Are You Ready For Generation Alpha?
Digital and diversity.
These are two of the most important macro trends and growth drivers for the 21st century.
For the past 20 years I’ve been building brands at the intersection of technology, entertainment, advertising, media and marketing — what’s referred to as the “TEAMM” industries. Ever since I became a father back in 2015, I’ve been thinking a lot about how digital and diversity will ultimately intersect and impact the world for our youngest generation — especially when it comes to two areas that I am passionate about: entertainment and education. Here are some of my initial observations about digital and diversity.
By now, most people know how important digital is. It’s hard to believe that it was in June 2007 that the iPhone came out, igniting a wave of creativity and innovation that changed consumer behavior forever. From Alexa to Uber, just look at what has been created in the past 12 years. While it may seem like we’ve come a long way since dial-up and the early days of the Internet, we really have only seen the tip of the iceberg.
One of the most exciting things happening today is the emergence of direct-to-consumer (DTC) brands. There is a consumer revolution happening and people want to “go direct”. As the IAB has noted, the old ways of the indirect economy are being transformed by the new ways of the direct economy. The Internet has reduced the friction in business enabling new brands to be created and consumers have embraced them with open arms. There’s never been a better time to start a brand!
There’s also no better place to see this transformation than in the $3.5 trillion retail industry. E-commerce has gone from 5% of total retail sales in 2007 to 14% in 2018 (that’s $517 billion). No matter the category, almost all of the growth in retail is now happening via digital -and that growth is being driven by DTC brands. From Away Travel to Casper, Dollar Shave Club to Glossier, or Mack Weldon to Warby Parker, these are just a handful of the dozens of DTC brands that are now the growth engine of the direct economy.
So why are they winning? It’s because they truly are customer-obsessed and they put the customer experience at the center of everything they do. However, the key is the 1st party direct relationship with their customers. DTC brands are able to super-serve their customers in unprecedented ways and personalize everything from content to products to services. Leveraging machine learning to understand the patterns in the data, DTC brands are able to have better insights and make smarter predictions that results in a stronger, more loyal relationship with their customers.
Of course, being direct-to-consumer isn’t confined to retail. This new direct consumer economy leverages technology in different ways to close the many gaps so that a brand can be as close and connected as possible with its customers. This is no longer about putting out a simple product, it’s about providing a customer experience. The DTC movement is spreading to many other industries ranging from automotive to financial services to real estate. One of the best examples is in the entertainment industry. Netflix’s data-driven DTC approach has disrupted the whole ecosystem in such a way that direct over-the-top (OTT) streaming is now mission critical to maintaining relevance in the media business. Everyone from Hollywood to Silicon Valley has made streaming an imperative, leading to once-unthinkable mergers and acquisitions.
At the heart of the data-driven approach is machine learning and the larger field of artificial intelligence (AI). I believe we are at the dawn of the AI era and as Stanford computer science professor and Coursera Co-Founder Andrew Ng has stated, AI is the “new electricity”. AI will eventually permeate all aspects of our society and will radically transform every industry, company and customer experience.
The spark that will help AI accelerate will be all of the data that is generated thanks to the fifth generation of wireless dubbed “5G”. 5G starts to be deployed in 2019 and promises exponentially faster and consistent download/upload speeds with initial median speeds of about 1.4 gigabits (roughly 20 times faster than the current 4G experience). Perhaps more important than 5G’s impact on speed will be its impact on latency, as the time it takes for devices to wirelessly communicate with each other will drastically decrease. 5G will also have ramifications across the tech ecosystem impacting everything from battery life (lower energy consumption will mean smaller and longer lasting batteries) to the form factors of our screens, phones and other devices. Indeed, mobile is about to experience its next renaissance.
Fueled by an unprecedented amount of data that people and devices are already generating daily, the rise of AI and 5G combined with cloud-based computing will set off a virtuous cycle of creativity and innovation leading to new applications that will improve and enhance customer experiences. This data-driven AI+5G+Cloud “flywheel” will have a domino effect enabling other technologies to take off as well. With extremely low latency, the Internet of Things will become the Internet of Everything as sensors are deployed everywhere from phones, homes and cars to traffic lights, roads and buildings. As everything starts to get connected, the lightning fast speeds of 5G will help bring extended reality (XR) to the masses. As new augmented reality (AR) and virtual reality (VR) use cases multiply across industries ranging from beauty to healthcare to retail, XR will evolve from today’s awkward, clumsy and one-off trials to tomorrow’s seamless, immersive and must-have experiences. Just imagine how XR will transform entertainment and education!
The digital road ahead is extremely exciting and it will clearly be an important growth driver for years to come.
So what about diversity?
The Rise of Multicultural Nation
According to the U.S. Census, in 2020 the U.S. population will be 19.0% Hispanic, 13.3% African-American, 5.9% Asian-American and Native Americans and other ethnicities 2.2%. That means that over 40% of the U.S. will be diverse, over 135 million people. While most population estimates have the U.S. becoming a multicultural majority in the year 2040 with over 50% of the country diverse, the future in fact is already here.
Almost half of all millennials (older “Gen Y” & younger “Gen Z”) are diverse today, with the largest percentage coming from the Latinx community. Over 75 million strong, the millennial generation is now America’s largest — eclipsing the current size of the postwar baby boomer generation. As Brookings has noted, the millennial generation is the demographic “bridge” to the nation’s diverse future. This means that multicultural millennials will pave the way for the generations behind them as workers, consumers and leaders in business and government with their acceptance by and participation in tomorrow’s more racially diverse America. Demographics is destiny.
Today’s families are not only multicultural but increasingly multi-racial as well. In the past decade alone, the rise of multiracial marriages in the U.S. has led to a 50% increase in America’s multiracial youth demographic. According to Goldman Sachs, “the Census Bureau is actually forecasting that over half of all kids in America will belong to a minority race or ethnic group by 2020, so diversity in the traditional sense of the word has actually become the norm.”
Which brings us to Generation Alpha.
Understanding the Children of Millennials
Generation Alpha, also known as the “children of millennials,” is the first generation born entirely within the 21st century. Born beginning in 2010 (the same year Apple debuted the iPad and Instagram launched) to 2025, Gen Alpha will be the most diverse generation in history. They will also be the most digital as these children are more comfortable swiping a tablet or speaking to a voice assistant than most of their adult relatives. This makes them a critical gateway for any brand or company looking to engage their millennial parents.
In fact, Alphas are already guiding many of the purchasing decisions within their families. A recent study surveyed millennial parents around the world with children between 4 and 9 years old and found that 65 percent of these parents said the habits of their children influenced their last purchase. However, that number increased to 81 percent among U.S. millennial parents. About 31 percent of these parents believe tech matters more to their kids than toys, holidays or pets, and around 27 percent of them said they asked their kids’ opinions before buying a new TV, laptop, tablet or phone. Fun fact, Gen Alphas are also expected to be the longest-living generation as well as the wealthiest, according to Grant Thornton.
So the future is going to be both digital and diverse. It will be driven by multicultural trends and millennial families using powerful technologies. We are on the cusp of the next big transformation as 5G rolls out. What does this mean for our youngest generation, Gen Alpha? I believe that the families of today and tomorrow are going to want smarter, more modern ways to both entertain and educate their kids. They will want to see themselves represented. They will demand cultural authenticity. They will want to understand the backstory, the intent, the motivation, the “why” of a brand. They will vote with their dollars and their likes so they can feel proud of the things they buy, use and share. They will care about what businesses and people are doing to give back. They will want purpose-driven brands.
This is why we founded Encantos.
Ready for Generation Alpha!
Encantos is building family entertainment and education brands for today’s multicultural world. Created as a public benefit corporation, our mission is to help kids of diverse backgrounds see the very best of themselves in entertainment and education. Along the way, we are create bridges and bringing people together as we help families be inspired by a world of cultures. We’re ready for millennial families and Generation Alpha.
As a women-majority owned business, we are bringing diverse perspectives to the way stories are told and brands are built. We design and develop direct-to-consumer brands using the best of digital technologies to bring them to life via content, publishing, e-commerce and consumer products. We have a blank canvas to build new DTC brands for the 21st century leveraging all of the latest innovations ranging from AI to AR and apply them to “KidTech”. We’re so proud of the initial success we’ve had with our first property, the award-winning Latino-inspired bilingual nursery rhyme brand Canticos. And we have a robust brand development pipeline and many committed creative collaborators and partners.
At the very heart of Encantos is family. We want to represent today’s multicultural families the right way. We know how important this is and what it means so much to the communities that we aspire to serve. While our world is diverse, our content is not. However, we believe multicultural done well is mainstream done right. The vision is for Encantos to build a “house of brands” that are culturally authentic, story-centric, character-led, beautifully designed, universally beloved and most importantly purpose-driven.
Gandhi said “be the change you wish to see in the world”.
Encantos is going to be the change in family entertainment and education.
We’re just getting started.
Be inspired,
Steven
