Monday, October 5, 2009

Strategic Planning Analogy #279: Trends Change, Not People

When I was a teen, my observations were that young people drank Coke and older people drank coffee. Now, decades later, it seems that it is the younger crowd that is patronizing the coffee shops and drinking the coffee in large quantities. If anyone is drinking a Coke, it tends to be an older person.

The same with hair color. When I was a teen, I observed that if there was a woman with bright blonde hair, she tended to be a relatively young adult. Older women had more subdued colors. Now, decades later, it seems that the bright blond colors are on the older women and the younger women use more subtle highlighting.

It’s as if all of the rules I learned as a teen no longer apply.

The problem with the rules I came up with as a teen was that I was linking a trend to an age. In other words, I believed that when people reached a certain age, they should act a certain way.

Instead, I should have linked a trend based on date of birth. In other words, people born at a certain time have a particular characteristic they will carry on throughout adulthood. The next generation is not bound by the old trend and so they start their own, which they carry on throughout their adulthood.

It isn’t so much that people’s beverage preferences change completely as they get older. It’s that the “cool” drink in the formative years changes from generation to generation. Depending on that was “cool” to drink at that formative age, that became the beverage of choice you carried with you as you aged.

A couple of generations ago, that cool drink was Coke. Now, it’s some fancy form of coffee (or maybe an energy drink). I suppose in another generation or two, young people will find something else “cool” and it will be the old folks who drink the fancy coffees (who are those same people who picked up the coffee habit when they were young and when coffee was cool).

This concept has been particularly true with beer brands over the ages. A particular beer brand is cool when drinkers are starting out, and they tend to stick with that brand through the rest of their life. The next generation chooses another “cool” beer brand and sticks with it. And so on.

So what does this imply for strategy? Strategies try to find the ideal place for your firm in the future. To find that ideal place in the future, it is important to first have an accurate view of the future.

As you try to imagine that future world, you can fall into the trap I did as a teen and incorrectly assume that younger generations will revert back to the behavior of the prior generation when they get older. I had thought that young people would always prefer Coke and old people would always prefer coffee, no matter when you were born. That was an incorrect assumption.

A better way to predict the future is to look at how each generation forms its habits in those formative years, and use that as a guide for how each generation will adapt to the future.

The principle here is that trends change faster than people change. The next revolution in behavior tends to start with the generation still forming its life-long habits. Those who already have long-ingrained habits change far more slowly. As each new generation arrives, there is the opportunity to create a new trend, even if the older folks hesitate to participate.

This principle should lead to the following concepts.

1. Don’t look to the older people of today to predict how the older people of tomorrow will be
Back in the 1980s, I remember reading predictions about shopping behavior. At that time, the older people were shopping Sears, while the younger adults preferred shopping discount stores and specialty stores. Some prognosticators at that time were predicting that when the younger customers became old, they would switch store preferences to Sears, since that seems to be what older people do.

Well, here we are at the point when those younger shoppers from the 1980s are older. And guess what…they did not automatically start switching over to shopping Sears. Sears’ customer count continues to drop.

Those prognosticators in the 1980s made the mistake I did as a teen and associated behavior with an age rather than with when you were born. Sears is losing customers because the ones who were in their formative years when Sears was cool are dying. The next generation stayed with the same basic habits they formed back in the 1980s. They didn’t say they needed to switch to Sears when they got old because “that’s what old people are supposed to do.” Instead, they said, “Sears is the store for my parents, not me.”

Buick has been trying for years to get young people to embrace their brand. Unfortunately, Buick tends to be associated with a much older generation and it is hard to dislodge that image.

For young people, Buick is not the cool brand of their generation. And when today’s young generation gets old, I doubt they will suddenly switch to driving Buicks. They won’t think that “Old people drive Buicks, so now that I am old, I should drive a Buick.” No, unless something dramatic happens, Buick’s fate appears tied to an earlier generation and its best years will die as that older generation dies.

The same is true for newspapers. For awhile, many newspaper folks were not afraid of the internet because they thought that as the young adults got older, they would become more like their parents and switch from the internet to the newspaper. You don’t hear those comments much anymore, as people realize the new generation is never switching to paper for their news as their parents have habitually done.

This is not to say that older people never change their behavior. They do. However, those changes are not because they say “I’ve gotten old now, so I have to start acting like my parents did.” Instead, the changes tend to occur because:

a) Their relative discretionary time versus discretionary money changes over their lifetime (we act differently when we are time rich and cash poor versus when we are time poor and cash rich).

b) Their physical abilities change (older people have poorer vision, weaker stomachs, and are less mobile—perhaps no longer able to drive themselves).

c) Even though they may not be trend-setters, older people will switch to the new if it is found to be vastly superior (for example, the elderly eventually saw the benefit of the internet for their lives). In this case, they are not changing to be more like their parents, but to be more like their children.

2. Don’t look to the younger people of today to predict how the younger people of tomorrow will be
Each generation has its own defining moments. Those who grew up in the depression of the 1930s had a different outlook from those who grew up in the prosperous 1950s versus those who grew up in the turbulent 1960s, versus those who grew up in the materialistic 1980s, versus those who are growing up in the current age of terrorism.

Times change; technology advances. A person who has been tapping on a computer keyboard since the age of three sees technology a lot differently from one who first typed on a computer in their 20s. The “cool” behavior of one generation becomes “the weird stuff my parent’s did” to the next generation.

“Cool” communication has morphed from email to IM to texting to tweeting. We’ve moved the core cool internet page from portals to search engines to social network sites. The cool thing of tomorrow may not even be invented yet. So don’t assume today’s definition of cool will last.

It’s difficult to stay relevant and cool for each new generation. MTV has had to reinvent itself many times over in order to have its brand still be relevant to each young generation (and it appears to be losing the battle). Perhaps a better approach is to emulate Pepsi, who adds new brands to its portfolio in order to be relevant to each new generation, from Pepsi to Mountain Dew to Gatorade to SoBe.

Therefore, when envisioning the future, assume some behavior patterns which do not yet even exist. Better yet, try to create that next cool thing.

Behavior patterns tend to follow generations. Therefore, it is often a mistake to use one generation’s patterns in order to predict a different generation’s patterns.

All of this change is good, because it provides a competitive advantage to those who know how to exploit it. If things never changed, we’d all still be shopping Sears.

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