Tag Archives: New Year’s Resolution

Innovation and Risk Taking – Everything in Moderation

Joe Schmieder
Joe Schmieder

Family businesses tend to pursue incremental opportunities rather than radical new innovations.  Growing by incremental innovation steps has proven to be more sustainable than giant leaps of change.  This incremental approach is prevalent partly because family businesses are less prone (not adverse) to taking high risks and leveraging large amounts of debt.

One finding that stands out when reviewing Family Business research is that successful, long-lasting family firms exercise moderation.  Typically, family firms do not over leverage, over risk, over plan, or over innovate.  Seldom do we read about a family firm that has discovered or developed a groundbreaking new product, like the iPod or Viagra!  These developments emerge from the heavily funded research and development departments of large public companies like Apple or Pfizer.

Whereas venture capital firms talk about burn-rate, the amount of cash a start-up venture plows through in the early stages, family businesses talk about less exciting things like self-funded developments or modifications to existing products.  This moderate approach to business, while less exciting, has for the most part served family businesses well.  The steady, moderate approach creates a more stable firm. 

Unfortunately, at times this status quo climate can be the underpinning cause of the decline of a family business.  When factors change and a family business does not adapt quick enough, there can be a noticeable drop in the value of the family business.  The print media industry is one of those very visible industries, populated by many family-owned firms, that has faced rapid transformation mainly because of the delivery of content through channels very different from traditional printed formats.  The digital age, specifically the internet, has changed this industry dramatically.  Some have adapted.  Some have not, and suffered for it. 

While moderation in a family business may be admirable, is your family business adapting to new trends in today’s accelerating pace of change?

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Risk Taking in a Family Business

Joe Schmieder
Joe Schmieder

Research indicates that family firms take fewer risks compared to non-family firms. This lower risk-taking viewpoint has led to the myth that family firms are risk adverse.   Another conclusion is that family businesses take “safer” risks that are closely associated with their core business.   Since other studies indicate family firms show higher performance over the long run, it could be argued that family firms actually take more “high-probability” risks than non-family firms.  While these risk are not as exciting as what venture firms and some publicly owned firms may take, the family firms’ conservative, calculated approach to risk-taking appears to deliver stronger value over the long term.

As the New Year gets under way, what are some risks that your family business is considering for 2014?  Are you looking to expand your business?  Add more employees? Develop new products?  Acquire a business?  Open a facility in another country?  There are risks associated with each of these initiatives.  The competition could introduce an advanced product just before you go to market with your new product or the country you plan to enter could fall into an economic slump.  Regardless of these possible occurrences, family firms have a history of carefully selecting investment risk levels so they can endure these possible setbacks.  Families do take risks.  They are not adverse to risks.  They simply take measured risks that have a high probability of providing a long-term return.

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The Year of You

Norb Schwarz

By now most of us have made our New Year’s resolutions and have put them on a back shelf.

For 2012, I am working on a new challenge. I am concentrating on self-improvement as opposed to focusing on the business. The process will be much the same as my business planning process. First take an inventory. Who am I? What are the elements that make up “me”? I came up with eight potential elements for myself; the spiritual me, the emotional me, the relational me, the financial me, the professional me, the experiential me, the intellectual me, and the physical me. Given those elements of “me”, the next step is to look at how I have fared in each area in the past, where I am now, and where I want to be in the future. The final step is to outline what I have to do to meet each of my future goals and begin the process for each.

I like to keep the following favorite verse in mind as I go though my “year of me” process:

Isn’t it strange that princes and kings
And clowns that caper in sawdust rings
And common people like you and me
Are builders of eternity?

To each is given a bag of tools
A shapeless mass and a bag of rules
And each must make, ere his life is flown,
A stumbling block or a stepping stone.
R. L. SHARPE

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