We travel a great deal around the U.S. working with CEOs and their organizations to help them adapt to changes in the business environment—and change is literally all around them.
Since we are often in an observational role, we have many opportunities to spot “trends from the trenches,” both from an outsider’s perspective and through the eyes of those trying to make sense of their new reality.
Everything’s changing, faster and faster
In his recently published book “Thank You for Being Late,” Thomas Friedman has done an exceptional job chronicling the rapid acceleration of change since the emergence of the cloud (the supernova, he calls it) in 2007, opening the floodgates for new businesses to be created with highly innovative global solutions. And he is correct in warning that robots are coming, potentially replacing 50% of the labor force by 2035. (There is already one hotel in Japan almost completely run by robots, with a second on its way). Add to this the expansion of sensors, the Internet of Things (IoT), the data and analytics that enable us to better predict what is going to happen before it does, and voilà, the world is changing, and fast.
No wonder CEOs are overwhelmed, trying to cope with the cultural shifts that are transforming every facet of how business is done today. And if in fact, culture eats strategy for breakfast (as Peter Drucker famously said), what does this mean for companies, large and small, desperately trying to prepare for the future?
5 Trends from the Trenches that are transforming the way we do business
Here is what we see our clients and others across the country struggling with, as they and their businesses try to survive and thrive in these rapidly changing times:
1. The next generation of the U.S. workforce has arrived. By 2020 (just four short years away), 50% of America’s workforce will be Gen Y/millennials—75 million strong, born between 1981–1997. There is abundant literature (check out “11 Tips for Managing Millennials”) on who they are, how they work (or don’t) and how to run a company with this new generation of employees who see the world through a different set of eyes. As Don Tapscott wrote in 2008, millennials have grown up digital. They’ve also grown up playing soccer. They understand teamwork and like to get things done, but together. They research problems online and seek solutions based on what friends tell them, what colleagues recommend and what the Internet says is true. They also like to mix work and play. A CEO recently told me how frustrated he was because he had to buy ping pong tables for his new employees. “Don’t they know this is work?” he said. Similarly, the head of talent acquisition for GM said at a conference where we were both speaking that his new hires typically last only 2.5 years before moving on. Undeniably, there is an entirely new culture emerging for the workplace of tomorrow. Can it be as productive and innovative as it needs to be to thrive?
2. 67% of the businesses in the U.S. are owned and run by Baby Boomers. Within the next decade, these Boomers will be retiring, passing those businesses onto family members or others, selling them or closing them down. This means than an estimated $10 trillion in wealth will soon be transferred from one generation to the next. For those who do business with these companies, the challenge will be matching up their own (often younger) sales force with an aging leadership team, introducing new innovations that may improve services and add new value, and ensuring that the next generation remains loyal to them as a preferred provider, rather than passing them over for another vendor. Our clients, whether they are manufacturers, steel fabricators, accounting firms or physicians, all see these challenges coming. If their clients sell or retire, what happens to their business? Indeed, there is a lot of uncertainty out there right now.
3. Millennials just “do things differently.”
a) They are graduating from college and returning to live in their family’s home, in part because they have considerable student debt but also because they haven’t found jobs and salaries that enable them to live independently.
b) They’re not getting married. Marriage rates are down 5% because couples are waiting until their late 20s and even 30s to wed, or they are just living together, even if they have children together. Our theory is that they have experienced the impact divorce has had on their own families growing up and have no interest in marriage. Another theory is the “paradox of choice,” where millennials are shopping for a mate in much the same way they comparison shop online for everything else. Add in college debt and the fact that marriage no longer means what it used to and it’s not surprising that weddings are way down.
c) They are not buying cars and few are getting driver’s licenses (only 71% of Americans of driving age have licenses). According to The Atlantic, “In 2014, just 24.5 percent of 16-year-olds had a license, a 47-percent decrease from 1983, when 46.2 percent did. And at the tail end of the teen years, 69 percent of 19-year-olds had licenses in 2014, compared to 87.3 percent in 1983, a 21-percent decrease.” You can blame their student debt or their urban living. But for many, Uber, Lyft, Zipcar and even bikes have made car ownership unnecessary.
d) Today’s sharing economy is making it much easier for millennials to create a low-responsibility lifestyle that fits their values, beliefs and behaviors. As one Uber driver said to me,” I share my home through Airbnb and my car through Uber. I am paying off my college debt and making a nice living in this sharing economy.” (For additional insight into Millenials check out our video here.)
4. New business startups are not occurring like they used to. As of 2016, for the first time on record, business closings outpaced business openings. While this slowdown began even before the 2008 Great Recession, it has become particularly pronounced over the past two years.
Currently, there are only 20 counties where startups are being established (down from 170) and these are essentially technology-related business ventures on the east and west coasts. In addition, the traditional trend of opening new retail or service businesses has been eclipsed by big box stores, roll-up consolidations and online options. If a business isn’t in the new technology sector, it is hard to get it off the ground. Even after opening, competition remains keen and success is uncertain.
5. Home ownership is at its lowest since 1965, with only 62.9% of Americans owning homes. Analysts postulate this is because millennials are not interested in living in the suburbs, credit is tight and renting has surged after the crash of ‘08. And even though mortgage rates are low and the job market is improving (for some), first-time buyers have been struggling to find affordable properties amidst tough competition for a tight supply of listings. My own observations from the trenches is that millennials are sharing rental apartments with other millennials to save money, freeing up income for travel and other enjoyments that are less permanent. They do not see home ownership as necessarily a good investment and, as I noted previously, they are not getting married and therefore have little need to buy a home.
Our culture is changing, and fast. Are we prepared?
Everything, from what we value to how we behave, is going through a major transformation today. The issue is not that we haven’t passed on what we value to the next generation. It is that this next generation has been raised, educated and prepared for the labor market in a vastly different way than previous generations. Plus, the labor market is going through its own upheavals of gargantuan proportions.
So what does this all mean if we are going to "Make America Great Again?" For one thing, it means that the culture of the millennial generation—those millions who have grown up digital in a global economy and who are using technology in dramatically new ways—is not only transforming the way we do business but actually who we are. There’s no going back so the only answer, as we see it from the trenches, is to adapt, and soon.