photo credit: via photopin (license)

There has been a lot of buzz and disapproval around the word "sharing" in the term "Sharing Economy." While there is plenty to criticize (and praise) about the concept of the sharing economy, I get tired of people disparaging the idea simply because of its label. Call it the Sharing Economy; call it the Collaborative Economy; or call it the Aardvark Economy--it will make no difference in the growing trend of collaborative consumption and commerce that is changing the way consumers acquire and use goods and services.

Today, people are picking on the term "sharing economy" because, in the words of a post on Harvard Business Review, "The Sharing Economy Isn’t About Sharing at All." The article is actually quite good, focusing on the motivations of those who participate in the sharing economy, although the author's conclusion strikes me as achingly obvious: People participate not out of a sense of altruism or community improvement but instead do so for economic benefit.

Well of course the primary driver behind the rapid growth of sharing economy models is economic--that's why the word "economy" is in the label!--but does that really mean people are not sharing? HBR says it does, because it defines sharing as "a form of social exchange that takes place among people known to each other, without any profit." Apparently, they do not have dictionaries at Harvard, because when I turn to Merriam-Webster, I see much broader definitions:

share
    verb 

• to have or use (something) with others of two or more people 

• to divide (something) into parts and each take or use a part 

• to let someone else have or use a part of (something that belongs to you)

Of those three definitions, only the last one implies the act of giving something for free (and even then, it is not explicit with respect to the lack of monetary exchange). The other two definitions focus on the division or mutual use of things.

We have all shared things for economic benefit. We share meals and then divide the check. We collectively purchase and share weekend homes and hunting land. We pool money to share ownership of lottery tickets. We pay association fees to jointly own and share community services like pools and streets and pay taxes to share access to public parks and schools. We own shares of stocks (a term derived from the literal sharing of ownership). And at our jobs, we use and transfer funds for access to shared services such as Human Resources.

The word "sharing" does not (solely) mean giving or lending of things with no economic expectation; the definition of the word also includes the way things are divided, used and consumed. This is the sort of sharing implied by the "Sharing Economy" label.

Those who do not own a car can access one thanks to Zipcar, a company that shares the cost of its distributed fleet of vehicles across its customer base. On Lending Club, people do not fully fund individual loan requests but share the risk and ownership with others. And today, small businesses can avoid the risk of long-term rental agreements by using services like PivotDesk to share office space and services with other SMBs.

The reason I am so irked by the HBR article and others that make a big deal about the term "sharing" (such as this one and this) is that they can encourage those not paying attention to deride the important trend towards collective consumption. It is too easy to see such a critique and think, "Nothing new here--it's just the same old greed and economics." On one hand, they are correct--the individual drive to maximize economic power is as old as humanity; on the other hand, to ignore how new digital, mobile and social technology and behaviors are rapidly altering consumer attitudes and expectations is to miss how vital this trend will become to us personally and to our companies.

Another reason I find these articles annoying is that they can shift the focus away from truly meaningful and concerning aspects of the sharing economy. Rather than debate whether the "sharing economy" label meets the kindergarten definition for the word "sharing," let's instead shine a bright light and have a robust discussion about the potential risks and societal impact of these nascent business models.

Is the sharing economy "hurtling us backwards," as economist Robert Reich suggests? Does the growth of the sharing economy demand new forms of employee benefits and protections? Are collaborative companies behaving unethically? And what does this trend say about the role of government--do we trust sharing economy platforms to empower consumers to keep themselves safe, or do we want new government regulation to enforce safety norms?

As funding for collaborative startups pushes past $11 billion and almost a third of Americans say they are open to purchasing products and services through consumer-to-consumer channels, the time has come to stop debating semantics and start considering the profound changes ahead for business, government, workers and consumers.

Postscript: While I have no issue designating the trend as the "sharing economy," I have shifted towards using the label "Collaborative Economy," the term preferred by Crowd Companies' Jeremiah Owyang. That is not because people aren't sharing (they are!) but because the trends that are threatening traditional sales, ownership and consumption include new ways to empower people to collaborate on the development, production and distribution of new goods and services. In other words, Zipcar and Airbnb may permit us to collectively use (or share) today's products, but Kickstarter and Shapeways are furnishing new ways for consumers to develop, distribute and promote new products. The word "collaborative" better describes the breadth and diversity of these innovative business models.

“Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.”
                                      ― Peter F. Drucker

One of the mistakes that successful companies make when faced with profound change in the business environment is to believe that their loyal customers will stay loyal, both to the brand and traditional business processes. Of course, building customer devotion is a necessity for brands nowadays, but leaders must recognize that today's strong brand loyalty offers no protection against significant changes in consumer expectations and behaviors.

This is an especially vital message now as we witness the birth and growth of the collaborative economy. No brand, regardless of existing consumer preference and loyalty, can avoid innovating to meet consumers' evolving expectations around sharing, renting, collective consumption and P2P (peer-to-peer) commerce.

I love the Drucker quote that leads off this blog post, although I would change one word, replacing "marketing" with "Customer Experience" (CX). At the time he said it, Drucker was referring to the old "Four Ps" model of marketing--product, price, place and promotion; nowadays, too many marketers are concerned with Promotion, leaving the other Ps to different parts of the organization. Nonetheless, what he says is that today's success is not enough; marketing and CX can create strong customer relationships today, but innovation is what creates strong customer relationships tomorrow.

Of course, studies demonstrate Drucker was correct. For example, in "The Living Company," Arie De Geus shares a study completed by Royal Dutch/Shell Group. Researchers examined similarities in companies that have existed since the nineteenth century. The study found that companies that enjoy long-term success share four attributes. Two do not pertain to innovation, but are important nonetheless--successful companies are fiscally conservative and have strong cultures with a firm sense of identity. The remaining two factors speak to the way innovation is baked into the core of their business:

• Successful companies are sensitive to their environment: "As wars, depressions, technologies, and political changes surged and ebbed around them, they always seemed to excel at keeping their feelers out, tuned to what-ever was going on around them." These companies "managed to react in timely fashion to the conditions of society around them."
   
• Successful companies are decentralized: De Geus later rethought the word and redefined it as "tolerant." He notes, "These companies were particularly tolerant of activities on the margin: outliers, experiments, and eccentricities within the boundaries of the cohesive firm, which kept stretching their understanding of possibilities."

Source: Econsultancy

History teaches us that today's brand strength furnishes no protection against the need to innovate. This has never been more true than today; while innovation has always been important, as the pace of change increases, the demand for business innovation grows. That companies today struggle with the quickening pace of innovation is apparent, as the average age of organizations in the S&P 500 has dropped from 60 years to less than twenty in the course of the past five decades.

We can examine what has occurred over the Internet era to see many obvious examples of companies that quickly failed despite very strong brand preference and customer loyalty. This loyalty meant little once the companies could not provide a product that met the changing needs and expectations of customers:

• Source: Journalism.org

  Newspapers: By the late 1990s, newspapers had seen an uninterrupted 40-year increase in both ad and circulation revenue. At the time, many in the news business saw the Internet as little risk given the high levels of subscriptions and trust people had in print media and low usage and trust consumers had for information on the Web. Newspaper were riding high with strong consumer perception and profitable business models. Then Craigslist and eBay launched P2P marketplaces, Monster created a digital job board and dozens of news sites like CNN.com and SFGate gained traction.
  
  The result was the rapid destruction of newspapers’ business models. Classified advertising dropped almost 80% in thirteen years and continues to fall today--down another 10.5% between 2012 and 2013. Circulation declines have not been as severe, but the trend has been consistently downward. In 2012, total daily newspaper circulation and total Sunday newspaper circulation were each equivalent to about one-third of U.S. households, down from around 55% in 2000.
  
  Newspapers could have innovated with consumer behaviors, but instead they are playing catch-up. The recent release of the New York Times' digital strategy demonstrates just how much change newspapers still must undertake because they relied on existing customer loyalty and business models rather than on innovation. The question is if newspapers can adjust in time--in recent weeks Gannett, Tribune Company and E. W. Scripps, all empires built on the newspaper business, spun off their newspapers into separate businesses in order to reduce the earnings drag on their bottom line. The New York Times said the newspapers were "kicked to the curb" and questioned if they can survive (or if anyone will notice or care if they disappear).
    

• Source: Zap2It.com

  Television Networks: Around 1980, the three big television networks had seen three decades of substantial growth in ratings, with viewers per season rising from 6 million in the early 1950s to more than 15 million around 1980. The launch of satellite and cable networks seemed a minor inconvenience, but it began a significant decline that only accelerated as the adoption of the Internet provided entertainment and video alternatives.
  
  The national networks have suffered a 50% decline in viewers by season over the last three decades. Today, there are even greater signs of change ahead; while traditional TV watching among older demographics has been steady in recent years, younger people are increasingly tuning out. In the past three years, Q1 TV viewing by 18-24-year-olds dropped by 4-and-a-half hours per week, or around 40 minutes per day.
  
  Television networks did not adjust to the Internet age. People were recording and sharing their favorite TV shows via filesharing sites years before the networks would acknowledge the online demand for their content. The networks were slow to innovate, leaving openings for a slew of startups (many with dubious legal models) including Napster, The Pirate Bay and even YouTube (which in the early going was subject to great wrath from the networks for not preventing sharing of their IP.)
  
  Today, less than ten years after YouTube's launch, its growing ad revenue is beginning to approach that of some cable and national TV networks. Meanwhile, a recent New York Times article notes that “no one really talks about the broadcast side anymore;" investors care more about the cable channels that the parent companies also own more than the big national networks. The enormous power and viewership of the national TV networks in 1980 could not prevent the 30-year decline of their business model as others innovated more rapidly.
   

• Source: WSJ.com

  Retail:  By the late 90s, national retailers were riding high after decades of strong growth. Their enormous purchasing power had allowed them to shoulder smaller competitors out of the way. In 1948, single-location retailers accounted for 70.4% of US retail, but by 1997 this percentage had fallen to 39%; meanwhile, sales from chains with more than 100 locations grew from just 12.3% in 1948 to 36.9% in 1997. Worry about those tiny, money-losing online eretailers? Ha! Why would loyal customers begin to trust their credit card numbers and retail purchases online?!
  
  Less then twenty years later, Borders, Circuit City and Linens 'n Things are gone. Other retailers--ones that not long ago possessed high levels of consumer trust and loyalty--are on life support, and few believe they can pull out of their death spirals. Radio Shack may not survive through the coming holiday season. And Sears Holdings, including both Sears and Kmart, have experienced constant declines in same-store sales over the past three years. (Since the beginning of 2011, the stock of Sears Holding has dropped almost 50%.)
  
  I recently wrote about the lessons companies should learn from Borders' failure, but here is perhaps the most surprising fact about the chain's demise: Just six months before the company filed for Chapter 11 bankruptcy, Forrester declared Borders the top company in the nation in its Customer Experience Index (CxP). The research firm surveyed consumers for opinions on their experiences with over 150 brands, and customers put Borders at the top. At the very same time that Borders had the strongest customer perception in the country, it failed.
   

A free ebook in progress, being created one blog post at a time:
	Four Mistakes Made By Borders And How To Apply The Lessons To The Collaborative Economy The Innovation Imperative: Customer Loyalty Won't Save Your Company From the Collaborative Economy New (and Very Old) Consumer Attitudes Support Rapid Growth in the Collaborative Economy Old, New, Newer and New Newer: The Past, Present and Future of the Collaborative Economy
Join the "Share and Share Alike" discussion on Facebook

Many people assume that the sharing or collaborative economy is something new and innovative, and as a result, it is subject to caution and skepticism, but is this really the case? I often wonder if people considered today's burgeoning collaborative economy models in a historical context, might their caution and skepticism be lessened? Airbnb, LendingClub and Zipcar are new, but the collaborative economy is not; in fact, when considered in a historic context, it is not collective consumption that is new but the idea of private ownership and individual consumption that are quite recent developments.

Ownership was a relatively alien concept for most of human history. For millennia, we lived in tribal societies that pooled resources, skills and output. During the time of the Roman Empire and feudal society, the common man had little right to anything more than tools, with land ownership reserved for nobility who doled out property rights and protection in return for fees and loyalty.

Ideas of personal liberty and private ownership really only flourished following the Reformation, and even then, modern attitudes of ownership and individual consumption were not truly possible until the Industrial Revolution. It was then that the mass production of consumer goods and rise of a middle class to purchase, own, collect and consume those goods led to today's attitudes about private ownership and consumption.

Advertisement from September 1957 "The American Home" magazine

Our current perspective on individual ownership and consumption is really only a few generations old. Still, even as private ownership flourished, collective consumption never truly evaporated. Government services represent a form of collaborative economy, where mass transit and libraries offer people alternatives to the individual ownership of cars and books. Private enterprise also found rare ways to furnish alternatives to ownership, such as laundromats that allow people to rent washers and dryers one load at a time versus owning (and finding room for) expensive appliances.

For much of the last century in the US, collective consumption has been caught up in attitudes about class and standards of living. While poorer urbanites lived in apartments and waited at bus stops, richer suburban dwellers from single-family homes zipped past the straphangers in private cars (or, more likely, over them on the new freeways that connected the suburbs to city centers). While those with more means could avoid sharing walls or rides with others, they could avail themselves of P2P (peer-to-peer) services to avoid doing tasks that were messy or unpleasant, from cutting hair to painting nails to maintaining lawns to cleaning their homes. The ability to privately own more stuff while paying others to do your chores was as much a symbol of status as it was an economic necessity.

"Keeping up with Joneses" became a thing, as families demonstrated their economic power by consuming as much and as obviously as possible. "The Joneses got a new Chevy," said the Smiths with envy, before rushing out to buy the newest model, egged on by mass media advertising that associated ownership and consumption with status and achievement.

Source: Wikimedia

This sort of conspicuous consumption brought benefits such as employment, rising income, economic growth and improved products and services, but it also came at a cost, both personal and to society. We moved further from work, accumulated more debt and spent more time commuting and more hours working. Meanwhile, garbage dumps and automobile scrapyards grew due to the continuous cycle of private purchase, ownership, consumption, disposal and repurchase.

Sharing economy circa 1893; families sharing their homes for visits. H/T +Jeremiah Owyang Source: Airbnb

In the last several decades, a new word has entered our vocabulary: Sustainability. In 1987, the Brundtland Commission of the United Nations issued a report in which variations of the word "sustainable" appeared 400 times. It defined sustainable development as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

What started as a buzzword for environmentalists and advocates has now become business as usual in corporate America. Almost two-thirds of businesses say, "My organization makes public our environmental and social goals, and publicly reports progress against those goals." (Alas, only one in five report that the leadership team’s compensation is driven in part by sustainability performance.)

Reviewing the history of ownership, consumption and sustainability is important for two reasons. First, it puts in perspective that our attitudes about individual ownership and consumption are relatively new and that we humans have a rich history of collectively sharing and consuming goods and services. Second, history demonstrates that significant and broad change in consumption habits results from two parallel trends: Technical revolutions (efficient industrial production, available mass media, etc.) and attitudinal changes (adoption of different modes of living and commerce).

The new wave of collaborative economy sites are succeeding not simply because they use technology in innovative ways. No web site or app can encourage people to embrace new behaviors unless they are ready to change--the foundation for change must be present at the same time the capability for change is presented. (That's what SixDegrees.com found in 1997 when it tried and failed to bring open sharing of one's social networks to a population that would not embrace this sort of behavior for another decade.)

Today, the foundation for a change in attitudes and behavior toward ownership and consumption is in place. Many point to the 2008 economic downturn as a turning point in terms of people's attitudes, but there are many trends that were occurring prior to the Great Recession and are still continuing well into our slow recovery:

• In 2000, researchers found that the time parents spend with their kids was at a 35-year high.
   
• In 2013, the use of public transit was greater than in any year since 1956; from 1995 to 2013, transit ridership rose 37 percent, well ahead of a 20 percent growth in population and a 23 percent increase in vehicle miles traveled. In addition, in 2012, 9.2% of U.S. households were without a vehicle, compared to 8.7% in 2007.
    
• In 2005, the US saw the reversal of a decades-long trend in longer commute times; experts attribute this to several factors, including millennials' reduced interest in cars, more compact and mixed-use development, higher gas prices and more employees telecommuting.
    
• In 2011, for the first time in nearly a hundred years, the rate of urban population growth outpaced suburban growth.
    
•  IHS Automotive found that the average age of vehicles on US roads was 11.4 years in 2014--three years older than the average in 1995. Moreover, an improving economy is not expected to reduce the age of cars on the road; IHS expects the average to rise to 11.5 years by 2017 and 11.7 years by 2019. Our changing attitudes about cars combined with better quality automobiles is having an impact on the industry; a recent study predicted that today's Americans will buy almost four fewer cars in their lifetime compared to the past. 

Keeping up with the Joneses is simply not as appealing as it once was to Americans, while sustainability is a growing imperative in every corner of our personal and professional lives. These changes in attitudes are beginning to fuel changes in purchase behavior, setting the stage for continued growth in new (and very old) collaborative economy models.

I will continue to explore the data and trends supporting the Collaborative Economy in future blog posts.

If you are a regular reader of this blog over the past few years, you have seen news and insights about social business and the growing sharing economy. In fact, the reason I have been blogging a little less in the past month is that I am working on an ebook on the topic. (Watch for it in the next month or two!) Luckily, Altimeter Group just made the job of researching and writing my ebook a little easier. The firm, which has embraced a sharing model itself in how it collects and distributes research, has just published a terrific report on the sharing economy. 

The publication, by Jeremiah Owyang, defines the Collaborative Economy as:

An economic model where ownership and access are shared between corporations, startups, and people. This results in market efficiencies that bear new products, services, and business growth.

The shift in consumer consumption habits will have an increasingly troublesome impact to some long-standing business models. The report lists six categories of business that the sharing economy will affect, including the automotive business.  Altimeter cites some terrific data to make the point, such as that “every carsharing vehicle replaces 9-13 vehicles” resulting in a revenue loss of $270,000 to auto manufacturers.

The report surveys some 200 sharing economy companies with an average funding of $29 million. Almost two-thirds of these companies focus on peer-to-peer sharing (where an individual who owns an asset or has a skill makes this available for rent to other individuals) as opposed to business-driven sharing (where a business makes goods or services available to consumers). The difference is the difference between RelayRides (which allows consumers to rent their vehicles to other consumers) and Zipcar (which owns and disperses a fleet of vehicles for rent).

Owyang shares some excellent thoughts on what this new form of business will mean to companies. For example, he notes, “Companies risk being disintermediated.” Just like iTunes replaced Musicland and Amazon bumped Borders, the sharing economy will make losers out of the firms who fail to invest in the future.

The report also looks at the changes the sharing economy will bring within companies and not just externally. For example, Altimeter foresees a “porous workforce redefining employer and employee roles.”  And it notes that the “difference between employees and customers blurs,” citing the excellent example of GiffGaff, a UK telecom company that  leverages customer support communities to significantly reduce the need for customer support employees.

Altimeter’s report on the The Collaborative Economy is a great read and highly recommended for those who want to know the future. I hope you will also watch for my upcoming ebook, which explores these same trends and what companies can do today to prepare.

Many of the changes of the digital era came because older folks ("digital immigrants" like me) adopted new behaviors, but most of the inertia for business evolution occurred when a wave of "digital natives" came of age. What will happen when the current batch of young "social natives" reach their adult years? A lot, and this will require businesses do far more than just add to the IT stack and hire a couple community managers.

In the mid- to late-2000s, the Gen Y cohort--people who almost could not remember a time (and could not function) without PCs and the Internet--joined key advertising demographics, reached voting age and entered the workforce. Many companies anticipated this and had deployed digital strategies early, but some waited for the mid 00s before shifting significant ad dollars online, adopting email and online service channels and developing new digital products and business models. Companies bound to old business models struggled to adjust to new realities as their customer demographics rapidly changed.

One example of how the last major demographic shift swamped an industry is the photo business. Shutterfly and Ofoto, two early photo-sharing sites, launched in 1999 at a time when Kodak had a market cap of almost $22 billion. The startups foresaw the wave of change to come with young people adopting digital photography. Kodak waited two more years before getting into the photo-sharing game (by purchasing Ofoto, later renamed Kodak Gallery), but it never really understood how Gen Y was changing the photo business. Kodak Gallery didn't permit sharing in the same way as its upstart competitors, kept photos locked behind a registration screen, and in 2008--just as the use of mobile phone cameras was exploding--Kodak implemented an ill-fated program requiring customers to purchase items or lose their stored photos.

How did that work for Kodak? Since January 2005, when Kodak launched its rebranded online photo-gallery service, its stock is down over 99%. Currently, Shutterfly is acquiring Kodak Gallery for a mere $23.8 million and Kodak is restructuring. Shutterfly was the only bidder in a sad auction for Kodak Gallery, which gets fewer than a million visitors a month, down 29 percent in one year.

Source: MinorMonitor

So, what will happen within the next few years when "social natives" enter key buying demographics, join the workforce and begin voting? We'll find out soon. Facebook launched a high school version of the service in 2005 and opened to the general public (13 and over) a year later. Of course, many teens had already adopted social behaviors before Facebook via services like Myspace and Friendster, which hosted millions of accounts as early as 2003. This means that by 2015--just three years from now--the average 18 year old won't remember a time without online social networks. (And before anyone points out that 2015's new adults will only have been legally able to use Facebook for five years, it is worth noting that over 38 percent of children with Facebook accounts are below Facebook's 13-year-old limit.)

Many of today's leaders do not understand what it will mean to serve, sell to, market to or employ the new generation of social natives. The answer is not merely to have a corporate Facebook presence, advertise with Promoted Tweets and host a community on the company intranet. Social natives will bring vastly different attitudes and expectations into their adult years, and this will force changes in the way we steer our brands, conduct business, set policies, devise organization structures and manage employees.

Soon, we will need to employ and build relationships with people who are disconnected and awake less than an hour a day.  (Any longer and it "creates an unnerving sense of disconnectedness.")  We all know business hasn't been 9-to-5 for a long time, particularly for global brands, but serving a generation constantly connected and demanding of non-stop brand care and interaction is going to require an even greater focus on deploying a 24/7 enterprise.

Think of how quickly this single aspect of social demographic behaviors is changing our world. On a personal level, few of us employed in marketing, PR or social media ever truly disconnect any longer, and on a business level, most large organizations already deploy community management well beyond old-school "working hours." Still, few companies have significant numbers of service staff deployed round the clock.

Soon, it will take more than a skeleton second- and third-shift crew to meet the needs of never-disconnected "social natives." The customer who tweets a customer service question at 1 am will likely have no different an expectation about response time than the one who tweets at 1 pm.

The generation of social natives also evaluates its brand preferences differently than their parents. TV advertising? It's not dying, but neither is it going to be as effective as in the past. ComScore recently found that millennials are less likely to say they found a TV ad interesting, believable or likeable, and they are more likely to call it irritating.

Source: Bazaarvoice

If younger folks don't believe in TV ads, what do they rely upon? It sure isn't corporations--37% of millennials claim to distrust big business. Instead, social natives trust others; Millennials are 50% more likely than boomers to say that recommendations from strangers influence their opinions.

Another way millennials are different than preceding generations is that they aren't afraid to voice their opinions and act when unhappy. Whereas Gen Xers were more inclined to reject institutions that failed to serve their needs, millennials are far more likely to take action to force change. This isn't just the case for brands they use and buy but also for their employers. In an Ad Age article, economist Neil Howe, who coined the term "millennial" in the early '90s, notes:

"If you ask a bunch of Gen Xers [born in the '60s and '70s] what they would do if they didn't like where they worked, most would say 'leave.' But if you ask millennials that question, their attitude is, 'Someone will fix it.' They'll start IM-ing each other, a few will get Mom and Dad on their cellphones, someone will call the local media, another will alert the congressman."

Source: Edelman Trust Barometer 2012

And woe be to brands that think they can compete merely through operational excellence. Great products and services are table stakes to a generation that expects transparency. Edelman's most recent Trust Barometer study found that trust in CEOs and government officials experienced record declines in the last year while trust in other consumers and regular employees skyrocketed. Moreover, when it comes to building trust, the agency notes:

"The 16 attributes... responsible for shaping current business trust levels are largely tied to business competence, and those that will build future trust are more societally focused. Listening to customer needs, treating employees well, placing customers ahead of profits and having ethical business practices are all considered more important than delivering consistent financial returns."

The differences between social natives and previous generations go on and on. In Zipcar's fascinating study of millennials and driving (embedded below), researchers found that younger consumers:

Source: Zipcar

• Find physical interaction less vital--nearly seven in ten say sometimes talk to friends online instead of driving to see them. 
• Are willing to drive less if options are available--those under 34 are almost twice as likely than people over 55 to be willing to drive less, provided public transportation, car sharing or convenient carpooling is available.
• Are ready to buy less and participate more in the sharing economy--compared to consumers over 55, those under 35 were approximately five times more likely to participate in car sharing and home- or vacation-sharing programs.

Is your enterprise prepared to sell to, rent to and employ a generation that is always on, empowered and prepared to take action, highly networked, more influenced by peers than ads, distrustful of big business, unforgiving of companies that aren't transparent, disinclined to conduct business with organizations that do not stand for something and more willing to share and rent than buy and own? What will happen when the current generation of ROI-maximizing, privacy-protecting, production-oriented, quarterly-obsessed CEOs runs headlong into a new generation that expects organizations to listen, make the world better, be transparent and commit to long-term societal missions?


Many companies think they know the trends and are comfortable planning for change in the future, but they are not really prepared. In 2008, when Kodak was comfortable with its decision to make sharing difficult and to force users to buy something or have their photographic memories deleted, it had a market capitalization of over $5 billion and Shutterfly was worth less than $200 million. Today, Shutterfly has a market cap of $1.1 billion and Kodak is in bankruptcy with a market cap of $77 million.  Of course, even innovators need to play by market rules, and later today Shutterfly announces its latest quarterly earnings; it may have bested the giant Kodak, but with social natives seeing no need to print photos given Facebook's (not to mention Twitter's, Instagram's, and Flickr's) free storage services, even Shutterfly could get crushed in the next demographic wave.

In very short order, social natives will be your customers and employees. Time is not a luxury today's businesses can enjoy when considering the evolution required in the next five years.
 

While social media may today feel mature and fully integrated into our world, we have only seen the start of the changes social technologies and behaviors will bring to our personal and business lives. Profound evolution is coming that will alter how we operate our businesses, buy products, manage money, attain status and establish and protect our identity.

It is instructional to look at how the Web developed, because it provides a means to understand how nascent social media still is and how much change is ahead. In 2011, the number of US adults that use social media sites surpassed 50% for the first time. To put that into a historic perspective, the Web surpassed the 50% adoption mark in 2000. Now consider the amount of change the Internet has brought to business and our lives since 2000, and you get a sense for the substantial transformation that social media and social business will create in the next decade.

Some of the changes social media and social business will deliver will be welcome, but some of it not. After all, the Web brought many changes we all cherish (Free email! Real-time news! Videos of cats playing piano!) but many we do not (Connected to work 24/7; loss of privacy; online bullying). Exciting and difficult times are coming.

As my friend, Neff Hudson, likes to say, “There’s a lot of future in the past.” We cannot predict the future of social media and social business with certainty, but the trends and outcomes become much clearer as we compare and contrast the Web experience of the past 15 years to the social experience we can expect in the coming 15 years.
 

PHASE ONE: Businesses and Most People Pay No Attention

The Web: The advent of the Web was not the first time people used computers to communicate and access information on networks; Bulletin Board Systems had existed since the 70s and were hardly setting the world on fire. When Prodigy and AOL opened up the Internet to the public in 1995, the world greeted this momentous event with a yawn. Most people said they had no interest and found it dangerous; business dismissed the Web as a place for geeks and kids; and naysayers predicted people would never purchase $2,000 PCs and rewire their homes just to use the Internet. Still, some people recognized the trends and invested in the future; in 1995, while bookseller Borders sat confidently on hundreds of millions of dollars of investment in their retail stores, a guy named Jeff Bezos launched Amazon.com and sold his first book, “Fluid Concepts and Creative Analogies.”

Social Media:  The advent of Friendster, Myspace and Facebook was hardly the first time people used the internet to connect and share; sites like Geocities and SixDegrees.com permitted people to update personal web pages and share connections, and these sites were hardly setting the world on fire. When Facebook opened its gates and became a public social network in 2006, the world greeted this momentous event with a yawn. Most people said they had no interest and found it dangerous; business dismissed Facebook as a place for geeks and kids; and naysayers predicted people would never embrace online social sharing widely. Still, some people recognized the trends and invested in the future. It is too early to tell who may be the Jeff Bezos of social business, but at a time when few people saw social media as a business platform, Shelby Clark started RelayRides, Chris Larsen launched P2P lender Prosper,  Renaud Laplanche initiated LendingClub, and Perry Chen, Yancey Strickler, and Charles Adler created crowdfunding site, Kickstarter. (Only time will tell if these names are mentioned alongside Bezos' ten or fifteen years from now.)
 

PHASE TWO: Consumer Media Consumption Habits Change and Marketers (Slowly) Take Notice

The Web: In the late 90s, the Web was growing. Adoption was strong, particularly among younger consumers. Most in the business world still shrugged, but the Marketing Department took notice. The shift of marketing dollars into the online channel substantially lagged behind the shift of consumer online media consumption, but marketers cautiously began to invest in banner ads and search ads. Marketers also launched their companies’ first web sites, but they did not embrace the fundamental principles of this new medium. Early sites took the text and images used in existing print collateral and pasted them into static, non-functional Web pages, resulting in the term “brochureware” to describe the first generation of Web sites.

Social Media:  In the late 00s, social media was growing, led by blogs, Facebook and Twitter. Adoption was strong, particularly among younger consumers. Most in the business world still shrugged, but the Marketing and PR Departments took notice. The shift of  marketing dollars into the social channel substantially lagged behind the shift of consumer social media consumption, but marketers cautiously began to invest in blog advertising, sponsored conversations with bloggers, and Facebook advertising, with 70 billion display ads appearing on Facebook in the first quarter of 2009. Marketers and PR professionals also launched their companies’ first blogs, fan pages and Twitter profiles, but they did not typically embrace the fundamental principles of this new medium. Early blogs and social media profiles took existing press releases and pasted those social media sites, and some marketers treated blogs as they would paid media and were embarrassed when their efforts to buy their way to blog success were revealed, resulting in the term “splog” to describe spam blogs.

PHASE THREE: New Business Ideas Attract Investment Faster than Customers

NASDAQ's two-year 188% dot-com climb

The Web and e-Commerce: By the late 90s, a dot-com boom was underway. As early Web retailers like Amazon grew rapidly, the business world took notice and got scared.  Old-line business worried that it was out of step with a “new economy” defined by clicks and users and not earnings per share, and investors feared they were missing something big and threw money at any entrepreneur with an online business idea. For example, dozens of online pet stores launched and competed to gain users quickly and at any cost; Pets.com raised $300 million of investment capital and bought expensive Super Bowl advertising in the land grab for new online customers. The focus of all this attention was not really on robust e-business but specifically on e-retail; Amazon and Pets.com sold physical goods, just like the book and pet stores on the corner, and most business leaders obsessed over how the internet would affect price, selection and delivery of existing products rather than on how it might create new products and services. Then in 1999, Sean Parker launched Napster and sent shockwaves through the music industry, demonstrating that the Internet was not just a medium to market and sell physical CDs.

Social Media and Social Commerce: A social media stock boom has and may continue to occur. As Facebook’s share of the display-ad market grew from 2% in April 2009 to 20% in April 2010, the business world took notice and got scared.  Old-line business is worried it is out of step with a “new economy” defined by retweets and likes and not earnings per share, and investors fear they are missing something big and are throwing money at any entrepreneur with a social idea. For example, many group-buying and -discounting sites have launched and are competing to gain users quickly and at any cost; by the end of 2010, Groupon had turned down a $6 billion offer from Google, raised almost a billion dollars in venture capital and was buying expensive Super Bowl advertising in the land grab for new social customers. The focus of all this attention is not really on robust social business but specifically on social retail; Groupon and Facebook advertising are largely driving people into existing businesses like the book and pet stores on the corner (and to online retail sites) that sell existing products, and traditional retailers such as Gap and JCPenney launched early F-commerce stores on Facebook. While not as headline grabbing as Groupon’s, LinkedIn’s and Facebook’s IPOs, small peer-to-peer business companies are showing strong growth and demonstrating social media can be a medium for collaborative consumption and not just a medium to market and sell existing products.

PHASE FOUR: Stock Values Crash While Business Value Widens

NASDAQ's one-year 63% dot-com crash

The Web and e-Business: As it turned out, profits and earnings per share mattered. The dot-com bubble burst in painful fashion, destroying $5 trillion in market value between 2000 and 2002. The correction even caught the winners of the Web 1.0 era—after five years, Amazon had yet to make its first dollar of profit and could not build earnings quickly enough to justify its exorbitant stock price, and shares plunged from $107 to $7. Startups like Pets.com with weaker business models never made money and evaporated completely. However, what crashed were stock values and not the value of the Internet, and out of the ashes of the dot-com disaster grew something bigger and stronger. Consumers continued to adopt the web, broadening both the demographics and the use of the medium.

Online consumers had different expectations and demanded more—they wanted more product information, access to account information  and service in their channel of choice, and they wanted it now. Online advertising and e-retail continued to grow, but something more substantial was happening—brochureware sites were replaced by rich, functional web sites, and the Web evolved from a focus on marketing and retail to a focus on business value throughout the enterprise.

Social Media and Social Business: I believe we are in the midst of a slow-motion social media market correction. Profits and earnings per share matter, and soon investors will care that Zynga and Groupon are struggling to attain and sustain profitability. Groupon is already trading near its all-time low price, almost half of its peak price five months ago, and a recent analysis demonstrated that just three of 2011’s twelve social IPOs were beating NASDAQ. I expect the social media bubble burst to be less painful because exuberance is not as great today as it was in 1999, but it still would not surprise me if the correction caught the winners of Web 2.0 era, causing Facebook’s post-IPO price to plunge as it struggles to build earnings quickly enough to justify its stock price. However, even as the market reconsiders the valuation of social media companies, something bigger and stronger is growing. Consumers continue to adopt social media, broadening both the demographics and the use of the medium.

Social consumers have different expectations and are demanding more—they want access to the objective opinions of other consumers, demand companies respond to their complaints posted to social networks and expect organizations to be more transparent about corporate practices, and they want it now.  The first F-commerce sites failed because they didn't bring true social benefits to the shopping experience, but social commerce can be expected to grow. In addition, advertising on social networks will explode as marketers continue to shift more dollars to the channel where consumers spend so much time. But, something more substantial than just social ads and retail is happening today—PR-oriented corporate social media profiles are being replaced by robust communities and dialog where companies engage consumers (and consumers engage each other) around business policies, service needs, new product ideas, employment, and more. Social media is evolving from a focus on marketing and PR to a focus on business value throughout the enterprise.

PHASE FIVE: Now It Gets Interesting: New Products and Business Models Challenge Old Ones

Estimated Quarterly US  E-commerce Sales as a Percent of Total Quarterly Retail Sales

The Web and e-Business: For all the headlines and investor enthusiasm about e-retail in 1999 and 2000, the percentage of total US retail that occurs online did not surpass two percentage points until two years after the dot-com crash. Since then, the growth has been steady, but despite the fact online retail has shaken retail to its core and forced former powerhouses like Borders into bankruptcy, e-retail still represents just one of every twenty retail dollars spent in the US. Of course, online retail is wildly uneven, affecting some categories far more than others; digital sales of music surpassed physical sales just last year.

While the impact of e-retail has been significant, that is not the big story of this phase; rather, in recent years the Web has fundamentally changed consumers’ relationships with products and services. We used to buy CDs and listen to music in cars and at home—now thanks to iTunes, iPods and cell phones, folks download music and listen throughout the day. Many said they would never give up the joy of a paper book, but just a few short years after the creation of tablets and e-readers, one in five adults read an electronic book in the last year and Amazon already sells more e-books than print books. Mobile wallets, digital photography, real-time communications, online news, delivery tracking—the Web is no longer a way to market and sell traditional products but the foundation for completely new ways to conduct business.

Social Media and Social Business: Social media will bring great change to our products, services and business models over the next ten years, just as the web did in the last ten years. This won’t happen quickly—Amazon was selling books online for 16 years before e-books surpassed print books, and Napster demonstrated that consumers would download music 12 years before digital music sales exceeded physical ones. The companies that led these changes tended not to be the big, traditional, existing ones but the startups. Barnes and Noble has been remarkably nimble for an old-school organization, launching its first web site two years after Amazon.com and deploying the Nook two years after the first-generation Kindle, but today Amazon has diversified its business and enjoys a market capitalization more than 100 times greater than Barnes and Noble.

This trend repeated across categories—Kodak was too committed to print photography to lead in digital photography, and Apple handed the record industry its butt because it was unencumbered by physical music models. Today, for example, banks may be too invested in physical branches to lead in the social business space for financial services; no banks have launched or invested in peer-to-peer unsecured lending (Prosper and LendingClub), direct peer-to-peer lending between friends and family (National Family Mortgage) or alumni-to-student college loans. The nascent Sharing Economy and Collaborative Consumption models promise to change consumers’ relationship with products ranging from cars (RelayRides and Wheelz) to lodging (AirBNB) to lawnmowers and drills (Rentalic and NeighborGoods). Perhaps big companies will get smarter this time around—U-Haul has already launched a peer-to-peer model to finance the purchase of new trucks and GM has partnered with RelayRides.

PHASE SIX: New Technology Rewires People and Society

The Web: You might have thought Phase Five was the end, but the web has done more than just change products and services—it has altered consumers’ attitudes about themselves and the world. Our world is smaller, faster and more connected today than 15 years ago. We never want for communications or entertainment. We are never disconnected from our friends or our jobs, no matter the time of day or day of the week. The web flattened corporate structures and altered organizational dynamics--business leaders are no longer protected by Administrative Assistants, work relationships are more casual and the speed and pressure of business have increased.

The Web made the world flat, instantly furnishing insight into happenings around the globe but also creating downward pressure on US salaries as outsourcing became exponentially easier. The Web put spectacular power into the hands of people, giving them the capacity to launch businesses, communicate widely and build reputation but also providing a platform for bullying, coordinating terrorist attacks and stealing identity. The Web has brought us together to raise record amounts of money for victims of earthquakes and tsunamis, but it has also furnished a way to drive us further apart as we reject news and information offered by a handful of media conglomerates and consume hyper-local, hyper-niche and hyper-partisan content.

The web has made parenting more difficult. Children grow up faster, can get themselves in more trouble, are exposed to more worrisome content and are impossible to monitor and protect as in the past. Parents cannot punish children by sending them to their room, because those rooms contain access to more information and entertainment than a TV network control room had three decades ago. Kids never have to negotiate for access to limited resources--homes that 15 years ago had one way to communicate externally and one screen for entertainment today have options too numerous to count. (Go ahead and try.)

The Web has affected how we go to school, date, work, age, retire and play. Absolutely nothing happens today that isn't caused by, planned, hosted, captured or shared on the Web. Without the Web, there would be no Tea Party or Occupy Wall Street, no multi-tasking, no telecommuting, no smartphones, no iPad, no World of Warcraft, no Angry Birds, and arguably no President Obama, Kim Kardashian, Lady Gaga, Justin Bieber or green movement.

Social Media: Social media has already affected communications in substantial ways, but the advent of peer-to-peer and sharing economy business models will do more than affect the communication networks we maintain. It will change:

• Our sense of identity: We are constantly connected to others, communicate in real time, and have more and stronger “soft relationships” (but some argue weaker “hard relationships”). Our identity is increasingly created not in quiet moments by ourselves but in constant and pervasive social interactions. A strong majority of Millenials say they are so connected they are never really alone.
   
• Ownership: Already, many people rent music via a subscription model rather than buying and owning audio tracks, and over half a million people have used Zipcar’s 8,900 vehicles. This is not just changing the way we get products and services—it alters long-held attitudes. Teens are less inclined to get drivers licenses than in past in part because they are more open to public transportation and often choose to spend time with friends online rather than driving to see them. Cash-strapped consumers are finding they don't need to own certain categories of things, they only need to access, borrow and rent them in real-time.
   
• Status: As Collaborative Consumption rises, we will be defined less by what we drive, wear and own and more by our experiences and sharing—already more than half of Millenials agree with the statement “What I post online defines me.”
   
• Privacy: In the past we cherished our privacy, but in the future many will happily sacrifice privacy in order to gain access to sharing economy goods and services. We may soon elect to add our credit history and driving record to our online personas so that others will be more willing to rent us their cars, lend us money, allow us to stay in their spare room or rent us their hedge trimmers.  Consumers will come under pressure to sacrifice privacy for transparency, but not because Facebook or some shadowy marketing research firm wants your data but because we will come to expect it of each other.
   
• Pricing: The more transparent we become, the more fluid prices will be—if you rent your car, would you charge the same to someone you can identify with a strong reputation, transparent credit score and open and clean driving record as you would to @HotGuy1992? Who we are, the trust we engender, the influence we create and our actions online won't just affect our access to sharing economy goods and services but also will influence the prices we are charged. The drive to earn our way to lower pricing with better behavior and more transparency will be a powerful force that encourages smarter financial decisions in the future.

We are just scratching the surface of the changes social technologies and behaviors will bring to our lives. For individuals, the future belongs to those willing to embrace both the welcome and difficult aspects of a more social, transparent world.

The same is true for business; the future belongs to those who see and invest in the future and not merely protect today's business models or chase this quarter's ROI. Amazon.com moved while others ignored the trends; it saw a business platform where others only saw retail and marketing; it invested for six years to achieve its first dollar of profit; and then it put its predominant revenue stream at risk with a bold new vision for how consumers would consume content in a digital and wireless world. Today, founder Jeff Bezos' personal wealth stands at $18 billion while the combined market caps of Barnes and Noble and Borders is just $730 million.

“There’s a lot of future in the past.”

Before Zappos and Dell.com thrived; before Pets.com and Beauty Jungle crashed; there was Amazon and eBay. These ecommerce pioneers weren't the first companies to conduct transactions online, but they were the first to take root and grow. Today we know the success stories, but in 1999 their future was hardly certain--while Borders was earning $92 million, eBay cleared just $10 million and Amazon bled $720 million. Ten years later, Borders lost $187 million and the two eCommerce giants earned a combined $3.3 billion.

A decade from now, perhaps we'll look back and speak of two social business pioneers, LendingClub and Prosper, in the same way we today speak of Amazon and eBay. One might argue peer-to-peer (P2P) commerce is nothing new; after all, eBay and Craigslist were both facilitating P2P transactions long ago, but these companies replaced and enhanced existing business models, such as classified advertising and flea markets, by bringing them into the digital age. Today, we see a new wave of social businesses creating forms of commerce that previously didn't exist outside of tiny transactions facilitated between friends and family members.

Never before have we seen scale brought to things like person-to-person lending (LendingClub and Prosper), car sharing (Wheelz and RelayRides) and space sharing (Airbnb). As in 1999, it can be difficult to see how these small companies might alter the world, but I believe these social businesses represent the next wave of change that will challenge traditional business models.

The primary P2P lending sites in the US are LendingClub and Prosper, and both are growing rapidly. Lending Club's 2011 loan volume more than doubled its 2010 totals, and Prosper is growing at a rate of 178% year-over-year. To learn more about the growth of peer-to-peer lending, I interviewed Peter Renton, who blogs at the Social Lending Network.

Renton notes that the strong growth of P2P lending is even more remarkable when you consider these businesses are not legal in all 50 states. "As laws stand right now it would be virtually impossible for any P2P lender to create a model that would please every state," notes Renton.

That may change with new action at the national level. A crowdfunding bill has passed the U.S. House and is gaining support in the Senate. This bill would not immediately make P2P lending legal throughout the US, but it is a step toward bringing P2P lending to every state. "I expect this will happen sometime in the next two to five years," says Renton.

One thing fueling the growth of P2P lending is the influx of institutional investors seeking better yields than they can get from other fixed income options. (Does this mean P2P lending is not really P2P?) "Prosper has received a $150 million commitment from a large institutional investor," notes Renton, "and Lending Club has seen massive growth in the last year in the institutional side of their business."

While investors are lining up, borrowers are not--at least not in large enough numbers to maximize growth for these two sites. Both P2P lending companies could be growing even more quickly if they could attract more borrowers. Renton notes, "There is plenty of money from investors and they continue to reinvest their payments, so there is always new money coming in. But borrowers have to be attracted one at a time."

All this growth in loan volume has not resulted in either company becoming profitable yet, but "Lending Club could be if they wanted--they are just focusing on growth for now," according to Renton. Both companies make most of their money from charging an origination fee of up to 5% for loans and a 1% service fee on all loan payments. With continued growth, Renton expects both sites will achieve profitability by the end of next year.

Will P2P sites someday challenge banks? Maybe, and that depends on what banks do. Even with the impressive growth, LendingClub and Prosper's loan volume is still tiny, Renton points out. "This month both companies combined will do less than $50 million in loan volume. They could do 100 times that and still not make a big dent in overall consumer lending."

Then again, growth like the P2P sites are experiencing demands attention. "If banks ignore it, then eventually they will see some erosion in their core business, but we are many, many years away from that," notes Renton. And, of course, banks could get a piece of the P2P lending action, if they wanted. "Nothing is stopping banks from entering the P2P lending space. In fact, I think when these sites start to get big, one of the leading banks will buy one or both companies."

Watching the growth of new social startups makes me want to party like it's 1999, but whether we will see Amazon-like growth over extended periods is uncertain. I would not discount, however, the level of change or pain that can come from today's nascent P2P lending sites and other new social businesses. As I like to point out, ecommerce represents less than five percent of total US retail, yet this small fraction is enough to undermine margins, threaten established companies and change consumer expectations and habits.

If you're curious about lending or borrowing in the P2P lending sites, Renton does a nice job of covering the business on his blog at http://www.sociallending.net/. Check it out!

We are still very early in the social media era, and it will take years for social and mobile technologies and behaviors to affect fully the way business operates. However, some changes are already evident if you look close enough. Is your business watching for these changes and investing so that it is prepared when consumers are ready for new business models?

Today, many companies have happy customers and a sound business model, and they are confident that social media will have a nominal impact on their organization. If this sounds like your enterprise, beware! This was the mindset of companies like Borders and Kodak at the dawn of the Web era, but these organizations scrambled--and failed--to catch up to competitors that were quicker to understand, invest and evolve into new business models.

Whether your company will be Borders or Amazon (or Blockbuster or Netflix) (or MySpace or Facebook) will depend on whether it is willing to continually invest and adapt to fundamental changes in consumer mobile and social behavior over the next decade. Here are eight ways the business landscape will change:

• Your purchase funnel becomes more complex and mutable: We already know that social media is affecting the way consumers become aware of products and narrow their consideration set. Brands like McDonald's, Ford and Kellogg's have made social media a substantial part of their strategy to raise awareness in the early potion of the funnel. As an example of using social tools to improve the end of the funnel, Forrester (my former employer) notes that USAA (my current employer) is effectively using ratings and reviews to increase conversions. (Sorry, a subscription is required to read the Forrester report.)
  
  Some say the funnel is dead, flipped, irrelevant, a maze, or a dozen other analogies. They are all right and they are all wrong, which demonstrates the complex, ever-changing world in which we operate. Attracting and binding consumers to your brand will take far different strategies than have worked in the past. The brands that succeed will be the ones that recognize they need agile strategies to capture different customers in different ways and to exploit moments of opportunity as they arise. Think Old Spice, which realized it had a hot property with Isaiah Mustafa's TV spots and rapidly deployed a real-time social media campaign that doubled sales.
  
  Inflexible multi-year marketing plans that focus on traditional tactics and media and that do not connect directly to product development and customer service will result in a disjointed and anemic funnel for the enterprise.
    
• Your employees need new skills: Today's employees, who seem to spend every waking moment updating their Facebook wall or Twitter stream, may seem like they possess the skills your enterprise needs in the social business era. That assumption is wrong--it is akin to saying that people who text friends on their cell phones are prepared for the mobile technology and business models of the future.
  
  A skill gap is forming. Take the banking industry, as an example. For decades, the single deciding factor that people used to select a bank was the location of branches and ATMs, so banks put the vast majority of their channel dollars into branches. Times are changing quickly, and most banks are not altering their strategies accordingly. In Branch Today, Gone Tomorrow, Brett King predicts the number of bank branches will shrink by 50% in the coming years. Few of today's banks are prepared to differentiate on the products and services they furnish in mobile and social channels rather than the location of or service in their branches.
  
  What new skills will today's change-counting, window-staffing branch employees need tomorrow, and what will happen to employees who do not develop the right skills? Tough times are head for some. Brett King points out that the four largest banks employ just under 1 million people in North America while the three top tech firms manage with only 150,000 employees--and the tech firms earned 37% more profit last year. The employees of banks contribute $22,256 each to the profit of their employers, while the tech employees contribute $195,973 each. Banks must shrink, and they are not alone, so the imperative to adapt or be left behind is no less pressing for individuals than it is for organizations.
    
• You must be (or try to be) early adopters or face dire consequences: Social and mobile technologies are increasing the speed of business. Though many firms identify themselves as "fast followers," the speed of today's business has killed this concept. Today's true "fast followers" are companies that thought and invested as if they would be a leader but got there behind a speedier competitor. If a firm thinks it will sit on the sidelines, watch what develops, and start to invest after new business models and processes are proven, the best they can hope for is to be a laggard and not dead. The business cycle will be increasingly unforgiving to companies who try to follow rather than lead.
  
  We live in a world where consumers on social networks expect answers in hours and where PR disasters evolve in real time. However, this is not just about the speed of your PR and customer service; it is also about the shrinking life cycle of your products.
  
  In 2006, Pure Digital Technologies unveiled the Flip Video camera, and product reviewers and users quickly hailed it as an amazing and revolutionary innovation. In 2010's Empowered, Josh Bernoff and Ted Schadler shared how one employee armed with a cheap Flip video camera rewrote the rules of training at Black & Decker. Yet in April 2011, Cisco announced it would cease to produce the Flip. Forget the "hype curve," this is the survival curve: From groundbreaking, jaw-dropping innovation to yesterday's stale product in just five years. How will your products keep up in the future?
    
• Your products must be social: Social is not something you turn to at the end of a product development cycle merely to promote your new product. In the future, if your product is not innately social, it's nothing. Admittedly, it is difficult to make consumables like chewing gum or bananas more social, but what about the durable goods with which we interact every day?
  
  Cars seemed like an unlikely product for the integration of social, yet innovative automakers are leading the way with social technologies built into their product. You have already seen ads promoting cars such as the Chevy Cruze that permit drivers to interact with social networks. Even more ground breaking is Mercedes-Benz' new telematics app, CarTogether, which allows drivers to find people with whom to share rides and helps to cut down on emissions by reducing the number of car rides people have to make.
  
  Too many brands seem to believe that inserting a "Share This" button or implementing a Facebook widget on their site makes their brand social. Instead, they need to consider why consumers share, when they are most likely to share, and how the brand can facilitate this process from within the product and service experience. For example, after you book a restaurant through OpenTable, the company sends a timely email asking if you would consider rating the restaurant while your memory is still fresh. Another example is Amazon, which gives customers a one-click method to share their recently completed purchase with friends. The key to social won't be to have the most creative social media marketing campaign but to make it easy for your customers to share from within the product or service experience.
    
• You must prepare for significant shifts in people's perceptions of ownership and status: In the Western world, things have come to define us: our address, the car we drive, the clothes we wear, the computer we use. (Everyone wants to be Justin Long and no one wants to be John Hodgman--except me, apparently.)
  
  The status of things will not go away, but today's teens are demonstrating different priorities--they get status from their networks and access to things, not just ownership of things. Ask a parent of a teen what their child's attitude is towards driving, and you are likely to hear a different story than when you were young. A study by the University of Michigan Transportation Research Institute finds that the percentage of 19-year-olds with driver's licenses dropped 14% in the past 18 years. Younger teens have seen an even greater decrease; today 33% fewer 16-year-olds have their driver's licenses compared to 1983.
  
  The decrease in driver's licenses for teens may be due to legal or parental restrictions, but a study by ZipCar suggests that teen and young adult attitudes are considerably different from prior generations. Millennials are twice as likely to be open to public transportation, car sharing and carpooling as seniors. More than half of Millennials drive less in order to protect the environment. In addition, almost seven in ten Millennials say they sometimes choose to spend time with friends online rather than driving to see them. Finally, 18- to 34-year-olds are roughly twice as likely as those over 55 to participate in media sharing, car sharing or home sharing programs.
  
  Can we still call consumers "consumers" if they are actively adopting ways to consume less? And what does this mean to your business model?
    
• You must show consumers what you stand for, not just what you sell or make: Anyone in the world of brand strategy knows that consumers have always considered what your brand stands for when evaluating competitive products. That much is not new, but it has changed in two ways. The first is that who you are has never been more important. As Bob Garfield and Doug Levy shared in Ad Age, the 2006 Edelman Trust Barometer demonstrated that "quality products and services" was the top response in identifying the standard of trust, but by 2010, "quality" had dropped to the third slot. "Transparent and honest practices" is the new number one, with 83% of respondents citing it.
  
  Not only is your reputation more important than ever, your organization has never had less say in your reputation. In the mass media era, your organization was largely defined by your advertising and PR in few tightly controlled media channels. Today, consumers define your brand with their interactions in social networks, rating sites and other online communities (not to mention their face-to-face influence in the real world). Bank of America invested $1.9 billion in marketing in 2010, yet it could not defeat a cost-free groundswell of angry consumers led by a 22-year-old nanny and a 27-year-old gallery owner.
  
  Apple will make an interesting case study in the years to come. To date, it has been the gold standard for how your brand benefits when it means something more to consumers. Apple is the most valuable company in the world, yet for all its wealth the company has escaped the indignation heaped on rich corporations by the Occupy movement. That may be about to change--recent articles have questioned Apple's environmental policies and a blistering New York Times article last week made disturbing accusations about Apple's treatment of workers overseas. Apple CEO Tim Cook has refuted the article, but some observers fear Apple is following a traditional course of PR management by denying the accusations and responding narrowly.
  
  Apple will not retain its valuable place atop the list of trusted brands without a different course of action. Even then, it will be consumer reaction to Apple's policies and not letters from Tim Cook or slick advertising that determine Apple's fate in the future.
   
• Your enterprise must prepare to be on the right side of a new wave of disintermediation and reintermediation: Social and mobile business will affect every enterprise, but some will be more impacted than others will. I predict three broad groups of businesses will be affected sooner than others:
   
• Companies that own assets and make them available to consumers for rent: Hospitality and car rental companies face new competition from peer-to-peer models. In New York, hotels now compete against 10,000 rooms, apartments and even spare couches offered by consumers on Airbnb. (I find Airbnb's self-reported claim that the average New Yorker is making $21,000 per year renting on the social service highly dubious, however.)
  
  For most consumers, their car is one of the most expensive assets owned, yet the average consumer uses their car just 8 percent of the time. It is this low utilization that is leading some to offer their cars for rent, and RelayRides reports the average person using the service makes $250 a month renting their car. (I find this claim less dubious but still would like to see the data.) And as consumers get access to the cars they need when they need them, ownership becomes less attractive; one study found that people who use car sharing services were 72% less likely to buy or lease a car in the future.
  
  For both hotels and cars, more supply means lower costs for consumers and less revenue for providers. In addition, the new social business competition has a vastly different cost structure from traditional providers--Airbnb and RelayRides do not need to purchase, own or maintain assets, while IHG Group holds more than $1.5 billion of fixes assets and Hertz owns more than $13 billion of fixed assets.
   
• Companies that facilitate business between consumers: If you are in the business of earning fees to take something from one customer and get it to another customer, social business models will challenge your business. I am not talking eBay or Craigslist--they already are the standard for peer-to-peer (P2P) disintermediation and reintermediation, having killed newspapers' classified ad business.
  
  Instead, look at banks, which take money from savers and lend it to borrowers. Today, savers get little, but this is not the case for folks lending money on Prosper and LendingClub. Yes, the risks are higher, but so are the rewards (which, any economist will tell you, is the basis for capitalism.) While the regulatory hurdles for being a "bank" are high, companies are skirting the regulations and bringing down costs to consumers with new mobile wallet, P2P money transfer and P2P lending models.
   
• Companies that manufacture durable goods: We have already discussed how younger consumers are less interested in obtaining drivers licenses and prefer to meet friends online and to decrease miles in order to save the environment. It is clear that P2P and sharing business models will affect the auto business (and related industries such as auto parts and auto insurance).
  
  The buck does not stop there, however. Take, for example, garden and home tools. Some people are avid gardeners or DIYers around the house, and these people will want to own their own tools. But what about the average consumer? Must every household in every neighborhood own a circular saw or hedge trimmer--equipment that the owner uses for just a handful of hours each year? Today, many neighbors borrow from one another, but watch for social business models to put this on steroids. If consumers can share what they own more easily, widely and with a profit motive (and not just a neighborly intent), ownership of some durable goods could drop.
  
  It would not surprise me if in ten years Home Depot or Lowe's (or some upstart competitor) made more money from renting or facilitating P2P lending of equipment than from selling durable goods outright. While retailers that move quickly can have a key role in the future of social business, what about manufacturers? What does it mean if the market changes so that millions go from wanting to own an underutilized piece of equipment to merely wanting to rent it in real-time? Answer: Fewer items manufactured and sold and a shift in the market toward commercial-grade products that can withstand more punishment and usage.
    
• You must prepare for consumers empowered with greater information about you, competitors and their own money: Social and mobile business models have a way of empowering consumers to make better decisions. For example, as car owners, we tend to think of short trips as cost free, but this is not the case; we give little thought to how each trip means more costs for gas, maintenance and insurance, so the cost of a single trip is not immediately obvious or relevant to our decision to make that trip. Conversely, when we rent a car and must pay for the trip immediately and directly, the cost becomes a significant part of our decision.
  
  People who rent cars through car-sharing programs make better decisions, combine trips and find alternatives. This is the finding of a ZipCar study one year after introducing the service in Baltimore. The company surveyed customers and found that the number taking five or more car trips in a month decreased from 38 percent to 12 percent, and the number driving fewer than 500 miles per month increased by more than 17 percent.
  
  Mobile wallet applications will have the same affect on consumers by allowing constant monitoring and control of credit card and checking balances. Today, consumers spend by swiping a card, with no immediate feedback; tomorrow, each swipe of our NFC-enabled phone will show our credit balance rising or debit balance falling. In addition, applications can help us track spending to budget, manage cash flow in real time, collect discounts, create more usable records of our spending and furnish a host of benefits that permit better control of our money. In addition, using our phones as barcode readers holds can furnish real-time access to competitive prices, product reviews and, perhaps, to additional information such as the environmental or labor policies of the manufacturer.
  
  Social and mobile business tools hold the promise of making consumers more aware of the effect of each spending action. Will this newfound power overcome the innate human desire to impulse buy? Who knows, but it seems we will all be more empowered and informed in the future.