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Family businesses and 'discontinuous change?

By Rashmi Kumar

Family businesses are faster to react to “discontinuous change” than their non-family counterparts, but hesitancy to boost investment or allocate more resources when needed can be detrimental to their growth.

That's according to Andreas Konig, research fellow at Swiss-based business school IMD.

"Family-run businesses can react faster as they are less formal than listed groups. But the drawback is their hesitancy to increase their allocation of resources," he told CampdenFB during a forum organised by the IMD Global Family Business Center last week.

According to Konig, mastering “discontinuous change” in family-owned groups is important to their success and growth. He reckons that companies fail to respond to such changes – those that are unexpected and can threaten the survival of a business – because of numerous factors.

“Barriers to change could be a combination of behavioural, cognitive and psychological factors that influence decision-making,” he said.

“But family businesses should tackle that by bringing in outside executives and perspectives, or even spinning off structures.”

Besides bringing in external expertise, being “ambidextrous” is essential, reckons Albrecht Enders, professor of strategy and innovation at IMD.

“New dimensions of customer value, revenue structures and value creation are needed to respond to change,” he said.

But what is more important, added Enders, is to remember the four Cs of family businesses. “Continuity, command, community and connections are their characteristics – family companies should use the tools they have to diversify and grow.”