The Gen Z Effect: 6 Forces Shaping the Future of Small Business

Author Dan Keldsen discusses how Gen Z is affecting the world and the 6 key dynamics that could change your small business.
December 15, 2014

One of the most challenging sociodemographic dynamics facing small-business owners is literally one for the ages: how to deal with the "new generation" of customers, partners, investors and employees.

Social values and norms are shifting so rapidly—and at an accelerating rate—that a business culture may look and behave significantly different than it did six months ago, simply because a critical mass of younger associates has been onboarded. The customer segments you've reliably targeted for the past decade may disappear completely next month, because a new app has rendered your product or service obsolete.

What's a small-business owner to do? To help sort out the answers, I turned to Dan Keldsen, co-author with Thomas Koulopoulos of a great new book, The Gen Z Effect: The Six Forces Shaping the Future of Business.

Why did we start naming generations at the end of the alphabet ... X, Y, Z?

Generation X was actually coined back in the 1950s and popularized by Douglas Coupland in 1991 in his book, Generation X. The naming convention that began with X—as the generation that supposedly lacked direction and definition—and then continued Y through Z was essentially an accident.

It's time to rethink generational labels entirely. What traditionally defines generations is mostly a set of unexamined and lazy stereotypes of each "unique" generation. We're living in a post-generational world that's being held back by these stereotypes. That's one of the cornerstones of The Gen Z Effect.

Every generation has its gap, its departure from the previous. What's different about the Gen Z gap?

In our research, we found that the gap between generations is being increasingly bridged by the use of common technologies across all ages. The hyperconnectivity of email, texting, mobile devices and social media are making the notion of a gap less and less relevant to how we understand behaviors. What's important is individual behavior, not generational behavior.

While we can all adopt the behaviors of Generation Z, those born into it [after 1995] are the first true "digital natives" to have Internet access from birth, with "smart" devices as their first playthings, and are truly born directly into being hyperconnected all the time. That reality for Gen Z kids is also the reality for all of us now. Even people who were terrified of computers and had never owned one prior to their first smartphone now can't imagine life without one.

Ultimately the idea of a generational gap holds us back from connecting and collaborating across ages, personally, professionally and as a society.

I'm a small-business owner with eight employees. Why does Gen Z matter to me?

Gen Z are your customers right now, even if their parents are paying the bills. They're already 2 billion strong and wield enormous influence due to their ability to form communities and use social media as a personal megaphone. If you own a small company, they have a lot to teach you about how to create an impression and have the impact of a much larger company. Soon, they'll be your employees and your competitors; they'll become your trusted advisors, managers, partners and friends.

They're also the leading indicators of the behaviors that we are all embracing, and they adopt new technology at a faster pace than ever. That means they're bell weathers of what's coming next and why it matters. Simply put, if you're not paying attention to what they're unafraid to say they want, you're missing out on what older generations want but haven't yet voiced. They're the leaders of a post-generational revolution that's washing across all age groups, and they aren't going to be satisfied with excuses.

How did you settle on the six forces driving the Gen Z effect?

I joked with my co-author and longtime friend, Tom Koulopoulos, that we should make a video similar to the Moses scene from Mel Brooks' History of the World Part 1—where Moses steps out with three tablets for a total of 15 Commandments. He's about to unveil the commandments and suddenly trips, dropping and shattering one tablet to bring the masses the "15 (crash) ... 10 Commandments."

We had a similar experience in putting together our six forces. Based on our early research, and as we began to flesh out the book, we initially had 12 forces. As we began refining the outline and parsing our research, we condensed and prioritized the forces, eventually settling on five.

But something was bothering me. I realized that we'd inadvertently skipped innovation as an explicit topic in the book. As a result, I coined the term "slingshotting" to describe one of the most dramatic of the six forces.

Slingshotting is the force that allows a significant portion of the population to move all at once—and apparently overnight—from the past into the future. We've been experiencing slingshotting in very large waves in the past 10 years. It's the force behind the fact that there are now an average of 2.5 cellular-enabled devices per person, and that on Apple devices alone, over 65 billion apps have been downloaded since the first iPhone was released.

What's the most significant business implication of the "hyperconnecting" force?

Hyperconnecting is the foundation for essentially all businesses and people. Being "on the Net" used to be a very rare, expensive and slow experience, requiring far more patience and technical skill than an average person should have to deal with. Fast-forward to today, and within 10 minutes, just about anyone can be up to speed with a smartphone that's faster, smarter and always connected—and it doesn't need a user's manual. And that shift has happened in just the past seven years.

For small businesses, that means they can suddenly take advantage of dramatically lower costs and, frankly, far better options than the traditional options for sales, customer service and mobile payments.

Right now, I'm in a small rural town in the Midwest, with a population of 13,000. at a very small, one-man shop paying by credit card. How did he take my credit card payment? [Through] a credit card reader attached to his smartphone, which instantly sent an email receipt at the end of the transaction. The cost for a similar solution just five years ago would've been tens of thousands of dollars. Today it's essentially free, aside from the small cost per transaction.

How is the slingshotting force different from, say, the forces driving the dotcom bubble of the late 1990s, which we all know burst?

The Internet bubble of the 1990s was, as they say in Texas, “all hat and no cattle.” It was the beginning of a series of promises that have taken nearly 30 years to bring to the masses.

I’ve been on the Internet since 1988, when it was a text interface full of secret commands, unbearably slow by today’s standards and, in retrospect, user hostile rather than user friendly. It was built by and for geeks, and now, finally, it's simple yet powerful, affordable and far more shocking when you don't have fingertip access to the Internet than when you do.

What slingshotting does is finally bring forth the level of simplicity and affordability that didn't exist back in the '90s when computing technology was still primarily for geeks; now it's for the masses. Slingshotting has brought us the future we were promised 30 years ago—a future in which toddlers, grandparents and everyone in between can be part of it any time they want.

This is still just the beginning of the online revolution, but it’s a great foundation to truly usable and useful technology for the masses globally.

Which of the six forces should a small-business owner be most vigilant about?

As a small-business owner, lifehacking is the force to watch most carefully. Gen Z kids have less tolerance for rules that have stood unquestioned—they have no issue with working around or “hacking” the system. By hacking, we don't mean attacking and destroying, but rather finding better, faster and cheaper ways to solve problems. This hacking mindset and the three hacks that we believe will most shape the Gen Z landscape and the future are crowdfunding, 3D printing and changing attitudes about intellectual property and patents.

These hacks are creating new opportunities for small businesses, including solopreneurs, to create businesses at dramatically lower costs than traditional manufacturing techniques would require; to raise the funds to develop goods, services and the business itself; to leverage the work of others in their field; or to give back to the community.

What's the one thing you want readers to take away from The Gen Z Effect?

That we are all Gen Z, and we're all reaping the benefits of its effect. It's time to put those benefits, the six forces, to good use and make the most of our work and our lives.

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