The Family Business Difference: Capitalizing on Family Innovation

Joe Schmieder
Joe Schmieder

Family businesses have unique strengths built on the overlap of family and business, in part because the family running the business has more at stake—including reputation, survival, and security—than the managers and employees of non-family firms do.

Innovation is one such strength at the family-business intersection. Innovation in a family business, like most other features, is different from that in non-family firms. A key dimension of difference is that innovation in family firms is driven and enhanced by several distinct factors that can ultimately yield greater business performance, and family harmony.  Family-business features that serve as innovation drivers include:

  • Personal attachments such as family bonds, customer relationships, and inter-family-business connections—all of which support innovation

  • An incremental approach built on exercising moderation with R&D spending and emphasizing small changes to offerings, rather than giant leaps

  • Longer time horizons that yield greater patience with the development time associated with innovation

  • Shared values including innovation itself, with several supporting elements such as innovation-focused objectives and cross-functional visibility

  • Low leverage, with an emphasis on reinvesting funds back into the business—and into innovation, specifically

  • Experimental tolerance, or a willingness to try new things, even when that means going against the conventional (in a calculated way)

  • Family leadership that supports innovation by generating high-value ideas and speeding the product development process

Family businesses are indeed different from non-family firms, and many of the differences cited above support their ability to innovate, which in turn supports their growth and profits and the family’s well-being.

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