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From Resource, May 2007
Copyright by LOMA
Navigating
the Historic Technology Transformation
Technology and media changes are transforming our society and the business
world. Insurance companies need to
be ready for the challenges and opportunities in the transitional years ahead.
By
Tammy J. McInturff
The world is in the midst of a
rare technology and media transformation that has many implications for all
businesses. Insurance and financial
services companies need to explore the new business terrain opening up in this
historic moment and begin to think about the challenges and opportunities in
transitional years ahead.
At
LOMA’s Emerging and Distribution Technology conferences, Peter Leyden, noted
author and director of the New Politics Institute, discussed how key
developments in technology, media and demographics have laid the groundwork for
continued global economic expansion, a different business environment, as well
as big shifts in politics and government.
In the
keynote session sponsored by CSC,
Leyden
explained that what the world needs now is a little clarity about the future.
Leyden
, a futurist and co-author of What’s Next? Exploring the
New Terrain for Business, provided some insight and much needed clarity
about the future.
Media
Transformation
Leyden
stressed that we are not going through an ordinary change in technology and
media. “We are probably in the
most fundamental technology and media transformation certainly in our life
times,” he said. “It is
questionable whether we have ever seen such a huge shift in the fundamental
technology at the basis of our economy, society and media.
Also in terms of our media transformation, we are really looking at a
disruption on a scale that has executives in every single media sector and most
business sectors really fundamentally questioning how we change the way we do
business.”
In the
late 20th century almost everything revolved around television.
Television was the media that most consumers preferred for their news and
entertainment. It was also the
preferred way for companies to introduce customers to their new products and
services through TV advertisements and the way that politicians got information
out to voters.
According
to
Leyden
, we are now in a transition phase, which is causing a lot of trauma for some
companies. Companies that thrived in
the 20th century are struggling in this one in large part due to this
transformation. “What is happening
is we are transitioning to a different kind of technology infrastructure, media
infrastructure and a different way of doing business,” he said.
“And as we see on the horizon how this stuff can really work, we are
still in this messy transition phase where all of our organizations have one
foot in one world and one foot in the other world.”
Looking
to the Past: The
Arrival of TV
According to
Leyden
, the last time we came close to this level of transformation was with the
arrival of broadcast television. The
arrival of broadcast television was a major technology and media transformation.
“In the 1950s we had this new medium, TV, and we had to figure out how
we were going to pay for these TV shows,” he said.
“Do we have companies sponsor programs, or have ads?
How long should the ads be, one minute, 30 seconds, etc?
Everything was new and experimental with TV.”
By the
next decade, the 1960s, it started to actually get quite serious.
People began to realize the power that television had to get a message
out.
Leyden
gave an example of a commercial that ran only once in 1964 of a little girl
plucking petals from a daisy that eventually morphed into a countdown for a
nuclear bomb. The commercial’s
message was to vote for Lyndon Johnson for president, but the image was so
shocking and disturbing to viewers that it did not run again.
“So it was in the 1960s that we really figured out how to use
television in a very powerful way,”
Leyden
said.
People
realized that this medium was good for much more than just airing children’s
shows like Howdy Doody. “Television
started being used very powerfully in politics,”
Leyden
said. “For the first time people
could actually see presidential candidates debate.
TV began to connect with the entire country.
At the same time, we began to realize how we could manipulate emotions
for political affect. Everyone in
the country could tune in and listen to Dr. King’s “I Have a Dream”
speech. People realized that TV was
really the way that we were going to basically do politics and people also
understood that this was also the way we were going to sell soap.
So from that point on, for the next thirty to forty years, politics,
advertising and basic business was organized around television.”
Television
was a medium that was basically created for the Baby Boomer generation.
Leyden
said that Baby Boomers were the first consumers of this medium and ultimately
they became the producers of this medium over the course of their lifetime.
Television ended up dominating in terms of the economy and politics over
the course of a 40 year track.
“Today,
we’ve got around $60 billion in 30 second TV ads in the
U.S.
,” said
Leyden
. However, he said, today it is
almost in a freefall. “We are
coming to a point were we are fundamentally in transition here.
Television is getting eclipsed by a lot of different things.”
According to
Leyden
, a lot of the changes that we are seeing today actually started in the 1990s.
“In the 1990s we were in the early stages of the Internet.
Leyden
said the arrival of new distribution systems, in particular the Internet, has
caused the media world that we built around TV over the last 40 years to crack
apart.
Leyden
added that it is actually not just the Internet that is causing this.
There
are a number of factors causing the technology and media transformation.
Leyden said these factors to consider include the influx of new
distribution channels, the introduction of cheap new tools, the emergence of new
audiences in the
U.S.
, new forms of global competition and the emergence of a new generation of young
people that is larger in size than the Baby Boomers. “All these things
together started the 1990s great economic move,” he said.
All of
these changes basically started in the 1990s but paused briefly with the dotcom
crash and recession that followed, but the basic course of this technology
stayed on track.
“There was a pause but then
all these things kicked right back in,” he added.
“The adoption of technology and the spread of the broadband Internet
all kept going. These computer tools
just kept going on the same trajectory that they were doing in the 1990s.”
Cheap
New Tools
Leyden
said the introduction of cheap new tools is one of the factors that is changing
the way we do business. “It is not
just about distribution, it is about these powerful tools that you can use over
this distribution system, like cell phones and PDAs.”
Leyden
gave the example of how blogs have grown dramatically over the past few years.
“A few years ago blogs, as we know them today, didn’t even exist,”
he said. “Now there are millions
of blogs on the Web.” Blogs allow
regular people to control the content by posting their opinions or beliefs on a
topic.
There
is a lot of buzz right now about Web 2.0. “As
a new generation of Web-based tools enter the market, some are referring to
these as “Web 2.0” to set them apart from the tools of the 1990s,”
Leyden
said. “One feature of these new
tools is that they allow collaboration across distances.
These collaborative tools can reduce the costs of creating content.
They can also make everyone more efficient.
In the end, this allows many more people the ability to produce
content.”
Digital
tools like cell phones and video cameras have dropped dramatically in price over
the past few years. Even the cost of
video editing software has decreased dramatically.
Today Digital Video Recorders (DVRs) are very affordable and are even
being bundled in with cable TV packages.
For
businesses, the flip side of this is that consumers are getting much more
control over what they want to see. “This
can create a challenge for companies who are only marketing through traditional
media,”
Leyden
said. “For example, DVRs are a
very popular way for consumers to record television programs now and they allow
you to skip the ads. People who have
DRVs watch TV completely differently. Very
few people actually watch the ads. By
2008 a third of all American homes will have these types of devices and the
number will just increase. So
basically companies currently have 60 billion dollars invested in television ads
that in two years a third of all people are not going to be watching.
The entire industry is trying to face that as well as the entire American
economy. Why put $60 billion
into television ads that everyone is going to skip?
This is going to move. You
are going to watch a lot of this money move into all kinds of different
places.” Companies need to start
thinking about how they want to deal with this different environment.
Today,
fifty percent of all American households have broadband Internet.
That number also keeps growing. “There
are multiple ways to get broadband Internet and it is going to be higher and
higher bandwidth over the next five years,”
Leyden
said. “This is just the march of
progress.”
This broadband boom is also
going into the cell phones.
Leyden
said that by 2008, 90 percent of all phones will be Internet enabled.
Everyone will basically be able to get to the Internet send e-mail and
eventually watch videos from their cell phones.
All of these changes reflect how we are shifting from mass media to niche
media.
The
Millennials
Ultimately there is the arrival
of new audiences which often goes hand in hand with a new technology or new
media transformation. There is a new
generation coming of age right now, a group that
Leyden
called the Millennials. This
generation of young people, who were born in the 1980s and 1990s, is as large as
the Baby Boomer generation. The Baby
Boomer generation has made a huge impact on American society at every life
stage. The Millennials, who are
essentially the children of the Baby Boomers, will also make an impact on
society and media. In fact, they are
already starting to make an impact on the world now.
The
Millennial generation includes about 75 million people, or about a quarter of
the population of the
United States
.
Leyden
explained that these young people are where the boomers were in 1970.
The oldest people in this generation are about 26 or 27-years-old right
now and the bulk of the boom is coming behind them.
American
society was fundamentally affected by the Boomers.
The Baby Boomers affected the economy, the media, the real-estate market,
life insurance, etc, was all affected at every life stage of the baby boomers.
That is basically where this millennial generation is now.
“This millennial generation is very diverse, close to 40 percent of
them are not white,”
Leyden
said. “People of this Millennial
generation are the ones that are using these new technologies.
Millennials have grown up with the Internet and cell phones.
For a lot of them, these tools have always been a part of their world. They
are the most tech savvy generation. They
are the first generation that is more like fish in water with technology.
This group of young people also views the world differently than previous
generations. Millennials don’t see
gender differences, racial differences, sexual orientation differences or even
cultural differences. You’ve
really got to take a fresh look at this generation because they are very
different.”
Changes
in the American Population
Technology and media changes
are not the only trends that are transforming our society and the business
world. According to
Leyden
, there are also big changes occurring in demographics that businesses need to
be paying attention to.
Leyden
explained that in the 1980s and 1990s there was a large influx of immigrants
into the
United States
. He said that during this time the
number of immigrants entering the
U.S.
was larger than that of the early 20th century.
“In the early 20th century the immigrants were mostly European in the
‘80s and ‘90s they were largely Latino.”
Today
there are around 40 million Latinos living in the
U.S.
Latinos are on track to be a
quarter of all Americans by 2050 and any business who is in the business of
connecting to either new workers or new customers has to understand some of
these demographic changes that are also driving a lot of the changes in our
society today.
Globalization
We have watched the Internet
become more integrated in American society.
Leyden
said the 1990s globalization movement brought the Communist and Socialist
sections of the world into the global economy.
This brought the entire world together on “the same free market playing
field,” he said. This transition
in the 1990s set the stage for the second phase of globalization a phenomenon
Leyden
called “Globalization 2.0.” He
said, “The groundwork has been laid and now the building of a truly globally
era can begin.”
According
to
Leyden
this new global context has some incredible opportunities and challenges to
businesses. In the ‘90s globalization affected industries like manufacturing
this second phase will affect the media industry in particular.
“Countries
like
China
,
India
and
Russia
that were just figuring out the ropes in the ‘90s are now actually very
powerful players,”
Leyden
said. “These countries are
affecting this restructured global economy in a very fundamental way.
This is a really serious reworking of what is going on in technology
around the world. The boom mentality
and the big transformation mentality of the ‘90s is basically back.”
New
Distribution Systems
The arrival of new distribution
systems is going to create new opportunities for companies.
As these systems progress, organizations will have many avenues to
reaching the consumer.
Leyden
said the best way to understand what is happening now with technology is to
realize that there are two Internet booms.
Leyden
said we are in the second of the Internet booms now.
“In the 1990s we had the adoption of one kind of Internet boom and that
one we called the low bandwidth Internet boom.
The low bandwidth Internet boom affected all media related to text and
photo. What has happened after this
pause is we are now in the middle of the second boom—the high bandwidth
Internet boom. It is affecting all
the higher bandwidth, richer media which essentially were not able to migrate
during the low bandwidth Internet boom.”
In 1995, during the low
bandwidth Internet boom, there were companies out there that didn’t believe
that the Internet was going to really catch on.
“Today we know the power of the Internet and we can see that we are in
the second Internet boom,”
Leyden
said. “You need to reorganize
your strategy for this new boom. This
migration is inevitable and it is fundamentally restructuring all of these
industries. This is going to be the
capacity everyone is going to have and that you have to strategize from now.”
During
this second Internet boom, there is a major fundamental shift happening in our
society right now. People have more
power to choose the content they want to watch and read.
This is going to change the way we do business and the way we do
politics.
When
you look at broadcast television as a new distribution system in the 1950s, it
didn’t really directly impact other media at that time.
However, in this case the Internet is not just another medium.
The Internet essentially has a domino effect on every single media
sector.
The
film, music, radio, newspaper, magazine, book or cable broadcast industries are
all severely challenging and the audience is shifting rapidly.
“The way you do business and produce content in these spaces is
changing so quickly that no one knows what is going on,”
Leyden
said.
The
New Media World
Companies need to be ready for
the technology and media changes that are coming.
You also need to find a way to situate your company in this new media
world.
When
the Internet became popular no one really knew how to capitalize on it.
Leyden
discussed how Google figured out how to crack the problem of advertising on the
Internet. “In the 1990s everyone was going to the Internet but no one knew how
to make money on it, which is partly why it collapsed in the late 1990s,” he
said. “Google figured out how to
advertise on the Internet by selling search ads.
When companies advertise on Google, they purchase keywords that relate to
their product or service. Companies
bid for search words and often pay for the ad based on the number of people that
click on the company’s link. When
an Internet user types in a keyword on Google he will see the sponsored ads on
the same page as his search results. These
ads may be at the very top of the page or on the right hand side.
For example, a car dealer company might agree to pay a dollar for
everyone who clicks his ad. So every time someone is searching for a car his ad
comes up if they click on his link, the car dealer has to pay a dollar.
If they don’t click on the link then he doesn’t pay anything.
So the car dealer has an engaged person, someone interested in wanting to
know something about cars. These ads
are extremely effective and efficient. They
are a powerful way to advertise and corporate
America
has figured this out. So a lot of
advertising money is moving into these search ads.
Google is on track to get about six billion dollars in search ads this
year. Six billion dollars is more
than any newspaper chain or television network by far.”
This new way of advertising is very effective and very powerful.
“We
have started to watch how television or video clips on the Internet may
eventually supercede the way we think of the television industry today,”
Leyden
said. “For example, look at
YouTube. YouTube is a small company
that was literally just started in the early part of 2005.
It only went live in December of 2005.
It has now become a place that home spun videos, commercials, and
repurposed stuff off of TV gets put up. People
can search for and watch videos they want to see on this Web site.”
“When
YouTube first went live they were getting 15,000 people a day looking stuff up,
by September 2006, 65,000 people a day were looking stuff up there,” he added.
“Today 100 million videos are going up on YouTube every single day. In
its heyday Seinfield, which was the most popular show in the 1990s, would only
get about 30 million Americans to watch it.
Of course that doesn’t mean 100 million unique people are putting up
videos on YouTube everyday, but it also doesn’t mean only in the
United States
. However, it does give you a sense
of the scale of traffic that is happening here.”
Mobile Media
Cell phones and other mobile
media devices are basically turning into miniature computers.
“Apple announced that they are going to come out with the iPhone, which
is going to be launched in June. I
was blown away by how powerful this thing is going to be,” said
Leyden
. “It is essentially a computer.
It has almost all the capability of a laptop in this handheld device.
It really is a breakthrough in phones.
Of course, this will have all the other carriers scrambling to keep up.
We are going to see these smartphones evolve very rapidly and the
interface become very intuitive and be much more manageable.”
As
cell phone technology evolves, many consumers are relying on them as their
primary communication device. “By
2008, 30 percent of people with wireless phones, which is basically all adults
in the
United States
, will not own landlines,” said
Leyden
.
Gaming
There is also a virtual world
that is evolving now. “People who
are not familiar with the gaming world think it is just a bunch of 17-year-old
kids in a basement,”
Leyden
said. That is not true.
The gaming industry is huge. It
is rivaling
Hollywood
now in terms revenues in terms of domestic sales of these games.
The demographics of people playing games is different than some might
think. People in their 30s and 40s
are playing games and actually it is not dominated by a particular gender.
Women are about 50 percent of all the people on these online connected
worlds. So the gender, age,
demographic for gaming is essentially normalizing to the way we think of other
mediums.”
Movement
to 21st Century Media
Leyden
said we are moving to a 21st century media.
This new media will jell the way broadcast television jelled over the
course of the 1960s, out of trial and error.
“In this decade, we are experiencing a similar transition as we did in
the 1950s and ’60s,” he said. “We
are watching a huge amount of experimentation right now but it is going to
settle. We are going to have a 21st
century media that is going to be very good from the point of view of people who
want to get their message out. It is
going to be a better way to get our message out.
It will be cheaper, more efficient, and more productive.
It is also going to be a better way for consumers to get what they want
from businesses.”
This
technology is moving us to a place that will make the economy more efficient.
All of it will be more targeted. You
will be able to get much closer to exactly who you want, almost down to the
individual.
It is going to be much more
efficient and much more consumer controlled, which can have its positive and
negative points. “If you are a
consumer it is great, you don’t have to deal with everything coming at you;
you can basically get what you want,”
Leyden
said. “But if you are a company
trying to reach customers you are going to have to really give them something
they want. You are going to have to
actually connect to them.”
The time constraints that exist
with traditional media are not a factor in this new media world.
“You don’t have to worry about time in this media anymore,” said
Leyden
. “Whenever people want they will
get it and whenever you want to put it out there you can put it out there and
they will basically get it.”
This
new media is also much more collaborative. “Everything is going to be able to
be connected locally and across distances,” he said.
“Everything is going to be connected together in a way that will allow
much more collaboration which from a productivity standpoint can be very
helpful.”
It is already global, which is
kind of underestimated according to
Leyden
. “Everything that you do
domestically is going to be seen through a global lens.
And anything that we can do in the
U.S.
people all over the world will be able to get and vice versa.
This global interconnection is such a fundamental shift that we haven’t
really thought it through. There
is going to be a lot more competition around.
There is also going to be a lot more markets going abroad and a lot more
people you can work with from abroad.”
This is going to be an out of
control media world. “We are
coming from a world where the broadcast media had a rigid schedule,”
Leyden
said. “Viewers knew what was
going to be on network television on Sunday night.
With the blogisphere you have no idea what is going to happen in six
months. This is a very different
media environment than we are used to. It
is a different technology environment than we are used to.
So you have to kind of let go of it more and be ready for surprises.”
The
technology tools we have today are very powerful.
The whole country is coming together in different generations and
different groups. We are facing a
moment of global restructuring, partly because of this globalization phenomenon
and partly because of these technologies.
Leyden
said, “We are in a moment of transition for better or worse.
We are in a very profound historical moment.
The old ways are not working. The
new ways show promise. We are in
that transition. This is our
defining moment. The Baby Boomers
did a good job of taking on the challenge of their generation.
Now it is really our time, today it is not just Boomers but all the
constellation generations.”
This is your defining moment.
As businesses you have obligations to your employees and your customers
to navigate this transition.
SIDEBAR
Peter Leyden is the Director of
the New Politics Institute, a think tank helping people in politics take
advantage of today’s massive changes in technology, media and demographics.
Before that he was the Knowledge Developer for Global Business Network, a
futures think tank and strategic consulting firm specializing in scenario
planning. A former managing editor
of Wired magazine, he also co-authored The
Long Boom: A Future History of the World: 1980-2020, which has been
published in seven languages.
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