In my earlier blog post, I wrote about the importance of next-generation family leaders gaining challenging work experience with real responsibility inside or outside the family firm. How might a next-generation leader accomplish this within the family firm? It turns out that preparing for leadership and ownership succession in a family firm presents a great opportunity for next-generation leaders to stretch themselves and help the family business at the same time.
Transition in ownership in a family business often creates the need to grow the business to support the financial needs of more than one generation of family owners. It also often comes at a time when the market is suggesting a time for strategic renewal. The term “transgenerational entrepreneurship” refers to the ability of a family enterprise to meet these challenges by creating new streams of value across many generations (Cruz, Nordqvist, Habbershon, Salvato, & Zellweger, 2006). Next generation leaders may have entrepreneurial ideas for addressing new opportunities in the market that the senior generation does not see or understand. Taking responsibility for developing those ideas into new products, services, processes, or business lines can provide a way to stretch their wings and establish credibility in the family firm.
One of my former MBA students did exactly that. His father established and operated a highly successful catalog business in a niche market. My student researched opportunities for distribution of other products that were underrepresented in direct-to-consumer marketing and identified a highly fragmented market that seemed ideal for direct marketing. He developed a business plan that utilized existing distribution and sales infrastructure for his new line of products and raised the necessary capital himself.
Not only has his “company within a company” been successful in its own right, but he also convinced his father that investing in developing a robust online sales platform in addition to the traditional catalog was necessary to keep both businesses competitive. He has gained valuable experience, established himself as a respected leader, and created a new source of growth for the family business. His father now sees him as a capable successor for leadership of the entire enterprise.
Cruz, C., Nordqvist, M., Habbershon, T., Salvato, C., & Zellweger, T. 2006. “A conceptual model of transgenerational entrepreneurship in family influenced firms,” International Family Enterprise Research Academy.