The Gateway Recession: What CEOs Will Face Next

We’ll look back on this recession as much more than an ugly economic moment. History will view it as The Gateway — a portal connecting two very different eras.

When the economic clouds clear, many prevailing elites will have been swept away, organizational structures will have fallen, and many who were formerly in control will have lost power. Those who can speak digital will thrive, and those who cannot will finally get the message and retire.

The signs are everywhere. Post-Gateway players: Obama; Amazon; Zappos; Jet Blue; Twitter; Facebook; blogs; Craigslist; broadband; Wikipedia; DVRs and iTunes. Pre-Gateway: GM; The New York Times; the Republican party; shopping malls; print advertising; excessive executive pay; TV networks; boards of directors full of aging plutocrats; and the TV-centered Washington chattering classes. Like the US Civil War, which separated an agrarian society from an industrialized economy, or World War I — a death knell for many European elites — the Gateway Recession is exposing fundamental weaknesses in long-standing political, cultural, and economic institutions.

Here are the new challenges and rules that await CEOs on the other side of that door:

1) Digital will be mandatory, not a choice. Pre-digital CEOs could get away with IT/BT (information technology/business technology) ignorance. No longer. Tech will be key to how you sell, connect to customers, become more efficient, and lower costs. Why is Amazon so powerful? Because it combines two old-world attributes, great customer service, and superb execution with a critical post-Gateway attribute — digital. In the new world, CEOs of all stripes will have to have it all, in the mode of Amazon.

2) Brand loyalty will be limited. For five years, Forrester has been tracking the precipitous decline in brand loyalty — particularly for complex products like cars. Brands will afford only limited protection for your company in the new world — because choice has been radically expanded. All brands are subject to consumer testing, discussion, disclosure, and transparency. You can no longer own your customer — your customer will own you.

3) Customers will look very unfamiliar, as shown in the Forrester report, The State Of Consumers And Technology: Benchmark 2008. They will learn, play, work, and live differently than you or the customers you studied in business school. In the US, 18- to 27-year-olds spend 30% less time reading magazines and newspapers than 28- to 40-year-olds. They spend twice as much time playing digital games, 53% more time on cell phones, and twice the amount of time on social sites like Facebook. You may not like it, and you may not understand it, but your customer is being changed by technology — and your customer will change your company.

4) The war for people will be intense. It’s a counterintuitive thought at this moment of high worldwide unemployment, but the post-Gateway era will be distinguished by a pitched battle for good people. Basic demographics are at work — in the next eight years 35% of nurses and 40% of federal government workers will retire in the US. Already-low fertility rates in Europe will continue to fall. Yes, the baby boomers’ kids will fill the gap but not for another 20 years. CEOs will fight for people on three fronts: 1) Attracting and winning the best and the brightest takes world-class offices and factories, the best internal technology, and truly compelling corporate purpose and values; 2) retaining the best workers takes a great corporate strategy, excellent leadership, and inspiring management; and finally 3) getting productivity from the limited workforce you have — again, this loops back to nailing the technology imperative.

5) You will sell differently. You used to advertise in the local newspaper, BusinessWeek, CNN, Le Monde, or The Wall Street Journal. Many of these channels won’t survive in the new era — because the new consumer won’t pick them up or tune them in. You will have to reach customers in new ways — blogs, Facebook, Google, Twitter, and whatever supersedes them.

6) The way you innovated is dead. The era of black-box innovation has passed. Look to P&G for the new model. CEO A.G. Lafley searches for product ideas all over the world — competitors, customers, China, and India — then partners to bring the new innovation to market. The biggest change will be the involvement of customers in building your products — a concept that I call “social sigma” (with apologies to Six Sigma). The idea is that the customer, through social technologies, will spec the new product — that the customer will be an active participant in broad aspects of product development.
The forces of the recession will trigger many of these changes. But the end of the Gateway Recession will also usher in a new technology era. Tech and the Internet have been around for decades, so why is their impact felt post-recession? Because while technology changes quickly, people don’t. It has taken 15 years of cultural fermentation, generational transitions, and habit breaking for society to catch up to what technology can do. Pre-Gateway, society wasn’t ready. Post-Gateway, technology and human behavior will align to create a powerful brew.

Elites will die, but new ones will take their place. The Sulzbergers will fade from view, but the Brins and the Bezos' will fill the void. New companies (and therefore new elites) will aggregate around three areas: 1) new healthcare; 2) new forms of energy; and 3) technology. As CEO, you’ll have to drop your connections to the dying elites and figure out how to form connections with the emerging ones.

I'd love to get your thoughts on this topic. And as a note, this post appeared first in the Huffington Post:   http://www.huffingtonpost.com/george-f-colony/beyond-the-gateway-recess_b_205458.html

Comments

re: The Gateway Recession: What CEOs Will Face Next

George - Great insight. Very interesting how you see the understanding of "digital communication with customers and key influencers" as so imperative for the Executive Suite.Think the global idea also builds off of that. In this post-Western society, innovation(in terms of technology & business models) is coming from places like Mumbai and Kigali. Look at the cheap housing model in India (http://www.economist.com/businessfinance/displaystory.cfm?story_id=13837400) and digital efforts in Rwanda and Kenya (http://www.economist.com/world/mideast-africa/displaystory.cfm?story_id=13876700) The Web is accelerating globalization and CEO's of the future must be truly global.

re: The Gateway Recession: What CEOs Will Face Next

I truly believe in just about all that you've forecasted. In addition to attracting the best and brightest, the atmosphere in which they work or come from will change greatly. (To be fair, I think Godin or the Times commented on this too.) Goodbye to cubicles and corner offices. Hello to working-from-home, web conferences and such. People will come from different time zones to collaborate and join minds. Amazing. I'll bet transportation and technology-related industries that effectively shrink the world... will boom as a result.

re: The Gateway Recession: What CEOs Will Face Next

Excellent. Perhaps #6 will be the most difficult for organization's to achieve -- but doing that well goes a long way into bringing 1, 2, 4 and 5 to life. Do you think certain types of corporations (including those that have experience in software solutions, for example) will have an advantage?

re: The Gateway Recession: What CEOs Will Face Next

Great observation. Software has to be driver that enables the business to operate the way the customer wants it. Does all all the 'standard' hardcoded software do that today? Why do large businesses spend billions to automate processes in away that no customers wants?Not only the elites will have to go, but those global enterprise dinosaurs as well. Their CEOs have become way to rigid in their thinking to adapt to the changes technology could bring to their business.

re: The Gateway Recession: What CEOs Will Face Next

George, being focused on the insurance technology and marketing space, these comments are like an air-raid siren going off. Additionally, residing in Cleveland and driving past old industrial relics on the way to the office, I am constantly reminded of the potentially adverse impacts associated with economic, industrial, and corporate shifts. I can't help but wonder if some of the empty buildings I pass by are the result of Directors and Executives who were short-sighted and fearful of change, proud that they 'arrived', greedy because they 'earned it', and in other ways essentially killed their companies (probably ones they inherited rather than built). Will my children be driving through Hartford, Omaha, NY/NJ, Philly, and other cities with insurance 'towers' someday, see relics from today, and have similar thoughts? It's possible, lemme tell ya. It's VERY possible.

re: The Gateway Recession: What CEOs Will Face Next

Technology, and in particular the Internet, has changed the business paradigm COMPLETELY. Very entertaining article.I'm still not quite sure that most executives know how they can leverage Internet and IT operations. Most are so focused on the hardware and connectivity issues, buying all the right gear and software, that examination of the result is lacking. Sure, everything is bolted together and performs adequately, in terms of response time, but what does it contribute to the bottom line?CEOs will have to start thinking about why do they have Internet/technology and what do they want to achieve. Certainly the younger employees/users are much more savvy tech-wise and can more readily grasp the the complexities. They are also more inclined, based on personal experience, to abuse the technology placing themselves, their coworkers and the company at risk. This is one area where executive/management technology dependencies are getting everybody in trouble. Buying technology to control users doesn't work. Access control. Web filters. Data Loss Prevention. All very expensive but are a poor substitute for management process.Indeed, the new CEO must embrace change, technology and the associated fluttering, sputtering and twittering. They must also embrace that business is fundamentally about managing people and there are processes to accomplish this end. Technology is not the solution. It's a means to an end. So in a sense the new CEO must use some good old fashioned retro-ideas and practices in order to make the transition: management process; communications; setting expectations; education; monitoring (as in network communications) usage. I remember when management would go through phone logs and pick out personal phone calls! There was no abuse of business resources for personal use! Today, with Internet phone, personal email, streaming Video, on-line radio, on-line TV, on-line shopping, on-line travel etc. etc. Users don't have to miss a beat from the time they leave home to come to work. And for many, there's very little work being done as a result. It's just part of the new paradigm and CEO challenge: "You've embraced technology and now you have to deal with it!"

re: The Gateway Recession: What CEOs Will Face Next

Excellent insight. I agree with your ideas on where the business world is headed. However, this will not be an overnight change where the "old" way disappears and the "new" world exists. There are two primary reasons; one, the "old" companies are still fairly powerful from an infrastructure, capital, and customer base perspective. Some of them are willing to change to the "new" world, e.g., Comcast, and some will resist change. The second, and probably more influential reason is, there is a huge group of baby-boomers who are still a force in the marketplace. The baby-boomers represent a group with a significant amount of capital to spend, and for the most part, are uncomfortable with the change needed to work in the "new" world.I do agree with you that the way companies conduct business is changing and will continue to change and evolve; potentially this recession is an inflection point for that change. However, I think this will be a more gradual change as new technologies and new ways of doing business are tested and companies experiment with different tools and techniques. Like any other seed change; we don't know what will be on the other side of the change. There will be many people and companies trying different approaches to achieve the winning solution, but only a few will succeed.

re: The Gateway Recession: What CEOs Will Face Next

I think "digital" is too general of a term. It is the *social web* specifically that has changed everything. The world wide web of people that is emerging is transforming our behavior, relationships, and interactions both with one another as well as with brands and institutions.It's fascinating to think about how services like Facebook and Twitter are completely redefining the ways that we communicate, make decisions, anddiscover new products, services, and ideas.Before the web, the communication medium was largely 1-to-1. Information asymmetries led to hierarchy and irrational brand loyalty. In "Web 1.0," communication evolved to a 1-to-many, with a few number of publishers producing content consumed by the masses. With early "Web 2.0" wikis, blogs, tagging, and voting, we achieved many-to-many communication in silos of social web sites.With the Facebook-federated web and especially public Twitter, communication today is everybody-to-everybody, which personalizes the web, democratizes information and opportunity, enforces transparency, and flattens organizations.Clara Shihhttp://thefacebookera.com

re: The Gateway Recession: What CEOs Will Face Next

George, glad to see someone is addressing the retention/recruitment issue (your point 4) with sense and sound thinking. Those holding to the "people are glad to just have a job" and "I'll have my pick of candidates in this recession" are certainly in your pre-gateway pack.Even in the depths of this recession, we called attention to why retention is important now (http://globoforce.blogspot.com/2009/03/why-should-you-care-about-retention-in.html).Those who choose to turn a blind eye to employee engagement and satisfaction now will find themselves on the losing curve of competition in the upturn.

re: The Gateway Recession: What CEOs Will Face Next

George agree with insights. Enjoyed this post a great deal. To one of the comments in this thread...some "boomer executives" have spent the past 10 years re-engineering themselves to adapt. Those executives that don't have the desire to re-engineer themselves should work on their golf game or take up sailing....they are becoming or are already irrelevant in my humble opinion.

re: The Gateway Recession: What CEOs Will Face Next

Brilliant, thanks for sharing."Social Sigma" is a little pretentious, but the idea is huge. Businesses will need to corrupt their vision, strategy, products, and people with the external reality in a way that wasn't possible pre-Gateway. And creating the semi-permeable membrane around these businesses will require a complete re-think of how they communicate with customers and the world.

re: The Gateway Recession: What CEOs Will Face Next

George - Great insight. There is a new world order emerging where global shift is happening towards finding, consuming, and pricing services in the cloud/internet. These new service trends will dominate and accelerate in the coming decade. Anything that cam be digitized will be done..and improved upon continuously as the technology allows for it.

re: The Gateway Recession: What CEOs Will Face Next

"New companies (and therefore new elites) will aggregate around three areas: 1) new healthcare; 2) new forms of energy; and 3) technology."Learning and education in, on, and about new technologies will also be crucial to this new understanding and negotiation of the world.richard@mobileed.orgtwitter.com/richardscullin

re: The Gateway Recession: What CEOs Will Face Next

Among the elites that may pass with this Gateway Recession are the armies of financial engineers that once populated Bear Stearns, Lehman Brothers, etc. Perhaps MBAs will be more likely to consider fieldsother than investment banking and hedge fund management.

re: The Gateway Recession: What CEOs Will Face Next

Excellent summary of the hopes and dreams of the revived internet generation of management. I believe the statistics are and will continue to be skewed by these two observations:1) People change less than we anticipate as a culture, the 25-40 year olds that are noted here were supposed to be the digital generation and they got older and their habits and preferences changed. They don't talk on the phone because it is a waste of time when a text can do the job. The 18-25's spend how much more time playing digital games than the 25-35's did when they were 18-25. We still don't separate the generational from age related differences very well. This change still has years to brew.2) The digital CEO will have a significant challenge in finding technology innovation, so most of this will be in implementing and evolving where we are today, the last few next big things weren't new technology, they were new use cases.And just in case it's been missed, every 40-50 year old I know has a Facebook account, not so of the 25-40's this is all old hat for them and they don't need to be as connected. They just want to make sure they can shop on the web and text their peers.We should all be careful to watch the battles for people carefully, as they recognize the power they obtain the challenge will be to create a growing economy out of a pool of people under motivated to actually work. This is not an indictment of a generation, just an observation of human reality. Nothing reduces peoples drive to work hard and overachieve like lifetime job guarantees.

re: The Gateway Recession: What CEOs Will Face Next

Love your comments on what it will take to attract top talent. Clear strategic intent, crisp vision of the future, motivational leadership and sound core values. These are the keys to attracting people who want to be part of the cause, not just part of the payroll.I also like your coining of the term social sigma. As CEO of a software company, we're wrestling with how to involve the customer more and more in the product development process. It's exciting and challenging... and there's no doubt our customers are craving it and appreciating it to the extent we do it.thanks for your thoughts.

re: The Gateway Recession: What CEOs Will Face Next

This quote from a previous poster pretty much sums up one of the monumental problems of the pre-gateway era: "Nothing reduces peoples drive to work hard and overachieve like lifetime job guarantees." Thanks Marty!

re: The Gateway Recession: What CEOs Will Face Next

Tell-tale signs that a company's leadership may be one of the elites about to be destroyed post-Gateway Recession:1) "We've got it all figured out -- we're already digital."2) "Nothing has changed."3) "We've got a market to protect -- we're not going to endanger our position by going digital."4) "I'll let my marketing guys or my CIO figure it out."

re: The Gateway Recession: What CEOs Will Face Next

George,Great article, many comments.I also wrote an article you may want to look at entitled: "What CEO's Wish They Knew" at http://bit.ly/qmEd6 and would love your opinion on my analysis...Best,Dean Holmes

re: The Gateway Recession: What CEOs Will Face Next

You are correct in your assessment. The element you don't discuss is how the new world will attract people to their sites to build this new 5 year brand loyalty. We disucss this in my webshow FilmFellas.tv webisode 10,11,12 & 13. The idea is that all companies will eventually need to have entertainment webisodic shows on their websites that will compete with television. The show will appeal to their demographic and force them to come back to the website whenever the next webisode airs and at that time you have a chance to sell them your products. I guess I'm saying this is a golden opportunity for indie filmmakers to create these shows that make a companies websites worth regularily visiting.

re: The Gateway Recession: What CEOs Will Face Next

Brave new world indeed. The age of transparency, honesty and truly listening to our customers (our partners) is upon us. The acceleration of this from the fringes to the centre of all brands will take the vast majority by suprise. Those brands - and those who can help to drive their brands - into the arms of an audience who are thirsty for interaction and two sided communication will win, and win big time. Exhilarating times.

re: The Gateway Recession: What CEOs Will Face Next

I believe is right on point your analysis that this crisis will give the final push to a new economy. However I see one missing assesment about the democratization of opportunities all over the wrold based on technology. It's the fact that IT is evermore responsible for the vanishing of national borders when it comes to commerce. CEO's will have to face growing competition from places they have never imagined, meaning a company from a distant corner of the world may take away even your dearest clients. However this goes both ways and a world of opportunities will appear in front of those who are smart enough to see them.

re: The Gateway Recession: What CEOs Will Face Next

Great comment George.For point no. 5 - I liken it to witnessing the Internet decentralize. That having a website as a complete resource is still very necessary and yet having just a website alone is no longer enough.Presence is absolutely required on Facebook, Twitter and other networks. Suddenly content, brand and service offering masters are needed at many levels of an organization with more training emphasis needed to help employees be their own Scobles. Having gathered content for many organizations - information will need to flow so much better and faster to service this new culture.I forgot to mention in 9-09-09 post, that companies need a better global voice. Now that facebook, et al are creating global fan bases, we need communication that is not country specific. Eg. Starbucks posting US based promotions on their facebook page and little for other countries. I think companies will need to carefully engage the most loyal and loud fan voices and empower them to act on their behalf. With this comes new organizations of marketing - more emphasis on global teaming.Finally - great points above Clara. The speed of change in 2009 is simply astounding - admittedly, I didn't see it coming - that the recession would fuel such social network growth. I guess that is obvious in hindsight.