Recognising tensions between family tradition and innovation is the first step towards managing those tensions and making strategic decisions to power the business forward, says new research.
British families of up to seven generations and all sectors, generating at least £25 million ($34 million) a year, said it was “vitally important” to retain the core elements of their traditions with the need to adapt and innovate. They were surveyed by Dublin City University for the new working paper on Long-Term Thinking in UK Family Business by the Institute for Family Business (IFB).
Senior members surveyed said keeping the business in the family, perpetuating family values, promoting and preserving the family reputation, maintaining family unity and harmony, and promoting social responsibility were the issues most dear to them.
However, upgrading existing product appearance and performance was the top priority of 77% of members surveyed. They also prioritised their development of new products (66%), innovation in marketing techniques (57%), their investment in new research and development facilities to gain a competitive advantage (56%), innovation in production processes (52%) and their production of speciality products (50%).
The paper’s three case studies found private family ownership reduced pressure on investment returns—22 of the 31 respondents said goals that took years to achieve were regularly pursued. Enduring relationships with customers, suppliers and other businesses were deemed “very important” to 29 of the 31 respondents.
Yet families were willing to explore emerging opportunities, with 25 of the 31 confirming they experimented with new products and services in their market. A total of 23 respondents agreed that demands that go beyond existing products and services were acceptable.
“The research findings highlight that the continuity of the family businesses (i.e. their pursuit of a long-lasting mission and reputation, whilst keeping the business within the family and valuing past influences) has been vital to their strategic decision making,” the report said.
“Understanding continuity in terms of family goals and priorities may help family owners and advisers to identify the reasons behind strategic decisions that are taken by multigenerational family firms, and the consequences of those decisions in the long term.”
Fiona Graham (pictured), IFB spokeswoman, said family business owners have a strong sense of respect for their heritage.
“They seek to build on the successes of the past, and to pass on a stronger business to the next generation. Sometimes people incorrectly assume that because they care about the past family firms aren't innovative. But family owners know that to be sustainable for the long term they need to continue to invest, innovate and adapt.”
Graham said one of the keys to balancing tradition and innovation was to acknowledge the challenge and work to understand how it effects the business and decision making.
“Honest and effective communication when undertaking long-term planning can help you address this challenge. If you are able to identify and agree on your long-term goals for the business as a family, you will be better able to make decisions about how to meet those goals.
“That may mean deciding to build on your heritage and use it as part of your marketing and customer experience to help the business grow. Or might mean you decide that certain parts of the business will not help you reach those goals.”