Relevance of Second Generation Family Businesses in the Age of Conglomerates and Disruptors
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In an era of unprecedented change, technological and digital disruption has made it mandatory for businesses to continuously and innovatively calibrate their products, services, and processes. While the capabilities and charisma of the first-generation entrepreneurs are often key drivers of the early growth of a family business, the ever-formidable time may pose great threats and pressure on the next-gen leaders during the succession process. This can make the response to disruption tricky, as most traditional businesses often end up leaning more heavily on the legacy and personal psychology than they do on business logic.
After all, if we are to believe Darwin’s work, it’s nor the strongest, neither the most intelligent creature, but the one most adaptable to change who survives.
The tenet of iterative evolution is not just key, but a criticality, if your business is to survive in the long run. A healthy mix of traditional and progressive thinking is an asset that sets a family-business apart from a non-family business entity.
The fact, however, begs the question – despite the presence of conglomerates and entrepreneurial disruptors in the market, what learnings can second-generation entrepreneurs bring to the table?
Customer is the Disruptive Force
A prime source of customer satisfaction is the care and speed with which their issues are dealt with. In a world where we speak often of technological disruption, the most disruptive force arguably is in fact, the customer. Just look at the development of several deep-learning and AI methods where the most valuable data sits within conversations between businesses and their customers. Holding on to the personal touch – increasing customer touchpoints, collaborating for growth - and selling outcomes, not solutions/products, creates long-term relationships. As such, it is the customer who drives product differentiation and creates new areas of business growth for any industry.
A Vibrant Internal Culture Feeds Innovation
It has often been said that culture eats strategy for breakfast. Strategies keep evolving every now and then, but it is a strong culture that can weather continual changes in any industry. This kind of culture requires an open, inquisitive mindset that is irreverent towards accepting challenges, yet humble enough for honest feedback. In doing so, you would create a culture where innovation and learning don't happen in spurts, but iteratively.
Premature Scaling is a Recipe for Failure
Any family business that has been around for long enough gets several opportunities to scale quickly with external funding through disparate channels. This is even true for startups who often end up focusing on their size and geography growth yet miss out on creating a sustainable business enterprise. As an entrepreneur, you cannot neglect this because it affects the lives of teams who have come in with an aspiration of building careers and not short-term wages. Business is scalable only with the right processes and people, lest it faces a myriad of issues due to premature scaling. After all the business is not about you. A truly scalable business should be able to function just as good without you.
Successful Innovation Requires Discipline
When it comes to innovating new ideas, most entrepreneurs operate in a world where they lack adequate data to inform their decisions. As a result, it is easy for them, especially in the case of a second-generation entrepreneur, to rely heavily on experience and intuition. Yet truly innovative ideas – that have often reshaped industries – typically go against executive experience and conventional wisdom. Experimentation in a business environment can bring new varieties of analytical complexities making it tough to control the cost of failure. Therefore, understanding why and how to innovate and then putting processes in place are the first three things any business needs to become innovation-friendly.
Transparency and Sound Governance Create a Winning Team
The ability to straddle multiple generations and different viewpoints in a family business can be frustrating. However, their unified and seamless functioning can make the difference between winning and losing. While entrepreneurship may very well have been the foundation for success for a family business, team cohesiveness is a key ingredient in generating better financial returns. To do this, transparent and early involvement of future generations as well as adequately empowering them with a vision may prove to be cornerstones for the success and sustainability for the company for years to come.
The Business Must Live on, Even When You Won’t
Every generation brings a new scenario to a family business environment. While it is useless to resist change, some challenges can be anticipated and prepared for.
The role of a second-generation is thus of stewards – wherein each member of the next generation must evolve their skills with the changing times, along with a strong commitment to move the legacy forward.