In times like these — defined only by a spectrum of uncertainty across our social, economic, ecological and political realities — many family businesses are asking themselves difficult questions about the future. At the end of the day, however, all these questions are fundamentally one; they all want to know, “What does the way forward look like?”.
And when they are asked about their ultimate goal, their answers can be reduced to one of two base aspirations.
Firstly, family businesses want to create the best possible customer benefit, because they know that companies have only one purpose, and that is to satisfy their customers. Sometimes, when companies grow older, they lose touch with this objective. They forget the only justification for their existence: the valuable services and products they provide to their customers. Companies who lose sight of this fundamental truth might find themselves in serious trouble because of it.
Secondly, family businesses want simply to survive. Some would argue that survival is a low-set goal — that companies should strive for more. Wealth, social recognition, size and profit might be attractive to some but rarely do long-lasting family companies cite them as motivating factors.
Surviving from generation to generation is quite enough, especially in light of the fact that 95 per cent of family businesses fail to make it to the 5th generation. Only about 65 per cent enter the second, 35 per cent the third and 15 per cent the fourth generation. Family Businesses are subject to an exceptionally high mortality rate — high enough that survival is an ambitious goal.
Improve the Odds
“Increased survivability” can confidently be defined as the overall strategic goal of healthy family businesses. And because in every family business no matter the scale, there are two systems at work — family and business — forward-looking action must be taken on both fronts. At the same time, the two systems must always align to achieve the all-important balance between them, the result of which is success and increased survivability.
Chart a Course for Increased Survivability
Over the last few decades of working with entrepreneurial families, we’ve been able to observe, collect and grow a series of findings to support the harmony and increased survivability of family businesses.
The findings concern both systems — the family system and the business system — as well as the interfaces between the two.
The variety of suggestions range from inspiring personal attitudes of family members, who know, for example, that a good succession process is the responsibility of everybody involved and needs to be subjectively fair and objectively not unfair.
Moreover, successful business families do not speculate with risky opportunities, reflect thoroughly before a decision is made, believe in the power of corporate and family culture and in the value of loyalty as a cornerstone of intergenerational sustainability.
Entrepreneurial frugality is both a lifestyle and a decision-making style, which in time leads to the comfortable position of wealth and financial strength, driven by outstanding entrepreneurial ability, knowledge and competence.
To survive in the frenetic world of modern business requires pausing when everybody else is running — reflecting when others are acting. To determine the what, why and how, when others do without really knowing. Survivors don’t let themselves become overwhelmed by the pace of time, but do not oversleep the exponentiality of current developments; they act in a measured way.
Finally, survival without a good portion of luck is impossible, but luck is not a survival strategy of a successful entrepreneurial life, and even if the brave and diligent deserve luck, they don’t always get it. That’s luck: not prescriptible, unpredictable and not to be counted upon.
What then, can family company leaders and managers do to ensure survival? Be curious and hold firm in the belief that things can be done differently or better. Find guidance in a discussion with peers, in a good book, in the 9-point program for survival below or in a platform like the Family Business Model Tool. To define and set a course for the future is the constant vocation of those family business leaders who honour their family’s legacy.
The 9-point Program for the Survival of Family Businesses
1. Individual Renunciation by Family Members
- Consider taking a step back for the good of the company
- Place yourself at the service of the company.
- The succession processes must be subjectively fair for everyone involved, and at the same time objectively not unfair.
2. Entrepreneurial Frugality
- The company has to be financially strong.
- Let small, manageable and affordable steps take you to every destination.
- Do not speculate with risky opportunities.
- Live frugality instead of avarice as a lifestyle.
- Entrepreneurship is meaningful and part of a meaningful life.
- Be positive even in difficult times but not unrealistic.
- Selling the company is never really an option but should always be possible.
3. A Measured Approach
- Pause, especially in frenetic times.
- Good decisions need profound reflection.
- Do not let yourself be overwhelmed by the pace of time, but do not oversleep the exponentiality of current developments.
- The wealth accumulated in generations is reassuring but not a guarantee for the future.
- Too big a strategic mistake can be critical for survival.
- Family investment offices diversify family assets.
- Outstanding ability, knowledge and competence are needed to survive in competitive markets.
- Build up unique core competencies.
- The constant creation of new competitive advantages is the most important task.
6. Attitude of Mind
- Corporate culture is tangible in everyday behaviour; not just an abstract concept.
- Investments in corporate culture pay off.
- An individually developed corporate culture is the competitive advantage par excellence.
- Intergenerational principles should be the foundation for survival.
- There are historic moments in every business life, that must not be missed. Use these moments to your advantage.
- Whoever misses these moments to set a course for the future will not survive.
- Today’s momentum is defined by exponentiality through digitisation and hyper-connectivity.
- Never forget your roots.
- Loyalty to the past, present and future is the old survival principle, newly called “sustainability”.
- Loyalty unites.
- You can’t prescribe luck.
- The brave and the diligent make their luck, in some senses, but luck can’t be counted on.
Do you want to check your Family Business Model? Register and get access to the Family Business Model Tool. Answer 100 questions associated with 10 DNA strands and get your 16-page report. Identify areas of intervention and start your journey towards the business model of the best family companies.