Innovation can be described as creative change that produces meaningful results. Family businesses that demonstrate a proactive ability to drive meaningful, value-adding change are those with the strongest cultures of innovation.
In some family firms, the notion of innovation, creativity or change is clearly stated in their values, which may be posted on the walls of the company. S.C. Johnson, the global household cleaning company that uses the tag line “A family business,” makes its values as clear as glass freshly cleaned by its products:
- Knowledge and technology
- Employee welfare
- Eustomer relationship marketing
- Global thinking
According to this list, the Johnson family explicitly values innovation. Supporting innovation are the complementary values of entrepreneurship and risk-taking. It takes an entrepreneurial drive and some investment risk to make innovation real and meaningful. The four generations of Johnsons have been inspired to exemplify these values by the story of founder Samuel Curtis Johnson: at age 53, he launched a flooring company and soon diversified into floor maintenance when he observed his customers needed a product to preserve their new floors.
Most family businesses have not been as intentional or broad scope about innovation as the Johnsons. In other family firms, innovation may be exhibited mostly in one area of the business, or only for specific periods of time. A family firm in the adhesive coating industrial sector discovered that one of their key ingredients was going to be discontinued by its sole supplier. Understanding that this would devastate their business, a team of engineers, managers, and salespeople banded together to generate A CREATIVE solution. It turned out that one of the salespeople’s customers knew a different vendor with a similar ingredient. After some joint development with that vendor, which was also a family business, the formula was developed to suit their needs, resulting in an even better adhesive. This was just one time the family firm exhibited such joint problem-solving innovation.
Creating a culture of innovation shouldn’t be about product/service DEVELOPMENTS alone (although the next chapter discusses that topic in detail). On the one hand, there may be no greater practical way to create a “sense” of innovation than to produce a steady stream of new market-focused products. New-product introductions are exciting and highly visible to the organization and its stakeholders. On the other hand, to maximize performance, companies need to aim for innovation on multiple levels. That means long-lasting family firms also work on creative ways to:
- Take measured risks to develop new wealth while preserving foundational or legacy wealth.
- Blend diverse family members working in the business with capable nonfamily executives.
- Transition ownership from one generation to the next while balancing incentive to work hard with financial security.
- Develop the next generation into leaders who are able to reinvent the business for greater growth, building upon the founder’s legacy without trying to replicate the founder’s hero image.
- Live family values that set the tone for business continuity while remaining focused on managing a healthy business in the short term.
- Steward family resources in a manner that benefits customers, employees, communities, and family members.
- Develop effective governance practices that balance the sometimes conflicting needs of the family, management, and ownership.
Together, these elements support a highly innovative family business culture.
Joe Schmieder’s new book Innovation in the Family Business utilizes the IP from the Family Business Consulting Group team and includes case studies from successful family business ventures such as SC Johnson, Beretta, Mogi (producers of Kikoman), and others. This is the first book to focus on innovation in a family business setting.