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How Next Gens are dealing with disruption
DISRUPTION is either going to happen to you or because of you. Too often there is the expectation that Next Gens are to be stewards of the family legacy and protect that which has been built up over several generations.
But contrary to what many may think, it is not always easy to preserve the status quo. The world today bears little semblance to the one our parents grew up in. While it is important that the values which helped define the success of family businesses transcend time, we need to acknowledge that blindly clinging on to the past may be detrimental. It is better to embrace what the new world order has to offer, and evolve to meet today’s challenges than risk being left behind.
New ventures from within
PwC’s Next Gen Study 2017, Same Passion, Different Paths, examined how the next generation of family business leaders are making their mark in today’s world.
Many successful transitions can be attributed to the foresight of these individuals, in particular those who had the tenacity and courage to disrupt themselves, ultimately transforming their businesses from within. We call them “intrapreneurs”, a nod to them promulgating an entrepreneurial mindset inside a family business environment.
Family support is crucial for an intrapreneur to succeed and it is important for family businesses to understand that this process is not simply about assigning a business function to the Next Gen to operate and run. They have to provide him or her with the latitude and leeway to carve out a niche of their own within the context of the family firm and encourage new ideas and concepts that may even end up challenging and transforming the current business model.
As opposed to embarking on a diametrically different venture separate from their family business, these intrapreneurs are comfortable operating from within the firm, actively seeking opportunities to do something new yet complementary to the business.
Some ventures may be in a related sector where the family’s existing contacts and market reputation can be a real advantage. Having developed a better understanding of the relationships affecting the family business, as well as having honed his or her entrepreneurial skills would put the Next Gen in better stead to ultimately take over the business.
Our conversations with Next Gens worldwide revealed that a large number harbour aspirations to do something new to make a name for themselves. At the same time, many are also acutely aware of their heritage, as well as certain expectations for them to take over the reins should the need arise. The intrapreneurship model provides a good way to allow these two seemingly conflicting pathways to converge.
Not always a walk in the park
Reflections from Next Gens who have walked this path highlight the need for buy-in, not just from the family but also the professionals supporting the new venture. Culturally, this may necessitate some change, as well as a paradigm shift, from a business-as-usual frame of mind to one where changes come fast and furious.
Not surprisingly, the need for flexibility and autonomy from the parent company is often cited as a key priority, reinforced by the fact that many of these new ventures embarked on by intrapreneurs have the look and feel of start-ups.
These changes may not be received with open arms all the time or right from the beginning. As intrapreneurs may still be “semi-attached” to the family business, developing strong relationships with internal stakeholders to ensure their support and buy-in is key. Family, colleagues, business partners and even suppliers all play different roles in driving the success of new ventures within the family business.
A Next Gen whose family is in the textile business shared that her parents initially had some reservations when she mooted the idea of starting a social enterprise in clothing and accessories.
Thankfully, her initial strategy of setting up and linking the family firm’s sales operations within the new business paid off, as this gave their existing buyers exposure to the new venture. Since then, the new enterprise has grown from strength to strength, and her parents have also learnt from the experience and are looking to incorporate lessons learnt into the core business.
Beyond technological disruption
Rapid advances in new technologies, globalisation and developments in telecommunication have certainly challenged the way businesses are traditionally run. What Next Gen intrapreneurs have to offer goes beyond an understanding of new technology and its broader implications to the business model, and how it may affect consumer behaviours.
As a Next Gen in the printing sector shared, digitalisation within the industry was precisely what led him to explore different ways to disrupt his business model. Today, his company has transformed from a legacy run-of-the-mill shop, to one that provides advanced printing solutions that are not only efficient, but also customised to his customers’ requirements.
Unsurprisingly, a common theme across the interactions we had with successful Next Gen intrapreneurs in our 2017 survey is the need to work out how the venture will fit in with the pre-existing activities of the firm. Our survey shows that while 82 per cent of Next Gens think that innovation is essential to the future of the firm, only 15 per cent think that the family business is doing well in this area. Perhaps it is time for family businesses to be concerned about the wave of digitalisation and the new economy, start conversations with their Next Gens, and look into opportunities to innovate and potentially disrupt themselves. W