Many of the changes of the digital era came because older folks ("digital immigrants" like me) adopted new behaviors, but most of the inertia for business evolution occurred when a wave of "digital natives" came of age. What will happen when the current batch of young "social natives" reach their adult years? A lot, and this will require businesses do far more than just add to the IT stack and hire a couple community managers.

In the mid- to late-2000s, the Gen Y cohort--people who almost could not remember a time (and could not function) without PCs and the Internet--joined key advertising demographics, reached voting age and entered the workforce. Many companies anticipated this and had deployed digital strategies early, but some waited for the mid 00s before shifting significant ad dollars online, adopting email and online service channels and developing new digital products and business models. Companies bound to old business models struggled to adjust to new realities as their customer demographics rapidly changed.

One example of how the last major demographic shift swamped an industry is the photo business. Shutterfly and Ofoto, two early photo-sharing sites, launched in 1999 at a time when Kodak had a market cap of almost $22 billion. The startups foresaw the wave of change to come with young people adopting digital photography. Kodak waited two more years before getting into the photo-sharing game (by purchasing Ofoto, later renamed Kodak Gallery), but it never really understood how Gen Y was changing the photo business. Kodak Gallery didn't permit sharing in the same way as its upstart competitors, kept photos locked behind a registration screen, and in 2008--just as the use of mobile phone cameras was exploding--Kodak implemented an ill-fated program requiring customers to purchase items or lose their stored photos.

How did that work for Kodak? Since January 2005, when Kodak launched its rebranded online photo-gallery service, its stock is down over 99%. Currently, Shutterfly is acquiring Kodak Gallery for a mere $23.8 million and Kodak is restructuring. Shutterfly was the only bidder in a sad auction for Kodak Gallery, which gets fewer than a million visitors a month, down 29 percent in one year.

Source: MinorMonitor

So, what will happen within the next few years when "social natives" enter key buying demographics, join the workforce and begin voting? We'll find out soon. Facebook launched a high school version of the service in 2005 and opened to the general public (13 and over) a year later. Of course, many teens had already adopted social behaviors before Facebook via services like Myspace and Friendster, which hosted millions of accounts as early as 2003. This means that by 2015--just three years from now--the average 18 year old won't remember a time without online social networks. (And before anyone points out that 2015's new adults will only have been legally able to use Facebook for five years, it is worth noting that over 38 percent of children with Facebook accounts are below Facebook's 13-year-old limit.)

Many of today's leaders do not understand what it will mean to serve, sell to, market to or employ the new generation of social natives. The answer is not merely to have a corporate Facebook presence, advertise with Promoted Tweets and host a community on the company intranet. Social natives will bring vastly different attitudes and expectations into their adult years, and this will force changes in the way we steer our brands, conduct business, set policies, devise organization structures and manage employees.

Soon, we will need to employ and build relationships with people who are disconnected and awake less than an hour a day.  (Any longer and it "creates an unnerving sense of disconnectedness.")  We all know business hasn't been 9-to-5 for a long time, particularly for global brands, but serving a generation constantly connected and demanding of non-stop brand care and interaction is going to require an even greater focus on deploying a 24/7 enterprise.

 

Think of how quickly this single aspect of social demographic behaviors is changing our world. On a personal level, few of us employed in marketing, PR or social media ever truly disconnect any longer, and on a business level, most large organizations already deploy community management well beyond old-school "working hours." Still, few companies have significant numbers of service staff deployed round the clock.

Soon, it will take more than a skeleton second- and third-shift crew to meet the needs of never-disconnected "social natives." The customer who tweets a customer service question at 1 am will likely have no different an expectation about response time than the one who tweets at 1 pm.

The generation of social natives also evaluates its brand preferences differently than their parents. TV advertising? It's not dying, but neither is it going to be as effective as in the past. ComScore recently found that millennials are less likely to say they found a TV ad interesting, believable or likeable, and they are more likely to call it irritating.

Source: Bazaarvoice

If younger folks don't believe in TV ads, what do they rely upon? It sure isn't corporations--37% of millennials claim to distrust big business. Instead, social natives trust others; Millennials are 50% more likely than boomers to say that recommendations from strangers influence their opinions.

Another way millennials are different than preceding generations is that they aren't afraid to voice their opinions and act when unhappy. Whereas Gen Xers were more inclined to reject institutions that failed to serve their needs, millennials are far more likely to take action to force change. This isn't just the case for brands they use and buy but also for their employers. In an Ad Age article, economist Neil Howe, who coined the term "millennial" in the early '90s, notes:

"If you ask a bunch of Gen Xers [born in the '60s and '70s] what they would do if they didn't like where they worked, most would say 'leave.' But if you ask millennials that question, their attitude is, 'Someone will fix it.' They'll start IM-ing each other, a few will get Mom and Dad on their cellphones, someone will call the local media, another will alert the congressman."
Source: Edelman Trust Barometer 2012

And woe be to brands that think they can compete merely through operational excellence. Great products and services are table stakes to a generation that expects transparency. Edelman's most recent Trust Barometer study found that trust in CEOs and government officials experienced record declines in the last year while trust in other consumers and regular employees skyrocketed. Moreover, when it comes to building trust, the agency notes:

"The 16 attributes... responsible for shaping current business trust levels are largely tied to business competence, and those that will build future trust are more societally focused. Listening to customer needs, treating employees well, placing customers ahead of profits and having ethical business practices are all considered more important than delivering consistent financial returns."

The differences between social natives and previous generations go on and on. In Zipcar's fascinating study of millennials and driving (embedded below), researchers found that younger consumers:

Source: Zipcar
  • Find physical interaction less vital--nearly seven in ten say sometimes talk to friends online instead of driving to see them. 
  • Are willing to drive less if options are available--those under 34 are almost twice as likely than people over 55 to be willing to drive less, provided public transportation, car sharing or convenient carpooling is available.
  • Are ready to buy less and participate more in the sharing economy--compared to consumers over 55, those under 35 were approximately five times more likely to participate in car sharing and home- or vacation-sharing programs.


Is your enterprise prepared to sell to, rent to and employ a generation that is always on, empowered and prepared to take action, highly networked, more influenced by peers than ads, distrustful of big business, unforgiving of companies that aren't transparent, disinclined to conduct business with organizations that do not stand for something and more willing to share and rent than buy and own? What will happen when the current generation of ROI-maximizing, privacy-protecting, production-oriented, quarterly-obsessed CEOs runs headlong into a new generation that expects organizations to listen, make the world better, be transparent and commit to long-term societal missions?


Explore more EK Data at Wikinvest

Explore more SFLY Data at Wikinvest


Many companies think they know the trends and are comfortable planning for change in the future, but they are not really prepared. In 2008, when Kodak was comfortable with its decision to make sharing difficult and to force users to buy something or have their photographic memories deleted, it had a market capitalization of over $5 billion and Shutterfly was worth less than $200 million. Today, Shutterfly has a market cap of $1.1 billion and Kodak is in bankruptcy with a market cap of $77 million.  Of course, even innovators need to play by market rules, and later today Shutterfly announces its latest quarterly earnings; it may have bested the giant Kodak, but with social natives seeing no need to print photos given Facebook's (not to mention Twitter's, Instagram's, and Flickr's) free storage services, even Shutterfly could get crushed in the next demographic wave.

In very short order, social natives will be your customers and employees. Time is not a luxury today's businesses can enjoy when considering the evolution required in the next five years.