Category Archives: Strategy

Renewal Energizes Multi-generational Continuity

Michael Fassler
Michael Fassler

The new year is upon us! This is a great time to consider the power of renewal and its impact on multi-generational continuity of your family enterprise. Multi-generational continuity requires commitment to the future for the family enterprise to sustain itself and renewal results in commitments. Consider engagement in renewal on three fronts: family relationship, strategic and personal.  This engagement will result in commitments on these fronts, all working in concert and serving to energize the family business system for multi-generational continuity.

Let’s consider the meaning of renewal. The Merriam-Webster online dictionary defines renewal as “the act of extending the period of time when something is effective or valid; the state of being made new, fresh, or strong again.” When you consider that “it’s natural for families to tend toward dis-organization and separation over time”[1], that business strategies are always moving toward commoditization, and that individuals tend to get into and remain in their comfort zones and become complacent, renewal on all three fronts extends and strengthens the effectiveness of your family relationship, your strategy and yourself.

The most significant risk to multi-generational continuity is deterioration of the family relationship. The result of engaging in family relationship renewal is an increase in affinity throughout the family making it more attractive to be together and work together thereby decreasing the risk. Increasing affinity requires spending time together in settings where individual family members feel their voice is heard, their contributions matter, and they are able to enjoy the company of other family members. Options include family events such as family celebrations, family meetings, family vacations, family business conferences and family retreats.

If your family events are feeling stale and the lack of energy or participation is waning, reach out to a broader segment of the family for input on freshening up the content and activities. Sharing your own expectations and getting updated on others’ is perhaps the most powerful outcome of family relationship renewal.

Competitive pressures are fierce and maintaining an edge in your marketplace is a continual challenge. Strategic renewal helps you maintain, if not gain, an edge. Strategic renewal involves making decisions to commit resources to evolve how your business creates value and competes in the marketplace. It results in commitments such as: deepening customer and/or vendor relationships to increase their cost of switching; building your brand; evolving your processes to achieve a higher level of operating efficiency; divesting of a legacy business enterprise; or increasing your geographic or product line scope to gain economies of scale.

You know a commitment is strategic if the investment requires making a trade-off such as between the investment and increased dividends. Investing in strategic renewal takes courage, particularly when things seem to be going along rather well and there is not a crisis at hand.

Personal renewal is about focusing on yourself in order to learn and grow your capability to be effective in your multiple roles as a family member, business leader, shareholder and director. Although seemingly more simple because it requires only you to commit, personal renewal requires courage as it involves self-examination and an increase in uncertainty. Personal renewal involves engagement in such things as changing the way you behave, learning a new or deepening an existing functional skill, understanding better the impact you have on others, taking on new responsibilities which involve risk of failure, and sharing power and control. Making commitments in these type of areas can be tremendously energizing for you due to the sense of satisfaction gained from the growth which takes place.

A practical framework to apply to renewal on each of the three fronts – family relationship, strategic and personal is:

  1. Reflect on the past.
  2. Assess the present.
  3. Imagine the future.
  4. Commit to action.

Periodically applying this renewal experience framework will result in commitments which create the energy critically important to achieving multi-generational continuity.

What will you do this year to renew your family relationship, your strategy and yourself?

[1] David Lansky article: “Ties That Unbind” in Private Wealth Magazine; March/April 2015.


Incremental vs. radical innovation (“Everything in moderation”)

Joe Schmieder
Joe Schmieder

Groundbreaking new products—like the iPhone or Viagra—rarely emerge from family businesses. Family-run enterprises tend to prefer smaller-scale, incremental innovation over radical changes, versus the publicly held Apples and Pfizers of the world, which have deep pockets for R&D funding. For most family enterprises, growing by incremental steps is preferable to advancing by giant leaps. This “incrementalist” approach dominates partly because family businesses are averse to taking large risks and taking on large debt. Not surprisingly, then, family businesses tend to be quick followers or quick improvers, rather than original innovators. But we can argue that incrementalism represents a form of innovation, as it focuses on steady improvement of offerings or ways of doing business through meaningful change.

Research suggests that successful, long-lasting family firms exercise moderation with regard to most key dimensions: planning, leverage, and innovation, among others. A 2013 research study conducted by Alfredo De Massis, Federico Frattini, Emanuele Pizzurno, and Lucio Cassia entitled “Product Innovation in Family versus Nonfamily Firms: An Exploratory Analysis,” highlighted how family businesses tend to take an incremental approach to new product development, as part of a broader objective of careful resource management. The moderation approach is related to the desire to maintain sufficient resources, financial and otherwise, for family shareholders. Thus, while venture capital firms talk about burn-rate, or the amount of cash a start-up venture plows through in early stages, and how quickly a given innovation can be brought to market and scaled, family businesses tend to talk about less exciting things, like self-funded developments or modifications to existing products. That prompts some to believe that observing family firms innovate is like watching paint dry. In reality, steady progress is the key to success and continuity for many family businesses and non-family firms. The paint may take time to dry, but it sets very well, with deeper, longer-lasting color.

The moderation approach to innovation has served most family businesses well: They evolve at a pace that fits them, based on collaborative thinking among family leaders and non-family executives who understand and adhere to the family’s guiding principles. At the same time, the incrementalist approach may not always be ideal, especially in fast-shifting markets. Family businesses that fail to adapt quickly enough to the changing landscape will struggle to perform. The print media industry, for example, has been a high-profile sector populated by many family-owned firms (such as newspapers). In the new millennium this market has undergone rapid transformation, mainly because of the rising popularity of non-traditional content-delivery channels, especially digital ones. Some family firms have adapted very well to the Digital Age, innovating digitally based strategies and offerings. Others have not adapted nearly as well, and are suffering greatly for it.

The highest-performing family businesses are those that have learned to be just innovative enough, like Goldilocks searching for the “just right” bowl of porridge in the bears’ house. They match their innovation speed to the requirements of their industry and the pace of their competition, moving more deliberately than many non-family peers, in part because they don’t face the same kind of pressure for short-term results.


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.


Strategic Planning

Bernie Kliska
Bernie Kliska

In order for a family business to survive beyond the current generation in today’s fast churning economy, a well-developed strategic plan would be greatly beneficial. Conceptually, a strategic plan is relatively long range, from three to five years on average.

The term Strategic Planning typically refers to the process of developing business goals and provides a detailed road map of how to achieve those goals. It facilitates communication among family owners, Board of Directors, management and employees.

Perhaps most importantly, strategic planning provides a framework to help guide decision making and how to make the business profitable and sustainable. It also challenges past business practices and opens the way for choosing new alternatives.

The result should be a well thought out written document that includes a business Vision and Mission Statement. It needs to include a time frame in which goals hope to be accomplished and designated individuals who will be responsible for meeting those goals.

Carlock and Ward (1) discuss the importance of having a parallel process. This means there should be a strategic plan for not only the business itself, but for the family members as well. This parallel planning will help unify the business and the family.

A strategic plan is not set in stone and should be revisited annually and revised according to current circumstances.

Strategic planning can be the key to unlocking the door to making a family business successful. Research has shown it to be one of the three most important factors of family business sustainability. The other two factors are holding regular family meetings and having a Board of Directors.

(1). Carlock and Ward (2001), Strategic Planning for the Family Business, Palgrave Macmillan.


Capital Market Theory and the Family Business

John Ward
John Ward

The most recent HBR has the theme, “Are Investors Bad for Business?” (excerpt). Extraordinarily respected Clayton Christensen of HBS talks of how bad capital market theory is for innovation and job creation. Finance rations capital to a short term bias presuming capital is scarce. But it isn’t, Christensen asserts.

Family business capitalism sees the world differently. Families see capital as limited, but also embrace the long-term view. Families don’t decide as much by IRRs as by future scenarios. Limited capital sharpens the commitment, persistence, and agility necessary for sustainable success.

For years I’ve thought that shareholder capitalism couldn’t escape its fundamental assumptions and elegant, even if wrong, orthodoxy. With Professor Christensen leading a different thesis I’m heartened we maybe see things differently. While that’s good for society, it also lessens the competitive advantage of business families. Or, maybe, business families are so innately good at this thinking that they are protected by years of experience.

It’s ironic. Just as the share value capitalism theory is facing critique by advocates, business families are losing confidence in their inherent advantages. They are increasingly being told by family business researchers that they compromise shareholder value too much for family continuity and comfort.


Fast Fashion Retailing: A Great Family Business Industry

by John L. Ward

What do Zara, H&M, Uniqlo, Benetton, Topshop and C&A have in common?  They are all family businesses and they are the largest fast fashion retailers in the world.

This curiosity was recalled reading recently about the strategic challenges facing Benetton.  To permit time to address their problems they announced they are taking themselves back private again.


Inspiring Entrepreneurship in Family Business

By JoAnne Norton, Ed.D.

The early morning sunlight warmed the meeting room where the forty-five members of a large fourth-generation family business gathered on the last day of their family’s retreat three years ago. The room had a panoramic view of a pristine lake nestled among fir-tree covered mountains—a vista that easily inspired long-term visions and harmonious values.

Through a series of visioning activities the family members had confirmed that they wished their family business would last for many more generations. They were, however, faced with the challenge that their wealth was invested in mostly mature industries. After a discussion of where they were then and where they needed to be in the future, the family members divided themselves into special interest groups based on how best to achieve their vision. One group, composed of members of the third and fourth generations, determined it was crucial to find new sources of revenue for the future. To that end, they formed a special “Entrepreneurship Committee.”

Over the last several years the group has been exploring ways to grow and nurture entrepreneurs in the family in order to expand their wealth thereby ensuring that they can continue as an enterprising family. At next summer’s family retreat several of the successful entrepreneurs in the family have been asked to share stories of how they started their own businesses, what their biggest challenges and biggest rewards are, what has worked and what hasn’t. In addition, members of the fifth generation, who are high school and college age, will have the opportunity to work on an entrepreneurial project together, coached by some of the entrepreneurs in the fourth generation.

What’s so exciting about this family’s hard work to inspire and educate budding entrepreneurs in their family, is that recently released research indicates they are definitely on the right path to being a long-lasting family enterprise. In December of 2011, the results of the Family Firm Institute/Goodman Study on Longevity in Family Firms were released. Robert Nason, Thomas Zellweger, and Matttias wrote “From Longevity of Firms to Transgenerational Entrepreneurship of Families: Introducing Family Entrepreneurial Orientation,” which appeared in the Family Business Review (XX(X) 1-20). The researchers found that the key wealth creation vehicle is not the firm but the family.  Nason says families should focus on the sustainability of wealth, not on the longevity of a particular operating entity, and one of the things Nason recommends is emphasizing the founder’s entrepreneurial spirit.

If you are in a family business, what kinds of things are you and your family doing to encourage entrepreneurship? Please share your stories with us on this blog.


Build a better mousetrap and the world will beat a path to your door!

Joe Schmieder
Joe Schmieder

Really.  Does that happen?  Certainly.

Family businesses show a high propensity to continuously innovate.  One family business expanded its trash business to capture the methane gas in their landfills.  Energy is now nearly half the family’s business.

And some family businesses have helped shape the world we live in today. It was a family business bicycle shop, owned and operated by the Wright brothers, from which emerged the creative ingenuity for man’s first successful flight.  It was the Tuthill family who developed the first bread slicer around the time of the depression which spawned another innovation aphorism:  The best thing since sliced bread. 

Family-led inventions build stronger family businesses that endure for multiple generations.  In fact, when innovative ideas build a better family business we witness the world of customers, employees, and vendors beating a path to their door. 

So which innovations in your family business have made you stronger?


How Innovative is Your Family Business?

Joe Schmieder
Joe Schmieder

Would you characterize your family business as innovative?  Can you think of an innovation that has helped strengthen the business or the family?

Back in 1961 a few doctors doing research at the University of Florida developed the formula for what would soon became known as Gatorade.  Applying their research to create a drink that more quickly replenished an athlete’s energy (salt and sugar) was a great “product” innovation.

But perhaps an even greater innovation was the creation of a Gatorade Family Trust to ensure ongoing distributions from drink sales regardless of who owned the brand.  Today just two shares of Gatorade yields over $500,000 per year according to Darren Rovell, author of “First in Thirst – How Gatorade Turned the Science of Sweat into a Cultural Phenomenon.”   It is not one family that is part of the trust.  It is three extended families that comprise this “family of affinity.”

The Gatorade story shows how one product innovation can endure for multiple generations, and how one ownership innovation – a group trust – can also endure for multiple generations.

What innovation in your family business can you share with us?  A product, service, process, communication technique, estate plan, governance structure —- Innovation comes in many forms for a family business.


Alternatives to selling the family business

Albert Jan Thomassen
Albert Jan Thomassen

In a recent program for business owning families one participant asked what the options are when the next generation may not be interested in taking over leadership of the business – but may not want to sell either.  Are there options beyond: ‘To sell or not to sell…?’

What we find is there are alternatives if the family is willing to develop themselves into different roles:

1)    The family remains the owner but the management of the company is taken care of by professional non-family executives.

2)    Ownership is shared between family and some key executives.

3)    Part of the business is sold, creating a different and smaller company that the next generation is willing and capable of owning and managing.

4)    Not all members of the next generation take over ownership but only one or a few – there is a ‘pruning of the ownership’

Big changes

Most families will be confronted with two big changes if they decide not to sell but go for one of the alternatives listed above.

The first is to let go of the ‘equality’ principle. In the case of the family that raised the question, to date the brothers had equal shares and equal salaries. The reality is, in most alternatives described above this principle will have to go.

The second big change is to move from operational roles as owner to governing roles as owner.

Governing owners are active with the board, involved in strategic discussions but do not have to take on the day-to-day responsibility of managing the operations. For next generation members with their own careers outside the enterprise, this often can be an interesting alternative. For the family it means that the business is not sold. If it performs well it also means better financial returns in the long run.

Rather than only ask if it is time to sell the business – perhaps the a first question should be, is the next generations willing to prepare for a different role in the family business than their parents had? If so, continuing the family legacy can be a rewarding option for both generation as well as the business.