Family businesses rising to challenge of global disruption

08 June 2017 5 min. read
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Family businesses are facing disruption from a range of global factors – from technology to changing consumer mind-sets – according to Big Four firm Deloitte. A new survey finds that most family businesses are rising to the challenge, with most seeing it as a normal part of business (49%) and as an opportunity (32%) - although concern around disruption from family dynamics continues to pose the key challenge at around a quarter of businesses.

The possibility of disruption continues to pose businesses across the spectrum with a range of problems with no certain solutions. New technologies, wider macroeconomic changes and the rise of platforms, among others, are setting up an environment in which incumbents lose considerable business to a new competitor or miss out on whole markets from cleverly packaged propositions.

Family businesses, too are feeling the pressure from disruption – in a new survey from Deloitte, titled ‘NextGen Survey 2017’, the firm explores the current environment in which family business operate, their expectations and challenges. The survey involved a survey and interviews with more than 250 family business leaders across the EMEA region.

Which catalysts affect your market

Deloitte’s researchers found that family businesses see the economy in general as one of the major external catalysts for change, with an average of 63% on a ten-point scale. The changing customer mindset follows, at 61% on average for all respondents. Technology too is seen as a key change enabler (51%), although the platform phenomenon was cited as a catalyst affecting the market by 30% of respondents on average.

The firm also noted differences in response based on the age of the family businesses. Businesses over 20 years old cited enabling technology as higher than average, while those between 50-99 claimed changing customer mind-set was more impactful than enabling technology. Businesses more than 100 years old too noted changes to the customer mindset as the biggest impact for their business.

Family’s level of awareness about disruption

The level of awareness of the potential for disruption within the families of family businesses is relatively high. Around 36% say that their level of awareness is 8 or more, indicating high level awareness, while between points 5-7, awareness stands at 41%, suggesting that overall families are well aware of the potential for disruption to their businesses.

Likelihood of potential disruption in the next 2-3 years

Deloitte’s paper also sought to find out how concerned family business about the potential for their business to be disrupted in the next 2-3 years. Overall, businesses are expecting disruption to affect their business in the next 2-3 years, with 15% saying it is very likely and 32% saying it is likely. Around 17% of respondents are relatively neutral regarding the potential effects on their businesses, with 28% say that disruption to their business is unlikely and 8% say it is very unlikely.

The firm also found some family businesses believe that they will lose market share to disruption, at 8% saying it is very likely and 19% saying it is likely. 37% however, say that it is unlikely. 49%  indeed see disruption as a normal part of business cycle, while 32% see it as an opportunity.

Approaching disruption

Most of the respondents are already approaching disruption as part of their wider strategic planning. 54% of respondents, for instance, say that they somewhat agree that they understand the nature of disruptive change, while 30% say that they fully agree. Respondents are also relatively confident that they have a clear point of view on the direction of their industry, market and business over the next 5-10 years, as cited by 84%.

In addition, three quarters of companies interviewed said that they are able to identify initiatives that deliver near-term impact and accelerate transformation, while 65% of respondents said that their family business amplifies impact and accelerates learning.

Most disruptive factors in family companies

While businesses more widely need to deal with disruption and internal organisation issues, for family businesses the question of family relations as such, as well as succession, can be more delicate. When asked what the most disruptive factors are in family businesses, changing family relationships comes number one at 24% of respondents, followed by market disruption at 20% of respondents. Succession and organisational challenges follow at 14% and 11% of respondents respectively.

“The global economy is changing rapidly and fundamentally, due to the exponential speed of transformation in digital infrastructure, among other things. Quicker than ever, the past is being left behind—a tendency that in the perception of many goes against the tradition of family-owned businesses. That is why, especially now, it is important to listen to the leaders of the future,” said Mennolt Beelen, leader of EMEA Family Business with Deloitte.