We have now been going through a sustained period of time whereby family businesses & SMEs have to deal with various unprecedented challenges. Over the years I have learnt that on average family business have important positive traits like a strong financial resilience and a strong commitment to the business, that will help them overcome challenges. However, I have often seen other negative traits, like their inclination to micromanage and let go of the overall picture (strategy), giving priority to family harmony over the family business needs and worst of all is their slow, almost tortoise like pace, in making changes. Family Businesses need to move away from these negative traits if they are to survive the present and future challenges.
Family businesses urgently need new mindsets, strategies and practices. As always the tone needs to be set from the top. Family Business owners themselves must lead the charge and insist on new directions and transformative action to ensure success in the years ahead.
Why is the need for family businesses to change, adapt and transform so important now more than ever before? Families businesses have always needed to adapt to changing times, but in general (and except for disruptive periods), they faced fewer changes and had more time to adapt than they do today. In today’s complex, fast-paced and hyper-connected world, the nature of change itself has changed. Family Businesses are today witnessing far greater volatility and more frequent disruptions, all of which make the future much harder to predict. This means that family business leaders need to act more like champions of change rather than bastions of stability.
Lets us put all this in context. Any family business on the face of the planet are today being hit by forces related to:
- Environmental degradation
- Technological advances and digital disruptions
- The shift to Globalisation and now back to Deglobalisation
- Various changes to Social, Political and Economic aspects due to the pandemic and geopolitical tensions
So the question as to “how ready for change is your family business?” becomes a very pertinent one. Many times I see that family businesses are able to recognise the need to change and adapt, but then fail miserably as they do not have the necessary ability and skill to push these changes. Others think that these changes can be postponed as they are always busy sorting some “top-of-the-pops” operational issue.
I sincerely hope, that all the present turbulence (from the pandemic to the effects of the present war) is at least making you, as a family business leader, sit down and reflect on your business model. Do you think your present business model will last? What are the potential pitfalls of your present business model? What change needs to be implemented to avoid these pitfalls?
The biggest opportunity that this disruption is giving to any family business is that it is pushing family business leaders to get out of their comfort zones and think on how to best adapt. Such attitudes are encouraging, but that is not enough. Family business leaders need a greater sense of urgency to implement the necessary changes and meet the challenges ahead. I get tired meeting family businesses where the way forward and changes needed have been agreed but some 3 or 6 months down the line nothing has been done!
What I have learnt is that for any family business to be really serious about implementing change, they need to have the following elements in place:-
- An improved mindset for family business owners: Capable and loyal family business owners has always been an essential foundation for family businesses. However in turbulent times, family business badly need their owners to be more agile. This means that family business owners need to be equipped with mindsets and skills that allows them to navigate such turbulence successfully. Here is where sometimes I see that family business owners fall short of the basics. First of all, family business owners need to take the job of ownership seriously, rather than viewing it as a birthright. This means that the family business would do well to invest in proper training of its owners. However the most challenging area with family business owners is their attitude towards managing their family business. Some owners still believe that they need to have 100% control over all decisions in the business. They have no idea how to distinguish between the strategic and important areas to focus on and those areas that are just wasting their time. Their mindset has not made the quantum leap of the need to collaborate more and control less. This many times becomes an obstacle for change.
- Being ready to change: The ability to address threats and pursue opportunities in a timely way will separate the winners from the losers. You can’t predict the future, but you can — and must — be able to anticipate and quickly respond to changing conditions. Family Business owners need to stop from always being engulfed with daily opertional issues and gain altitude i.e. the ability to get an overall strategic picture, monitor signals of change and build their view of the future. Family Businesses need to be in a constant state of exploration, with an eye to the future. Strategic foresight — a valuable tool for that purpose — requires a formal process for scanning the horizon and tracking key trends, developing alternate future scenarios, and then setting a strategic course forward based on the owners’ strategic vision and choices — a strategic course that can change and adapt as owners learn more.
- Give Digital Transformation more importance: As costs need to be constantly monitored and controlled and as human resources becomes more expensive and difficult to find, the importance of digitalisation is becoming more strategic. So family businesses need to constantly ask themselves as how they can reap further benefits from digitalisation, many times with a sense of urgency. There is also the needed for family businesses to proactively manage cybersecurity risks
- Use this turbulence and change to engage future generations: It would serve family businesses well to use turbulence as a way engage with their rising generations, who will have different expectations, during such turbulent times. Such turbulent times will be an eye opener as to whom from the rising generations is best set to contribute to the family business. This also means that to engage rising generations, in such turbulent times, there will be need for family business to step up their family governance game – having proper functional board of directors, possible also a family constitution and a family council – this so that future generations have a governance framework in which they learn to be more strategic whilst also feeling empowered to contribute towards preparing the family business for the future.
Surviving, let alone succeeding, in the new turbulent era requires nearly constant adaptation as well as some significant transformation by family businesses. Family Business leaders needs to look outward and understand the challenges and opportunities they face, and look inward and examine the strengths and vulnerabilities of their family business. Then, family business owners and leaders have a collective responsibility to define their desired future and map their transformation journey. Whatever the change agenda, there is no time to waste.
As Albert Einstein once said “The measure of intelligence is the ability to change”
So, be intelligent please!