The Transformation Pyramid
In my hands, I’m holding some raw coffee beans. What are they worth? Pennies on the pound? A few dollars? Several dollars? The answer is: It depends.
I learned the bulk of this idea from a book called The Experience Economy by Joseph Pine and James Gilmore. In the book they argue that our economy has entered a new day. What people are willing to pay for these days is mostly experience. But then they curiously end the book talking about transformation as the only thing above experiences and that will never be superseded. We’ll come back to that.
Let’s look at the hierarchy of value and what I’ve come to call The Transformation Pyramid. As we go through each layer of the pyramid I hope you’ll see that this applies equally to the overall customer experience as well as internally to our teams and cultures inside our shops.
First, the answer to the opening question. Technically those raw coffee beans are worth next to nothing. A few pennies at best. This is because in their raw state they reside on the bottom of the pyramid as a commodity. Commodities are the lowest value items in our economy. Do you think we’re experiencing commoditization as an industry? Absolutely! I heard someone a few months ago say that with insurance companies and the contracts they are putting into place it feels like a “race to the bottom.” In other words, it’s often no longer about doing a quality or safe repair or even delivering incredible customer service. It’s doing all that as cheaply as possible. Now, on one level that is understandable. Collision repair is all loss for them and they are trying to mitigate losses for their shareholders. Yet, on our side of the equation, it seems like the demands can sometimes conflict with quality, safe work and a great customer experience. In our industry and most others, there’s constant pressure to move down the pyramid to be the lowest cost solution.
On the second level and moving up the pyramid we have a good. Sticking with the coffee illustration, if we roast those beans and package them for a grocery store to sell they go up in value, right? Now those same beans once roasted and labeled and transported can be sold for around $10 per pound. What are the goods in our industry? We are at the end of the supply chain for goods like parts, paint and shop materials. The cost of these goods fluctuates based on what’s happening in the wider economy as well. For instance, as I write this column, GM is on strike and we’re having a hard time getting GM parts. It’s starting to affect other elements of our business like cycle time and customer satisfaction. Would I pay more for a GM part right now due to this scarcity? Yep! The value of goods affects us every day as shop leaders.
Moving up another layer we find services. Services are where humans interact. It’s where one person is literally serving another person and creating value because of that interaction. The interaction leads to the transaction. For coffee, this again increases the value. Think about when we go to a coffee shop or restaurant. Someone has taken the time to prepare and serve roasted and packaged beans by grinding those beans, adding some very hot water and then bringing it to our table or at least handing it to us over the counter. Now, there’s human interaction, a literal handoff from one person to another. What is that worth? At most restaurants and coffee shops now it’s a least a few dollars and we’re only using a tiny fraction of a pound. That one pound, if split into cups served, might be worth around $30.
In our industry, whenever we are face to face with our customers, or even just talking to them on the phone, we’re providing a service. That might be updating them on repairs. Service. Welcoming them to our shop. Service. Delivering the completed repair. Service. Yes, we fix cars but the business we are in is service. The human element is never going away. And I’m keenly aware of all the talk of AI and autonomous vehicles. But there will still be humans dictating those transactions. If not, we have bigger problems and the machines have taken over and we’ll be living in a science fiction horror at that point.
The fourth level is experience. The true coffee experience reminds me of my favorite coffee experience of all time. You can likely picture walking into a favorite coffee shop to a multisensory experience. As soon as you walk in you are hit with the wonderful aroma of recently roasted coffee. There is just a distinct smell and even many people who don’t like the taste of coffee can’t deny that the smell is out of this world. In this particular coffee shop, I was smelling coffee from all over the globe. Kenyan coffee. Indonesian coffee. African coffees. South American coffees. My nose literally circles the globe in seconds. In the background, there was classic jazz played by the masters from decades gone by. John Coltrane on sax. Miles Davis on trumpet. And the visuals were all planned out, as well. Everything seemed to fit together in a beautiful color scheme. As I picked up my warm cup of freshly brewed coffee I was literally immersed in an environment that touched every sense I have.
What is that coffee worth now? You already know it’s at least $4 but worth every penny for the value of the overall experience.
Our customers have gotten used to a very high level of service and experience as the wider economy continues to provide more and more. How can we live up to this? We have to keep pushing up the pyramid to offer the highest levels of service and experience if we want to stay in business. The days of the dusty, grimy office with papers everywhere and the customer waiting area being filled with out of date magazines is over. Shops that don’t really care about the overall customer experience will be a thing of the past.
Next month, we’ll look at how a transformative experience beats all the other levels of this pyramid and we are poised as an industry to deliver just that.