With Generation Z (aka, the first native digital generation) emerging as the world’s largest demographic, digital transformation will be mandatory for any company that wants to remain relevant.
As Centennials (Generation Z) get older, we will see a need for companies to accelerate their digital transformation maturity levels. Millennials made companies interested in digital transformation, but Centennials will make it a requirement if companies want to stay competitive.
It is no longer about debating the necessity of integrating new business models that are based on disruptive technologies; it is about embracing digital transformation wholeheartedly and without hesitation.
And yet, there is surprisingly little evidence that companies are actually paying attention to the importance of large-scale digital transformation. Perhaps this has to do with the fact that management of bigger, established firms is usually the domain of people in their late 40s, 50s, and 60s, while startups are founded by those who are younger and more “fearless.”
Startups are born with innovative digital mindsets; it is innate to their company footprint, and that is why they are outpacing tenured companies in just about every way. The increasing empowerment of Generation Z will undoubtedly make digital transformation a requirement for every business.
Digital Displacement on the S&P 500 Index
With the digital revolution well underway, we can clearly see its monumental effects across the financial market spectrum. Just look at the lifespan of companies on the S&P 500. Startups gone corporate are displacing more tenured companies.
In 1965, the average tenure of companies on the S&P 500 was 33 years. By 1990, it was 20 years. The forecast dictates that this will shrink to 14 years by 2026.
According to the projected churn rate generated by Innosight — a leading consulting firm helping companies navigate disruptive change helmed by bestselling author Clayton Christensen — over the next 10 years, about 50% of the S&P 500 will be replaced.
In 2018, technology companies led the way as the biggest gainers, with Amazon.com Inc. (AMZN), Microsoft Corp. (MSFT), and Apple Inc. (AAPL) on top. Their stock prices rose by 45.35%, 15.28%, and 9.38%, respectively.
So, companies are leaving the S&P 500, but which companies are coming into the S&P 500?
Companies entering the S&P 500 include digital-forward entities such as Facebook, PayPal, Incyte, Hologic, and Activision Blizzard, among others. The likes of those less willing to innovate, such as Bed, Bath & Beyond and Safeway, made their exit from the list after being on it for 18 and 17 years, respectively.
In 2017, most executives somewhat agreed that a business model change was in order.
Perhaps executives might completely agree to a business model change if they had a deeper understanding of the emergent demographic that is Generation Z.
Initially, “renegade” startups now with a corporate pedigree are robustly entering the S&P 500, but what we are not seeing are many tenured companies with high digital maturity levels on the list.
Younger Generations Will Soon Represent 59% of the World's Population
Within less than a year, Generation Zers and millennials will constitute more than half of the world’s population. The time for digital transformation is now.
We only need to look at some eye-opening numbers:
- 4.4 billion Centennials and millennials combined are in the world today – with Generation Z set to overtake millennials in population numbers in 2019.
- Generation Z and millennials are projected to be 59% of the world's population by 2020.
Without question, Generation Z is the next big market. Therefore, it is important that companies keep close tabs on this generation’s behavior, tendencies, and expectations.
According to Marketing Tech News, British Generation Zers spend a whopping 10.6 hours engaging with online content every single day.
Centennial behavior represents a significant shift from that of millennials and older generations. We identify them as the first true digital natives, never having known a world without the internet. They consider Google the only place to find information. And while they are more isolated from their physical environment, globally speaking, they are far more aware than their predecessors.
Simply put, companies cannot afford to overlook what will soon be the largest demographic on the planet — in other words, businesses have to cater to this ultra-digital target audience.
There Is a Place for Digital Solutions in Non-Digital Companies
As disruptive technologies steadily advance, we see a consistent pattern over all industries that digital-based solutions are exponentially faster, more efficient, more precise, and overall better than non-digital solutions.
Search engines and Google are a prime example. If you wanted to find information prior to the digital era, you trekked all the way to the library, spent hours in a card catalog tabbing through index cards, lugged heavy books, and researched for hours through dense page after dense page. In the end, you generally found only a portion of the information you needed.
Not today. Search engines work their magic in a matter of milliseconds, bombarding you with more information than you probably require.
That is just a basic example. Industries that shift from non-digital to digital rapidly realize tremendous gains. Below is a quick look at the value several digital-based solutions add across three different industries.
Digital Transformation in the Construction Industry
After more than 50 years with zero improvements in productivity, the construction industry embraced digital transformation.
According to Axel Kruger, CEO of Engworks, one of the leading BIM consultants in the U.S, 3D BIM Coordination and Digital Prefabrication services save 10% to 30% in construction costs by allowing problems to be identified and solved digitally before spending actual construction dollars.
But where they achieve the highest efficiencies are when they digitally prefabricate portions of the buildings, such as entire mechanical, electrical, and plumbing assemblies.
In an interview Kruger, those trade contractors that do not prefabricate digitally cannot compete when it comes to buildings of mid- to high complexity.
Digital Transformation in City Management
City management is also undergoing its digital transformation through a concept called smart cities.
Governments are enthusiastically adopting computer vision technology with artificial intelligence to help reduce crime and improve criminal activity detection.
According to Agustin Caverzasi, CEO at Deep Vision, facial recognition and vehicle recognition software assist law enforcement in their efforts to find suspects while saving cities a significant amount of money.
Digital Transformation in BPO Services
Bots that assist agents in performing repetitive tasks as well as answering client communications are dramatically transforming BPO contact center companies.
In an interview with Enrique Roman, director of digital business at Apex America, a preeminent Latin American BPO contact center and customer experience company, he explains that cognitive assistive technology will be something companies need in order to stay competitive in the digital era.
Bots improve response times, precision, productivity, and overall customer experience.
Digital Transformation Across Industries
At the 2018 Gartner Symposium/ITxpo, the world’s foremost gathering of IT leaders, analysts for the global advisory firm identified their top 10 strategic technology trends with the most disruptive potential:
- Autonomous things: Autonomous entities without human direction
- Augmented analytics: A new approach to automating the business analytics process through the use of machine learning and natural language processing
- AI-driven development: Empowerment through artificial intelligence
- Digital twins: A digital replica of a living or non-living physical entity
- Empowered edge: Edge devices empowered by machine learning
- Immersive technologies: Technology that attempts to emulate a physical world through the means of a digital or simulated world, thereby creating a sense of immersion
- Blockchain: Cryptocurrency networks
- Smart spaces and environments
- Digital ethics and privacy
- Quantum computing
Those non-digital business solutions still in existence, while staking a very modest claim in the current environment, are being replaced almost entirely as Centennials gather steam and spearhead their own brand of digital transformation.
Digital Transformation for Company Survival
Digital transformation is no longer optional regardless of how established or well-branded a company may be.
Disruptive technologies are a staple of the Centennial mindset: If it’s outdated, challenge it; if it’s no longer relevant, get rid of it; and if it isn’t enterprising enough, rethink it.
This is a generation fully enabled and empowered by the digital landscape around them, and for better or worse, this is not about to change.
As a digital transformation consultant who has been in the industry for years, working for companies with management teams who are aged 45+, we have seen firsthand why companies need to stop just “thinking about when to start digital transformation” and actually accelerate their digital transformation maturity levels.
Centennial numbers and purchasing power are only growing. Digital demand should thus be the first priority on any organization’s agenda.
If companies want to stay competitive in front of the new digital consumer, they need to adopt digital transformation and accelerate their digital maturity levels at exponential speeds.
About the Author
Carla Dawson is a content marketing strategist at Onmarc which has been helping clients with their digital transformation and marketing strategies and business models since 2011. Onmarc's digital marketing strategies and consulting are helping companies meet the demands of the "new" digital consumer.