Family businesses need to innovate differently

Source: (July 9, 2018) | Author: Thomas de Heide

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Family businesses do not focus enough on renewing their organizational structure and are often too dependent on their founder for new ideas. That must change if they are to survive, researchers and consultants say.

Making the best window frames or designing the most beautiful yachts. Many family businesses create products and want to do so as well as possible. Consequently, their innovations focus mainly on product improvements and manufacturing rather than modernizing services or how you treat each other in the workplace. That alone is not enough to guarantee the survival of these businesses, says Anita van Gils, lecturer on family businesses at Windesheim University of Applied Sciences.

Easy to copy

Van Gils researches family businesses in the eastern Netherlands (Flevoland, Overijssel and Gelderland). The risk she sees with many companies is that product and process innovations are easily copied by competitors. ‘To continue to be distinctive in the future, companies need to engage more broadly. For example, by selling services in addition to products or creating a more accessible corporate culture, so that in today’s tight labor market people will choose you instead of the competitor.’ That also means that it is sometimes necessary to say goodbye to in-house production and shift the focus to IT solutions, for example, Van Gils told the Ifera, a conference on family businesses held in Zwolle this past week.

That family businesses are less attentive to these forms of innovation is because entrepreneurs are used to focusing on technology, such as making new, better machines. Van Gils: “There was less need to modernize in other areas, because manpower was readily available until recently.

The founder invents, the rest executes

The experts present at the conference also see that the wait-and-see culture within family businesses often hinders innovation. Employees are primarily “implementers,” the ideas coming from the founder or owner. If that person quits or becomes ill, the organization is left adrift and bedraggled.

After all, employees are not used to taking charge themselves because the founder manifested himself as a heavyweight. Once a successor arrives, the new generation finds it difficult to implement innovations, Dirk Harm Eijssen notes. He is a partner at Gwynt, a family business consulting firm. “It is very difficult for a son or daughter to innovate with their organization if the founder has been dominant and has always kept the organization small. Eijsen’s solution: first make the organization more entrepreneurial, then innovate.

Set up separate department

Eijssen sees the companies at the forefront of innovations setting up separate departments, sometimes even outside their own corporate walls. There, employees can let go of habitual thinking patterns and, often without direct interference from the owner, have the opportunity to develop innovative ideas.

Companies that involve many family members on the board struggle to implement innovations, concludes Alfredo De Massis, professor of family businesses at the University of Bolzano. According to him, the family prevents modernizations because it makes decisions in the best interest of the family rather than the company. And so outsiders in particular must be attracted. “They have a more businesslike outlook and look primarily at what makes money.