Family Business Innovation
FAMILY BUSINESS INNOVATION
“If it ain’t broke, break it”
Creating a Family Business Innovation program is essential for every generational family business.
a top family business expert and a pioneer in the field of family business dynamics, has been studying and advising family business entrepreneurs for more than 40 years.
He is the founder of the
Family Business Institute
and the web organization Family Business Experts, both of which are headquartered in Atlanta GA.
Schwerzler tells this story about innovation... "For years, the mantra for many family businesses was simple: “If it ain’t broke, don't fix it.” Schwerzler continues, “The first time I heard someone challenge that philosophy was the then Chairman of Coca-Cola, Roberto Goizueta. Twenty-five years ago Goizueta opined that his core business philosophy was “If it ain’t broke, break it!” Schwerzler concluded, “That should be the mantra for family business innovation – “if it ain’t broke, break it”!
Innovation drives entrepreneurship – first the vision then the mission.
For many family businesses, innovation drives the early years of the family business. The following generations often tend to be caretakers rather than innovators. Not paying sufficient attention to “innovation” within their business, their industry and in their market place may be one of the contributing factors why so many family businesses fail to transition into being generational family businesses.
It is often argued that successful family businesses become more risk-adverse as the company matures. In that process, the concept of innovation does not get proper attention, support or funding.
When coaching Family Business Innovation, the ultimate challenge is in achieving balance between the “traditions” of the family’s business with “innovative” ideas and business practices that will enhance the growth, profit and sustainability of the family’s business.
Learning and innovation are two linked strategies for successful family businesses. Here are nine changes that will shape innovation.
Getting Started With A Family Business Innovation Program
The first step in developing a family business innovation program is to create a healthy environment for “idea management and mindset changes".
The second step is to know how best to connect the family business innovation program to the accrued business savvy and acumen of a family business.
The third step for family business innovation is to adapt and transition new ideas and concepts into successful and sustainable business programs that grow the family business. At a time when training and development content are not in short supply, but sustainable changes are, family businesses need to challenge the actual assumptions of their family’s business model.
To develop a successful family business innovation program, some “mind set” changes in the family business need to be addressed and challenged. The point and counterpoint of the “innovation dialog” between generations in a family business was wonderfully stated at one of our family business innovation workshops.
The son, with a newly minted MBA from an expensive top-flight business school proclaimed “I agree with the old saying that a new broom sweeps clean.” His father replied, “A new broom might sweep clean, but it is the old broom that knows where the dirt is!” In many ways, innovation in a family business is about bridging those two perspectives!
10 Critical “Mind Set” Changes
- Ethical Decision Making – the difference between “right” and “real”. What "should" you do versus what "would" you do?
Some would say that decision making, as a skill, is the major contributing factor to ROI, that we are the sum of our decisions. But the traditional model for teaching ethics (the "shoulds") we have practiced perfectly, a model that has no predictive validity. Companies like Enron and Arthur Andersen make that point.
- Corporate Training – the difference between "information-based" versus "knowledge-based" training.
Many family businesses develop “sequential” learning habits. They attend seminars and learn about new “buzzy” ideas and strategies. Then they try to adapt and implement these ideas into some area of their business. But new ideas and methodologies developed and implemented in one department, but not all the departments, create a checkerboard of training results. Knowledge based training is a more holistic approach where corporate training is a managed resource, customized to the specific needs of the business.
For more information about corporate training, Click Here
- Performance Evaluations – the difference between “human performance” versus “human nature”
Performance evaluations can provide the critical documentation to help a family business avoid unnecessary litigation. However, many evaluation techniques attempt to measure and improve performance against an inflexible standard. When this happens, the process can often exclude the “human nature” side of the employee. When “human nature” is not included as part of the performance evaluation, the family business may invest a lot of time and money trying to put round pegs in square holes.
For more information about performance evaluations, Click Here
- Management Practices – the difference between “Sensitive Compliance” versus “Commitment”
Many communication training programs focus on how a manager can get his/her subordinates to do “just what I say” - but saying it in a "sensitive" way. This manipulative approach produces pseudo-commitment. The secret to getting real commitment is by getting to know your employees and by being real. This simple truth will enable managers get more commitment from the entire team, naturally and with less effort.
- Envisioning Capabilities – the difference between “what you wish/want” versus “what is”
Being able to honestly and accurately assess the strengths and weaknesses of your family's business is the starting point. If the perception of the present is flawed, then you will be working towards a flawed future - having left a lot of good ideas/intentions along the way. The key is to unlearn our tendencies “to expect” and to build our capacity “to envision”.
- Employee Motivation – the difference between “emotion” versus “reason”
In non-family businesses, the business model is one of “rational problems” and “rational solutions.” However, in many family businesses, you have “rational problems” and “emotional solutions”. In a family business many decisions are not based on what is best for the business but what is best for the family or a member of the family. To enhance growth and profits, shifting the management style of the family business to being more rational rather than emotional will realize many benefits. Employees will be better motivated by what they "hear" when that matches the reality of what they "see".
- Family Business Processes – the difference between “family systems” versus “business systems”.
For more information about family business processes, Click Here
Role confusion in family businesses can cause communication problems that can hurt the business and wreck family relationships. With the senior generation, wouldn't be nice if they wore caps when they are talking that would say CEO or BUSINESS OWNER or DAD or SPOUSE/PARTNER. Everyone could listen with the appropriate set of "ears". Ditto the younger generation with caps saying VP or SON/DAUGHTER or Brother/Sister. This can create a very flexible and intuitive family system. So too, many family businesses tend to operate with a more informal management style and without sophisticated financial and operational controls. Without formalized infrastructure, the decision making tends to be more intuitive and the lines between family systems and business systems become blurred.
- Succession Planning – the difference between “hierarchical” versus “longitudinal”
Succession planning is often discussed from the family's perspective. However, how the employees of the family business perceive the succession process can have an enormous impact on how well the business does on a day to day basis. How the succession issue is perceived by vendors and customers is another important part of the succession management process. If key managers perceive a lack of competence in the leadership skills of the next generation, key employees may move to some other company where they may have more upward mobility and/or more influence on the organizational structure of the business.
For more information about succession planning, Click Here
- Executive Leadership – the difference between “loyalty" (trust a given) versus "authenticity" (trust re-earned).
Typically, in successful family businesses, the senior generation earned their spurs by hard work and commitment to the success of the business. That type of work ethic encourages genuine loyalty from the management team and the employees. The next generation of family must EARN the respect of the management team and the employees. Family business innovation programs represent a wonderful platform for re-earning or authenticating trust in the next generation of leaders in the family business.
For more information about leadership, Click Here
- Defining Success – the difference between “transgenerational” versus “transformational”
When a family business is transitioning from one generation to the next, more-often-than-not, the focus of the succession management process is to successfully transitioning the business to the next generation of leadership and ownership. In fact, successfully transitioning the business from one generation to the next is quite an accomplishment. Research indicates that only about 30% of family businesses successfully transition to the second generation! Successful family businesses tend to use the succession process to include family business innovation programs. This allows the family business to identify “transformational” opportunities and not just being focused on dealing only with “transgenerational” issues.
Succession time is an opportune time to work on creative changes and new ideas for the family’s business. It helps to regenerate and reinvigorate the family business with the passion that is associated with positive and healthy change.
Most important Benefit - it provides a process for a family business to pass wealth and wisdom to the next generation!
For more information on creating a family business innovation program for family business owners and their businesses, use our ATE form below.
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