AIIA_TL_-Digital_Natives_paper_FINAL

Ships in the Night
Connecting with Digital Natives
A white paper prepared for the
AIIA Financial Services Innovation Group
by Microsoft and Future of Culture
10 September 2013

© Australian Information Industry Association and Microsoft
Authored By
James Bibby
Microsoft
Jody Turner
Future of Culture
Editorial Contributor
Marcy Larsen
Microsoft
The AIIA wishes to thank their
Financial Services Thought
Leadership partners, Bartier
Perry.
Bartier Perry is a commercial
law firm that assists clients in
the Information and
Communications
Technology sector on a
wide range of commercial
transactions
Download the AIIA Financial
Services White Papers
www.aiia.com.au
AIIA Head Office:
39 Torrens Street, Braddon,
2612 ACT
p: 02 6281 9444
e: admin@aiia.com.au
w: www.aiia.com.au

© Australian Information Industry Association and Microsoft Page 1
Digital Native. Next Gen. Generation C. The iGeneration. Whatever label
you ascribe to the generation currently reaching university and the
workforce, this generation has grown up in a world where barriers of
distance and limitations of the physical world have been rendered
impotent by the digital age. It is a generation that has never known life
without computers, the internet, mobile phones, video games or digital
media. How has the experience of this digital world shaped the current
generation – their thought processes, behaviour and view of the world?
Is this generation really so different from generations before? And if it is,
how does this impact financial institutions as they endeavour to connect
with this new breed of consumers, homeowners, entrepreneurs and
investors?
This paper explores the concepts that encapsulate the emergent Digital
Natives, and provides insights into their preferred means of
communication, the extent of their influence over peers and family, and
how they best understand information. The paper also introduces the
approaches that disruptors, including PocketBook, use to build
meaningful (and profitable) relationships with this generation on their
terms.
The Digital Native defined
Before we explore the best way to connect with Digital Natives, it is
imperative to understand who they are. First coined by Marc Prensky1
, the
term Digital Native was born in 2001 from an exploration of the challenges
in educating young people who were going to school in a fundamentally
different world from their pre-digital teachers – the so called Digital
Immigrants. While there is not yet a definitive term for the cohort born
after the Millennial generation (Gen Y), Digital Natives are generally
characterized as those born during and after the mid 1990s.
Key to this generation is not technology per se, but rather the way in
which digital technology and the onslaught of information has shaped the
way in which they process information and think. This has led some
commentators to go so far as to suggest that this has impacted the
process of brain development, leading to biological differences in the
brain function and thought patterns of Digital Natives. So, how do you
then define the DNA of a Digital Native?
“How we use the brain is socially driven from the left brain linear
generation to the right brain creative gen. The youngest Digital
Native generation is seemingly firing across the board in an
integrative fashion. Just sit down for a minute or two with a digitally
savvy 9 year old and you will see what I mean. To me this changes
everything.”
Jody Turner, Founder, Culture of Future
Networked
This is a generation where the walls between offline and online are barely
visible; where digital technology like SMS, SnapChat, Facebook,
Instagram, Skype or twitter is a natural mediator in human-to-human
connections. These people function best when networked, and these

networks have removed the tyranny of distance or hierarchy enabling
them to collaborate and create in ways that would have been impossible
for Gen X or Millennial teenagers to experience. In some respects, space
or distance no longer exists, having been replaced by an internal feeling
of being ‘continually connected’.
‘Now’ists
Thriving on instant gratification and frequent rewards, Digital Natives live
in the now. They are used to a world that is always on, and they expect
to be able to access anything, from anywhere, at any time. They naturally
connect with others in this space through a variety of access points. How
you ‘connect in’ says a great deal about you. This creates a new idea of
tribe, language and identity through access as well as interaction.
Tracking access you have a constant and subtle feedback on people’s
identity and role. This generation has a different relationship with privacy
as a result; with more people allowing access to their information to
maintain their omnipresent feeling of connectedness (whether truly
connected or not).
Multi-taskers
Digital Natives have grown up in a world of constant information flows,
across a range of old media and new media – from television to the
internet with Blogs and IM, mobile phones with SMS, and digital music
and videos, accessible from a range of connected digital devices. The
proliferation of channels and streams of information have necessitated
the ability to rapidly switch between mediums and devices. Watching TV
while searching online for information about the lead actor, while
simultaneously participating in Instant Message conversations with one or
more friends watching the same show. This ability to rapidly switch has
engendered the Digital Native with a natural ability to multi-task by
processing multiple channels in parallel to achieve the desired outcome.
“This generation lives inside a connected world. To them it’s all one
big screen. Products are access points that may look and behave as
disconnected on the outside, but to Digital Natives they are simply
access portals to ‘home’. Youth subconsciously find and conquer all
access points everywhere they go, much like a natural game or
birthright. They have the ability to manage the immersive and
networked mental landscape much better than we do, in fact they
seek it. With this ability to curate and conquer, the more the better.”
Visual and Haptic
Preferring graphics over text and touch over clicks, Digital Natives
understand that the visualization of information makes it easier to quickly
assimilate new ideas and make decisions. For a Digital Native, seeing and
touching information helps them ‘walk’ through the data landscape
quickly. Short video bursts appeal to a quick hunter/collector as does
pinning of data through websites such as Pinterest (identity building and
rebuilding through content).
The more you visualize content for this generation, the more they can

take on and the more they are engaged with you. It becomes a never-
ending feeding machine that grows them and grows you, just as they like
it.
www.fastcoexist.com/3016315/how-selfies-are-re-
energizing-the-new-york-public-library
Gamified Hacker
From an early age, this generation has experienced the world through the
lens of digital games. Be they games for entertainment or learning – at
school, in the home or out and about, Digital Natives exist in a world
where there is a digital game for almost anything. This generation actively
engages in digital experiences that reward ‘players’ who accomplish
desired tasks through creative, competitive tension.
At the same time, gamification is no longer just for kids. The processes of
engagement are being developed to address complex social and
business issues with crowd sourced driven innovations for reward. A child
raised playing app games that teach them how to code as they educate
the child to engage and contribute in future interactions.
New skillsets are truly vital today. Young people enjoy developing them,
teaching and sharing them with siblings and parents. These skills help
them become a font of valuable knowledge in the family setting, while
also providing a basis for future success. Being in a world NOT designed
for them is not an issue – their inventive work-around means they can
‘solve’ a situation in a heartbeat, and products and services should
encourage this.
“Digital Natives live in a world designed by non-Digital Natives.
Even Legos today can be hacked or built to suit. What does this
mean for our future?”
Now we know who the Digital Native is. But how do these characteristics
translate into behaviour?
Understanding the DNA of a Digital Native is only half the story. How
these genes express themselves within their environment provides us with
a more complete picture of this ‘new species’. To understand this more,
Microsoft undertook a focus group comprising 11 graduates and interns
who were under 24 years of age and in their first year of work experience
with the company. The group was provided with 18 key words from Mark
Prensky’s follow up paper on Digital Natives2
(see Figure 1). They were
asked to discuss and identify the top five words that described what
Digital Natives ‘do differently’ to previous generations.

Figure 1: Key words describing what Digital Natives 'do differently'
Sharing
Sharing was the first word to be identified, and played strongly into the
networked characteristic of the Digital Native. Sharing was primarily
selected to represent social networking and sharing information about
oneself: “it’s all about me”. Notions of privacy in sharing are also well
understood: “we share knowing that we can’t be private”, but “what we
choose to share is in our hands”. Lack of privacy is not to be feared as ‘I’
am in control of what is shared.
Sharing is also seen as a key to identity, “we define ourselves by the
comments we make and the people we connect with” but identity is fluid.
“I can be more than one person on social”. This is a generation at ease
with curated identities.
But beware. Sharing too much ‘noise’ defines you negatively. “There is a
lot of over sharing, like, awgh life’s tough with my boyfriend, selfies on the
way to the gym, or ‘I had chicken for dinner last night’”. This cohort is a
critical audience that distinguishes and values relevance over quantity.
Communicating
The focus group observed that previous generations were all about direct
communication. “I think other generations were about reaching people
directly, picking up a phone. We are about broadcasting, reaching 100
friends.” Talking to people was almost seen as secondary. This is a
generation who have melded digitally intermediated forms of
communication into their norms. “You might be sitting near someone, but
you’re still communicating with them on Facebook Chat or IM”
“Communication is interesting today, being able to communicate
through text while you are near someone creates insider levels of
intimacy with a tool we might not normally see as intimate. What
we choose to communicate with dictates the timeframe of our
interactions and expectations overall. Email is slow, phone is faster,
IM fastest... and so on. The expectations are flexible with email
response, tighter in with phone calling, closer in with texting and

then tight with IMing. How you manage your schedule then begins
to depend on what you choice to communicate with.”
Collecting
Collecting was seen to be about the collection of information. “You can
find pretty much anything you need on the internet”. The group observed
that their ability to collect and synthesize information quickly from a range
of digital sources was integral to their adaptability and ability to easily
navigate the modern world.
Collection of information was also seen to be particularly powerful in
terms of collecting information about people. “It’s hard to be private, so
you know you can find out pretty much anything about someone if you
look”. Absolute transparency, the collection of information on people was
seen as the flipside of sharing.
Evaluating
The visual characteristic of the Digital Native came through strongly in
evaluating. “My father will buy something and he will read the instructions
from end to end. Me, I look at the page see a picture with a charger and
hey, I figure this is telling me where I connect the charger. Done.” This
preference for visual information goes beyond the consumption of
information and clearly influences decisions. “When I look for an app, I
check out two things. What do the screen shots look like, and how many
reviews does it have. I don’t even bother reading the reviews, as long as it
has a lot and the rating is good”.
Even with more complex decisions visual representation of information is
preferred “I could go and find out all the details about the best flight ticket
to buy, but I just prefer to go to a comparison site, see it summarised there
and quickly buy the best ticket”.
Evolving
The life of a Digital Native is firmly rooted in the now – and the now is
changing rapidly. “Change is the norm”, “we get bored quite easily, we
need new friends, new things, new jobs”, the Digital native is always
evolving every aspect of their life.
What does bored mean to you? “I am less involved”; “It’s become too
familiar”; “Not exciting”. But are you not loyal? “There is no such thing as
loyalty, it’s a short term concept”; “Loyalty means I’m not bored and my
friends are still there”. Do not, however, misunderstand this desire for
engagement and connection as fickleness. To entice a Digital Native to
move, the evolution cannot be incremental, “We need dramatic change to
move”.
Finally the group was asked to reflect on these differences, and review
some of the comments contrasting their own behaviour compared to
their younger siblings. Do these characteristics define your generation,
or reflect a life stage? Much like the nature versus nurture debate in
human development, now widely regarded as being nature via nurture,
the group did not think it was one or the other. The generational

differences were seen to be real, making them fundamentally different to
previous generations. However, they also expressed themselves in
different ways depending on one’s life stage.
An example using social networking was provided to explain this further.
While at school, many of the focus group reflected the value of their social
network as primarily determined by the number of ‘friends’ within the
network. There were few perceived consequences to sharing. But now
that the group has entered the workforce, their use of social networking
has been refined. Social network platforms are a canvas to curate their
identity. The loose connections and numbers game of adolescence has
been replaced by the creation of work and personal personas across
social and professional networks. They have begun a ruthless culling of
irrelevant connections but their use of social networking to define and
maintain their identity remained.
‘What’ this generation aims to achieve remains very similar: career
progression, wealth accumulation, family, home, etc. ‘How’ they will
achieve it, and their focus on digital tools as their first choice and primary
means of communication, marks them out.
How does the buying process of a Digital Native differ from previous
generations?
Non-linear buying
Digital Natives play at purchasing first by visiting, collecting, learning,
reading, engaging and sharing before making an actual purchase. On
one hand they love engaged brands like Abercrombie or Nike that
successfully deliver a real time visceral experience. On the other hand,
they love the online cat and mouse game of ‘discover and share’ that
takes them hither and yon. The combination of these approaches can be
useful to engage this “all of the above” – or as Adidas calls it – “all in”
generation.
A brand’s job is to make sure they are a part of this process. Right now,
Pinterest is considered one of the strongest marketing tools in the digital
branding world it delivers the play curation Digital Natives are into. But
yet, Pinterest chose not to have e-commerce connection to its dynamic
role at the 2013 New York Fashion Week. Why is that?
Moving out of competition into the collaboration zone
As a designated hub for the New York Fashion Week, Pinterest provides
a narrative for popular and leading designers including Burberry or
Michael Kor. Users can also jump online for ideas about how to dress at
Fashion Week – but the site makes no space for e-commerce, despite the
enormous opportunity it could provide. Why?
mashable.com/2013/08/28/pinterest-new-york-fashion-
week-hub/

Pinterest makes it money by being a discovery machine for Digital
Natives, and it hasn’t lost site of that. Being a pure discovery hub at the
biggest US event demonstrates self-control and an understanding of a
generation that enjoys generosity. For a Digital Native, this is the type of
commitment worth signing up for.
“Technology is an intrinsic part of most people lives. All we’ve done
is make sure to weave technology into the fabric of the company”
Christopher Bailey, Chief Creative Officer, Burberry
Become your demographic
Another intriguing approach as a marketer is to imbibe versus report on
the generation; being able to walk in their shoes, so to speak. Why not
check into 1888 Hotel in Sydney, a hotel that leverages Digital Native
selling points?
“When you walk into the boutique, you're greeted by a revolving
digital mural of Instagram images, and a selfie space to snap a
photo of yourself as you check in. More than 100 guest-shot
Instagram photos adorn the five-story space's 90 rooms.”
Adam Popescu, Mashable
Check out the hotel on Instagram under the #1888Hotel
hashtag
How are successful brands leveraging their knowledge of Digital Natives to
engage with them?
“Old money sees a segment, a demographic. New money sees a
community.”
Anonymous (Digital Marketing Executive)
Pocketbook (www.getpocketbook.com) is an Australian start-up targeting
consumers with a simple value proposition: we make managing your
money ridiculously simple.
The company has been building its business for close to a year and
launched in beta just 9 months ago – already achieving a number of
significant milestones. It won the SWIFT Innotribe Asia Pacific start-up
competition and earned a place in the global finals in Dubai this year,
became the top finance app in the Australian Apple App Store within a
week of its launch (beating all the major Australian banks and PayPal),
and has seen consistent growth of around 10% week-on-week.
We caught up with co-founder Bosco Tan to get his view on the Digital
Native.

Are Digital Natives a key part of your user base, or do you think that the
whole notion of Digital Natives is irrelevant?
Digital Natives are absolutely key. We like to think of ourselves as building
a critical tool for the Facebook generation. Much like Facebook is critical
to people’s social lives and LinkedIn is critical to people’s professional
lives, we are critical to their financial lives.
Building for this generation is also a little different to yesteryear. You are
dealing with lower and lower attention spans and increasing competition
for those spans, so you have to focus on getting key things, such as the
user experience, absolutely right. There is an expectation that it is right,
and if it isn't, then you lose that user.
Do you focus on Digital Natives in particular? Or are you targeting a
broad spectrum of users?
We build for the average Joe or Joanne, though this starts with Digital
Natives. The ideal user for Pocketbook is someone whose financial life is
either a little complicated or about to get more complicated. This
happens at various times in a person's life – for instance, when they get
their first job, move out of home, look at renting or buying their own place
just to name a few. When you go through those changes you need some
help. That's where Pocketbook comes in.
As a result, we see a lot of young professionals getting onto Pocketbook,
people who are naturally Digital Natives. Young people know they need
to do something about their finances, but leave it because it's too hard
to start, and they find the tools out there today laborious.
Over the last 9 months, we’ve seen the progression of our users to the
broader spectrum. When it is this simple, it begins to be applicable to
stay-at-home mums and retirees. We are able to on-board them and
fine-tune our product as we listen to their feedback on a daily basis.
What do you think are some of the defining characteristics of the Digital
Native?
Simplicity and instant gratification are key. Beyond this it’s about
connectedness, and we see that with the social movement. People are
connected now more than ever, not just with each other, but also with
the brands they identify with and the products they use.
This movement has led to a few trends, a surge in apps such as instant
messaging, social and professional networks. Associated with this is that
people are sharing and trusting more. A decade ago it would have been
hard to convince someone to post or share their lives in public, but today
millions of people around the world do it every day.
They trust these sites and applications with their lives. So the idea of trust
is changing for the current generation who have and are growing up in
this digital world.
How has this understanding influenced both the design and marketing of
PocketBook?
We have been building Pocketbook with the thought “if we were to start
a bank today, what would it look like as an application?”, and at the same

time thinking “how do we make the absolutely most awesome product”.
So we are definitely building for this generation, you can see that it in the
DNA of our product: simplicity, instant gratification and increasingly,
connectedness. These are traits of the greatest success stories of this
generation and we ascribe to this school of thought.
We actually haven't done any paid marketing to date. We've let our
product speak for itself, while we focus on finding and connecting with
our users and having conversations where it suits them.
Do you think your understanding of what it means to be a Digital Native
has given you a competitive advantage over banks? Do banks really
understand how to connect with Digital Natives?
I’m certain the banks understand Digital Natives. From the sidelines,
they’ve invested a tremendous amount in new online solutions to cater
for this population. Developments like ANZ Go Money and CommBank
Kaching, and the development of UBank by NAB speaks heavily to how
much they understand what it means to be digital first.
I think one of our competitive advantages lies is in the response. We are
nimble, brand agnostic and absolutely product focused.
We can also be a little more ambitious in where we go with the product.
When someone thinks of a traditional bank, there is a preconceived idea
of what it will look like and, by and large, that is what they get.
We aren't a bank, and we are taking our product where no other bank
(or anyone else) has gone yet.
What do banks need to be doing to better engage this generation?
Engagement with Digital Natives will be a battle fought on two fronts:
acquisition and retention. This is an important consideration as there are
significant costs associated with new customer acquisition, so any strategy
that ignores the more temporal notions of loyalty in Digital Natives will
likely suffer high churn rates.
Acquisition
Digital Natives are creators with a strong sense of “me”.
 Move from pre-packaged product to dynamic product that can
be assembled by the Digital Native to suit their individual purpose.
Natives live in the Reinvention Culture, and by enabling them to
contribute their own ideas of how it can be done will help feed
them – and grow you.
 Social Objects. Offer products in the new framework that a Digital
Native lives within, through visual cues they imbibe in. Offer
products that have a social aspect to them, providing a way for
them to share value with their friends, and be seen as a provider
of new ways of doing things.
 Money is digital to the Native. The world is catching up on this,
so offer new services that allow the Native to be at the leading
edge. In the US, Square provides simple access to mobile selling,
buying and purchasing – to anyone.

 Natives want to learn and grow, to share skill sets with others.
Provide online education on topics of vital interest to them – from
solopreneurship to entrepreneurship and coaching for getting
work in dream job.
Retention
This is not a set and forget generation. Boredom is key to a lack of loyalty.
So how do you continue to evolve a product in a way that continues to
generate excitement?
 Banks must become adept in the art of ‘the illusion of change’.
How can you re-skin products to create the sense of new, that
sense of change? UI changes, adding extra features and social
extensions all provide opportunities to achieve a sense of
newness.
 Broaden your customer centric strategy to foster and deepen
social links. Being relevant to this generation is more than being
relevant to the individual, its being relevant to their network of
influencers. If the influencers move, your customer will likely
move with them. Adopt a ‘community centric’ approach to
complement your focus on the individual.
 Continued right brain engagement. Build a sustainable relationship with
the creator hacker side of the Digital Native. Harnessing their creative
desires during acquisition is but the first step. Empower the Digital
Native to continue to influence and change their product, to share their
‘creations’ with their network, and deepen the emotional connection to
something that they uniquely’ created and contributed.
Umpqua Bank Portland Oregon is a small
hometown bank with an innovative edge.
Umpqua premiered a community bank in 2008
housing several digital community screens and a
40-foot plasma wall where you can learn about
the businesses of the area and upload your own
information. Long tables are offered, computers,
Wi-Fi, Umpqua coffee blend (Portland is a coffee
town) and financial experts
Just recently Umpqua opened an innovation
centre in San Francisco. The theme of both?
Support business growth. The new San Francisco
flagship retail store has a business lounge,
exchange rooms, a concierge, catalyst wall,
charging stations with Umpqua blend coffee and
The Spark Resource Centre to fuel ideas, with
digital booklets on industry insights.
http://www.umpquabank.com/sf

“Digital Natives live a life in beta, continually shifting and changing
in this grand experiment called life. The build of evolution occurs
through on and offline conversations with family, friends and yes,
brands. The role of brands has changed from the loud and
demanding advertising world of the past to something being co-
created before our eyes. Yes, ‘loud’ is still in but also in and growing
is the brand story bringer and sharer, the one who like the Digital
Native, is a contributor and harbinger of change.”
1 Prensky, M (2001). Digital Natives, Digital Immigrants. On the Horizon, MCB University
Press, Vol. 9 No. 5
2 Prensky, M (2004). The emerging online life of the Digital Native.
http://www.marcprensky.com/writing/Prensky-The_Emerging_Online_Life_of_the_
Digital_Native-03.pdf

About AIIA
The Australian Information Industry Association (AIIA) is the nation’s peak
industry body for the technology sector. AIIA sets the strategic direction
of the industry, influences public policy and provides members with
productivity tools, advisory services and market intelligence to accelerate
their business growth.
AIIA member companies employ 100,000 Australians, generate combined
annual revenues of more than $40 billion and export more than $2 billion
in goods and services each year. With member companies right across
the country, from every sector of the industry and representing every size
of company, AIIA is truly the ICT industry's association of choice.
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AIIA releases regular Thought Leadership pieces in the financial services
arena.
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Join us to:
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