Mastering The Boomer-Millennial Gap And Its Impact On MSPs

The business world is seeing a shift from older forms of capitalism to new models of consumer and business activity, and companies doing business in the cloud will need to better understand how businesses, and their customers, are changing in their thinking in order to succeed.

That's the message from John Battelle, author and founder and executive chairman of NewCo, a technology conference and festival focused on change, who told attendees at this week's NexGen Cloud Conference that there is a huge difference between what he termed the "OldCo" and the "NewCo."

The OldCo represents the way business has traditionally been done by the baby boomer and GenX generations, Battelle said.

[Related: NexGen Cloud: Get Ready For Enterprise Apps' Rush To The Cloud]

Characteristics of OldCo are based on mass consumerism, or the idea that businesses are built to produce things for a large number of consumers, Battelle said. OldCo may have development cycles taking 12 to 36 months, have on-premise IT infrastructure, and treat employees as resources. OldCo businesses also feature hierarchical management and are profit-driven, he said.

NewCo businesses, on the other hand, don't look at the world as a mass-consumption world, Battelle said. "They look at how to develop a market for one person," he said. "And they can turn one person into five different markets."

NewCo businesses are in a state of continual change. They feature cloud-based IT, treat employees as key assets, and depend on trust-based flat management. Just as important, Battelle said, they are both purpose-driven and profit-driven.

Battelle identified a number of big forces driving the migration of business from the OldCo model to the NewCo model.

The first is the idea that technology is now just a critical part of the economy and not an industry itself. Battelle compared the shift in technology to the building of the interstate highway system in the 1950s and 1960s. Then, he said, people talked about the cement industry and the building industry, but today we talk about the highways.

"There is no tech industry anymore," he said. "Technology is a horizontal force driving our economy. ... What we have just built is a fundamental part of our economy."

The second is how the baby boomer generation and the millennial generation will bridge the gap between them, Battelle said.

Both boomers, some of whom have been in the business world for 40 years, and millennials, who are now looking at what they want to do for the next 40 years, are huge groups of people who are looking at their legacies.

"So it's a significant moment--a moment that will last about 10 years--as the two biggest groups in the economy look to the future," he said.

Boomers are anxious about how the rest of their lives will work out even though they, as a group, are wealthy, Battelle said. They are in charge of business today, but grew up at a time when they thought that a handful of people in Moscow and Washington D.C. could at any time blow up the world with a push of the button. "We won," he said. "We out-produced and out-consumed the Soviet Union."

Millennials, on the other hand, are purpose-driven more than they are profit-driven, and over half plan to eventually start their own companies, Battelle said. They are secular, with less of a belief in either religion or government than boomers had, and their biggest issue is the possible impact of climate change, he said.

The bridge between them will be the ability of the boomers to invest in the capital to make the more entrepreneurial millennials successful, he said.

The third big force is the rise of cities. Battelle said that just a generation ago, about 33 percent of the world's population lived in cities. Currently, it's about half, but by the end of the century that figure will rise to about 80 percent.

Cities will face the biggest problems, but also present the biggest opportunities in the future, he said. Cities will be the centers of innovation and the birthplace of all great companies, he said.

Battelle cited as examples of NewCo those businesses like Uber or Airbnb that have come up which new approaches to old problems, and do so by modeling consumer behavior. This includes modeling behaviors that consumers themselves have yet to think of.

"Five years ago, who would have thought you would be sleeping in a stranger's house instead of a hotel," he said. "Who would have thought you'd be riding in a stranger's car?

NewCos also focus on awesome customer experience, and on finding ways to take advantage of new information flows, he said.

Battelle also brought up the example of San Francisco-based Earnest, a new business offering small loans to consumers who, for instance, might need to borrow $10,000 to fund a move from the east coast to the west coast for a job along with the first and last months rent.

An OldCo financial business, he said, might pull the borrower's FICO score and combine it with maybe four other data points to assign risk, and then charge 11 percent to 15 percent interest and face a default rate of about 10 percent. "And they're OK with that," he said. "They're making so much money they don't care (about the defaults)."

Earnest, on the other hand, looks at over 100 data points including the borrower's FICO score, LinkedIn profile, bank history and balances, and other information that boomers might feel uncomfortable disclosing but which millennials are already used to disclosing, and offer loans with interest of 4 percent to 6 percent, Battelle said. So far, Earnest's default rate is 0 percent.

"They have figured out how to use information to generate an information flow," he said. "I would not want to be an OldCo lending institution."

Battelle told solution providers they need to talk with customers about the information flows they need, and not just about technology requirements, and to image new information flows.

He also said they need to be able to talk about what kind of customer experience their clients want to provide to their customers. "Don't get stuck up in speeds and feeds," he said.

Battelle had a unique approach to not only what the cloud is, but also what changes are coming, said Ken Patterson, executive president of Casserly Consulting, a Bedford, Mass.-based managed services provider.

"I like his philosophy that IT is not an industry itself but is instead part of these other industries," Patterson told CRN.

Battelle's observations about how the market is changing from the OldCo approach to the NewCo one is important, Patterson said.

"These ideas will help us reexamine our approach to our clients, and better understand their approach to their customers," he said. "That's a good takeaway for us."

Robert Desman, director of business development at Carceron Managed IT Services, an Atlanta-based managed services provider, said the observations Battelle made about the shift in priorities from the baby boomer generation to the millennial generation is not really that much different from prior shifts.

"In the 1960s, a lot of people were cause-driven," Desman told CRN. "Remember 'turn on, tune in, drop out?' What ended it? Parents couldn't take care of their children forever. There's a lot of advice about how to work with millennials today. But not a lot of advice about what makes millennials work."

Many of the millennials Desman works with want to be entrepreneurs, but may not have the tenacity to work it through. "They have this great idea, and want to sit back and make a million dollars," he said.

It may be great that millennials can start businesses like Uber and Airbnb, but in reality such businesses are built on using excess capacity already available as a resource, and not on actually creating new resources, Desman said.

"When you're not in your house, that's excess capacity," he said. "When your not in your car, that's excess capacity. So any money you make here is coming from marginal revenue, making companies like Uber and Airbnb more like media companies. Supply is now greater than demand. If supply is constrained, you can charge more. But these resources are generating marginal revenue. So you can get $13 rides to the airport."

Desman said there are three reasons to start a business: Meet some unsatisfied demand in the market through invention, find something in the market that is already there that you can do better through innovation, and take advantage of unused capacity or logistics capabilities.

"Where do you plug new-wave businesses into this model?" he said. "A lot meet the third requirement, that of using excess capacity. It's not invention or innovation, but just making things more accessible. It's a cannibalistic model with its own built-in end point."

Such a model can't work indefinitely, Desman said.

"When the millennials can't pay for what they want, things will change," he said. "All my counter-culture, sandal-wearing friends, I was there when they put on their wingtips. Somewhere under this is economic reality: You have to pay the bills."