The world was a different place in the 2000s when CampdenFB was launched. While issues of good governance and succession planning are always front of mind for family principals, the new century has opened up the family business space to more pressure on more fronts than ever before. Are these six areas indicative of what’s to come?
Sustainability has long been a hallmark of family firms. The challenge to survive past the second generation hasn’t changed much. It’s the other definition of sustainability—engaging stakeholders about a firm’s environmental and social accountability—that has intensified over the past generation.
Nowadays families think deeply about their purpose and values—how they integrate corporate social responsibility into their business goals and decisions. The next generation, in particular, don’t see social impact as distinct from business performance. Which brings us to them.
This cohort has morphed radically. Whether modern business practices have shaped them or the other way around is unclear. They are increasingly leading enterprises into new sectors, new products, new services, and new territories. Digital-native millennials especially have fully embraced digitalisation. They have taken families out of their comfort zones.
Commerce is globalised. Family firms have had to adapt. There are new competitors in their once safe domestic markets. Customer loyalty has diminished. Yet the drive for international growth has hauled families out of traditional markets only to expose them to new competitors. Even small businesses are selling, sourcing, and doing deals across borders. As family enterprises become more international, so have their owners. Many are geographically dispersed, which has piled social challenges on top of operational ones.
Industry lifecycles are shortening. Compared with even a decade ago the rate of business change has accelerated. Indeed, in roughly 10 year cycles, family firms now tend to make two big changes to their companies. Some are good at it. When Marseille-based Daher morphed from a service-orientated company in the 1990s to an industrial aerospace conglomerate, it showed incredible agility. America’s Kohler, meanwhile, has change down pat with business lines as diverse as engines and bath products. Families are making frequent transitions of leadership to keep regenerating. But how long can chief executives stay in office without hindering innovation?
It is not uncommon to see three generations working in the same enterprise. Family firm chief executives remain in office for an average of 25 to 30 years. Longevity has changed the playing field. The notion of co-leadership is cropping up more frequently in families. Will the next generation get sandwiched in the middle of senior figures and stall out even younger next gens? It was not an issue a generation ago.
The biggest change by far is how family firms are approaching digitalisation to rejuvenate their business models and develop new revenue streams. Unfortunately, many firms still view digitalisation as e-commerce or social media. They are not necessarily aware of the deeper benefits of becoming technological disruptors (rather than the disrupted) or staying ahead of the curve in hot areas such as IoT (Internet of Things), robotics, virtual reality, and blockchain.
Three-quarters of family firms agree there’s a need for digitalisation, according to one KPMG study, but they may not fully understand the significance or possible benefits. Families are far more dynamic and innovative nowadays, but there is still progress to be made. Once thing is certain: More change is coming.