In a yesterday’s post, I shared a lesson from a study of large, old, successful family businesses – innovation is a key to success. But, while companies in this study demonstrated an ability to innovate, they also clearly recognize their core competencies and stick to them. So, we uncover another family business paradox – trying new things vs. sticking to your knitting. How do we resolve this paradox? As with all paradoxes, the answer is “both and” not “either or”.
Successful family businesses are willing and able to try new things, but they select carefully when they branch out. They choose new business areas that leverage prior knowledge and skills. Sure, occasionally the businesses in the study branched out well beyond their comfort zone. But, when they did they often did it with a partner (more on that in a future post). And, many of the businesses were currently in the mode of paring back their portfolio to focus on what they do best, then innovating around that core.
The key to successfully executing this strategy is to clearly understand what your competencies are, the ones that clearly differentiate you from your competitors, and how you might use them to take you to new places. The fact that family business owners provide patient capital creates the opportunity to build and leverage these core competencies to their greatest potential.