risky.
ALISON BEARD: Yes. But he says that when you get it right, it can be a huge boost to long-term performance. He has lots of case studies and he’s going to explain exactly what it takes to succeed with this kind of transformation offering. B. Joseph Pine II is co-founder of Strategic Horizons, and author of the book, The Transformation Economy: Guiding Customers to Achieve Their Aspirations. Here’s our conversation.
In your previous work, you’ve talked about the shift from products and services to experience. And why is what you call the transformation economy the next evolution?
- JOSEPH PINE II: Well, it’s because of the basic framework I put in both books called the Progression of Economic Value. And it describes how value that companies create has changed over millennia from the agrarian economy based off commodities, through the industrial economy, based off goods through the service economy. And what happened in the latter half of the 20th century, we shifted into an experience economy where again, experiences are a distinct economic offering, built to top services and goods. And now what’s happening is while all five economic offerings have been around, the fifth one is coming more to the fore. And the fifth one is, as we say, transformations. Transformations where you use experiences as a raw material to guide customers to change, to help them achieve their aspirations, to help them become who they want to become.
ALISON BEARD: So what is the impetus for companies that are doing well at selling products, services, or experiences already to make this shift to guiding transformations?
- JOSEPH PINE II: Every one of my books has had a boogeyman, right? And what this is, the boogeyman is commoditization, commoditization. Commoditization is like the law of gravity. If you do nothing, then eventually your offerings will be commoditized. And so, what that means then is you can be successful at commoditization with generally only one or two industries that automate as much as possible, get rid of as many people as possible. They can still succeed, but it’s no fun. I’ll put it that way.
What you need to do is think about how do we then shift up this progression of economic value? How do we innovate where we are and create new offerings that aren’t yet commodities and then shift up to create the next level of value? And we’ve already seen where some experiences are commoditized. I think the theme restaurant industry went into commoditization mode a long time ago. I and a colleague wrote an article for the HBR back in June of ’24 about how Starbucks was commoditizing itself basically because it’s focusing on efficiency rather than the coffee drinking experience.
There’s a huge opportunity that people increasingly are looking for help because change is hard. It’s just fundamentally hard. It’s hard to do on your own. And so, companies are increasingly positioned to help people achieve their aspirations as well as businesses with B2B transformations.
ALISON BEARD: So what are the key differences between offering experiences? And they could be aspirational experiences and making yourself better types of experiences. What are the key differences between that and transformation?
- JOSEPH PINE II: Well, as I said, transformations are built on top of experiences and many experiences are already transformative. In fact, even without trying to make them transformative, we all have life-changing experiences, just one single experience that changes us. What transformations generally take is not that one life-changing experience, but a series of experiences: change over time that take you upwards into the right from where you are today to achieving your aspirations. And so, it requires working with people over time to have a full transformation offering as opposed to, I’ll use the term merely, but it’s much more than merely a transformative experience.
ALISON BEARD: And what do you think is going on in culture or consumer psychology here that people are wanting to invest in transformation? Is it driven by social media because we’re constantly bombarded by these ideas of life hacking and self-improvement and also images of all these other people who are skinnier, richer, happier than we are?
- JOSEPH PINE II: Yes, and much more. So one thing I recognized again is that transformations have always been around. But what happens over time is we increasingly seek companies to help us. That’s one of the factors with transformations, knowing that we have more disposable income, which is a part of it, which allows us to spend it on things that are of more value to us. In fact, people want goods and services to be commoditized, so you buy them at the lowest possible price and the greatest possible convenience, so they can spend their hard-earned time and their hard-earned money on experiences and transformations that they value much more highly. So part of it is how rich we have grown over time.
What you say about social media is true and comparing ourselves to others. It’s also true that it’s a fundamental need of a human being to improve, to want to get better, to have aspirations. They come out of the relationships that we have. It may come out of the work that we do. It may be as simple as wanting to improve your golf or tennis game, that you look for coaches to be able to do that. And that’s one of the indicators you see in fact, is think about the rise of coaching occupations over the last 20 or 30 years. It used to be just basically sports. Now you got life coaches and executive coaches and speech coaches and that’s that indicator of how much we want to improve ourselves, how much we want to become, again, who we want to become.
ALISON BEARD: Is this transformation economy for a subsector of consumers or do you see it being more widespread? Is it just for the rich?
- JOSEPH PINE II: No, no. It is absolutely not just for the rich. It is for everybody. One of the things the rich do very nicely though is that they are able to buy offerings that have very high costs, that have a high price, and then so that the people that provide those can figure out how to do it more efficiently by focusing on the rich and then bringing it down to the middle class and all socioeconomic classes.
So that’s always helpful in any one of these economic shifts, just like the rich bought cars at thousands of dollars that people couldn’t afford until Henry Ford figured out how to mass produce them and give them to the masses. We see that sort of thing now in many different fields of transformation.
ALISON BEARD: Yeah. Celebrity personal trainers creating an online fitness plan. So give me a good example of a company that’s switched from offering products, services, or experiences to transformations.
- JOSEPH PINE II: You can think about fitness centers in general that treat themselves as a service, but they’re an experience because you’re paying for the time that you spend there, monthly membership fees, admission fees or membership fees put you in the experience business, but many have gone beyond that to provide a level of programmatic offerings. It’s not just here’s all the stuff that we will work with you personally, understand what your individual aspirations are, and so, can go beyond that generally for extra fees, often on a personal trainer basis to be able to help people actually achieve what they say they want to do when they join the fitness center.
I’ll give you another example, Medtronic, which provides physical goods and you have pacemakers and other medical devices. And their former CEO now had an interview with the Wall Street Journal a few years ago where he talked about how he was moving Medtronics and as all of healthcare is moving towards outcome-based pricing, that we put a pacemaker in and it doesn’t work for you, why are you paying thousands of dollars for that? Because outcomes matter, not inputs.
So you see many companies that are shifting into that direction as well, consulting companies and B2B have always been in the transformation business. Nobody hires a consulting company unless they want to change business as a result, but they are increasingly charging for that, charging for the outcome that they want through various different means of success pricing and so forth. McKinsey just recently announced how particularly the rise of AI, they’re increasingly moving to outcomes-based pricing as well. Inputs don’t matter, only the outcomes. So when you sell the outcomes, then you’re economically in the transformation business.
ALISON BEARD: So I can see how the transformation economy works in the health and wellness industry. I can see it working in beauty, education, financial services, any place where self-improvement is really at the forefront. Do you see lessons for other industries that might be less obvious?
- JOSEPH PINE II: You just pointed out what I call the four spheres of transformation. I keen off of the old proverb about being healthy, wealthy, wise. So there’s health and wellbeing, there’s wealth and prosperity, there’s knowledge and wisdom, and then there’s one more, which the old proverb didn’t include, which is purpose and meaning. There’s a lot of transformations geared around those.
If I think broadly, which is why it’s not just healthcare, it’s health and wellbeing. Wellbeing encompasses just a whole lot of things that customers generally pay out of their own pocket versus insurance companies or third party payers that pay for healthcare. Prosperity covers a lot more than just money. It’s about how you live a good life. Knowledge and wisdom is not just about paying for education, but practical things that help you live your lives in a way that become prosperous because.
But the thing to do for any industry is really the old Toyota production system method of asking five whys. Why are your customers buying from you? And why do they want that? And why do they want that? And however many it takes, you get down to a core aspiration.
You can think, for example, about accounting. Why do people want accountants? Why? Well, it’s because they want to have a better handle on their information. Why do they want to have a better handle in their information? Well, so they can use it in ways