How Gen Z Will Transform Your Business

Gen Z is significant not just because they are the future customers, but because they are shaping today’s business landscape. People born between 1995 and 2012 are pivotal as they are the first generation to fully grasp what the future entails.

We are less interested in their tastes or cultural traits, and more in how they represent a new type of consumer influenced by unique social and technological changes. Understanding their impact is crucial for businesses and innovators.

Adapting to New Generations Used to Be Simpler

Planning for the future involves figuring out how to sustain and grow a business amid constant changes in customer expectations, technology, and competition. This ongoing need for innovation is a fundamental business truth, as described by Schumpeter’s “gales of creative destruction” that bring new products, services, and models to market.

While improving the current offering is crucial, businesses must also reinvent themselves to continue growing. Successful businesses balance current innovation (curve 1) with strategic innovation for the future (curve 2). Examples include Apple’s transition from hardware to software and ecosystems, Netflix’s shift from DVDs to streaming, and Amazon’s expansion from retail to cloud services. Some companies, like Facebook with its acquisitions, have also adapted, while others, like IBM and Blackberry, have struggled.

In the past, societal changes were slower, making generational shifts subtle. Businesses could stay relevant by simply updating products, value propositions, or marketing strategies. Children without spending power were largely ignored, except in ways that influenced their parents’ spending. Catering to them often meant creating kid-friendly versions of existing products.

Gen Z is Driving Systemic Change

When discussing Gen Z, the focus often turns to mobile games and social media. However, technology has changed everyone’s behavior, not just Gen Z. What distinguishes them is social change. Child psychologists note that Gen Z is the most ’empowered’ generation ever, growing up in an environment that values and recognizes children more than ever before. They are aware of economic and environmental risks and are open to new social models, which differ significantly from traditional ones.

For the first time, catering to young people involves more than just creating new products or marketing campaigns; it requires designing for the future society they will shape.

Early Development of Sophisticated Consumer Behavior

Despite being the first generation to grow up with digital and social media, Gen Z still values in-person experiences like shopping in stores, watching movies in theaters, and meeting people in real life. Technology is merely a tool for them, providing autonomy and freedom without changing their fundamental human nature and desires.

Technology has, however, led to Gen Z developing consumer behaviors at an earlier age. They are exposed to the world sooner and with less oversight from traditional authorities like parents and teachers. They show behaviors such as a preference for control over convenience, low brand loyalty, and a lack of inertia, which will significantly impact how businesses attract and retain them.

Traditional strategies won’t work with this new type of consumer. Here are some behaviors typical of Gen Z:

– They don’t differentiate between physical and digital versions of things; they focus on outcomes, making many tech-led solutions seem cumbersome.

– They are highly self-reliant and value support services that provide data-based advice, but reject propositions that don’t offer control.

– They are pragmatic, preferring transparency over ‘peace of mind’ marketing.

– They understand the value of their data and are willing to share it if there is a tangible benefit.

– They appreciate the power of collective action and decentralized systems.

– They favor shared access models over private ownership, inspired by the ubiquity of cloud services.

Implications for Businesses

Businesses need to adapt to Gen Z’s behaviors and preferences. Here are some strategies:

– Focus on outcomes, not technology: Understand their goals and needs rather than simply developing apps or tech solutions.

– Design for groups: Create solutions that cater to groups of people with shared interests, facilitating mutually beneficial interactions.

– Engage Gen Z as collaborators: Observe and understand their lifestyles to develop new business or engagement models.

– Increase your learning speed: Quickly develop and test new ideas with Gen Z to iterate and improve.

– Avoid focusing on competition: Focus on adapting to rapid tech and social changes instead of obsessing over rivals.

– Avoid adding clutter: Integrate new solutions with existing tools and channels instead of creating new ones.

One way to see Gen Z’s impact is through the rise of peer-to-peer businesses across various sectors. For example, Stepladder’s peer-to-peer mortgage model matches users with similar financial profiles to save together and receive mortgage advances. This concept could transform other industries like travel, customer service, or supply chains.

Conclusion

Young people have always been crucial to businesses as future consumers. However, with Gen Z, simply updating logos or marketing strategies won’t suffice. They can drive future engagement and business models. By anticipating and responding to the changes this generation brings, businesses can position themselves to thrive in the new world while catering to fundamental human behaviors that remain constant.

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