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Succession Planning in the Age of Innovation and Technology 

 

Maintaining the momentum of an established family business is a task that is difficult to master. According to a Harvard Business Review article, "Avoid the Traps That Can Destroy Family Businesses," by George Stalk and Henry Foley, 70 percent of family businesses fail or are sold even before the second generation takes over. Just 10 percent of them remain active for a third generation handover. Unlike publicly-owned firms, where the average CEO tenure is for around six years, many family-owned businesses are led by the same person for at least 20 to 25 years. These long tenures increase the difficulty to adapt to the changing trends in technology, business models, and consumer behaviour. Today, family firms in developing markets, are facing new threats thanks to globalisation. Leading a family-owned business had never been more challenging.

In this age of innovation and disruptive technology, the business ecology is changing at a rapid pace. Therefore, what worked for the founder of the company decades ago, has little relevance to what's happening in the industry today.

People involved with a family business for years can be resistant to change. The attitude towards it is – “If a business model has worked for years, why change it?” While this might work for some firms in the short term, failing to recognise and act upon changing needs is sure to hurt a business in the long run. When a young leader from a new generation takes over, he or she should ideally bring a fresh vision, taking into account updated ideas and technology trends in the market.

According to a 2014 PricewaterhouseCoopers Family Business survey, 86 percent of the next generation planning to get involved in the family business say that they want to do something significant, and 80 percent of them have big ideas for change and growth, such as introducing new products, investing in new technologies, exploring social media or changing the way the business operates. While the first generation of the family business might have a stronger level of experience, the newer generation has a stronger education background and brings new and innovative skill sets to the table which helps modernise the business and takes it to a new level.

As difficult as it may sound, it isn’t an impossible task for a family business to break through and survive the innovation and technology explosion. Here are some pointers that can help family-owned businesses make a successful transition:

Recognise that change is good

Stick to core strengths

Plan ahead

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