by Peter Kelley
Ernst & Young Global Limited is an IMA B2B Partner…
Today’s family businesses are creating cultures for innovation that are nimble, foster growth and reward fresh thinking. According to the EY global family business survey 2018, family businesses from top global markets believe they are entrepreneurial (68%), foster agility and change (67%) and allow for failure in the pursuit of improvement (61%).
What’s more, global family businesses are also using social media (68%), incorporating big data (65%) and employing robotic process automation (50%). But in spite of utilizing what many class as disrupters in the marketplace, the survey finds that only 12% of global family businesses identify themselves as disrupters. The survey data comes from 589 global family businesses from 23 global markets who each have an average of 9,100 employees and an average annual revenue of US$3.4b. The EY Global Family Business Survey was co-authored by Dr. Joseph Astrachan, Professor Emeritus, Kennesaw State University.
In response to threats caused by disruption, family businesses plan to scale their investments in technology and innovation over the next three years. According to the survey, the top areas identified by family businesses where they plan to invest in during this period include new products and services (59%), IT systems and controls (57%), human capital (53%) and production capacity (48%).
Carrie Hall, EY Americas Family Business Leader, says:
“It is not surprising that family businesses are planning today to protect tomorrow’s businesses from disruption. An eye on opportunity and a focus on long-term strategy — as well as an enviable agility to move forward — have long set family businesses apart from their non-family counterparts.”
Family Businesses Turning to the Next Generation
Many respondents in the survey recognize the role that their family’s next generation can play when it comes to identifying disruptive threats. Thirty percent of respondents note that they are utilizing younger family members’ talents “a lot” today. But only 15% indicate they rely on the next generation “a great deal” for help identifying trends that could reshape the marketplace.
Still, that leaves the majority (55%) admitting there is more to be done when it comes to using their homegrown talent — the first generations that grew up alongside the digital revolution. Change and disruption were a natural part of their life cycle — and these generations may be well-suited to work in a digital landscape that affects every area of business.
Dr. Joseph Astrachan, Professor Emeritus, Kennesaw State University, says:
“Family cohesiveness is a key ingredient in generating better financial returns for family business. The next generation grew up with the digital revolution and is used to change. It has a role to play when it comes to identifying disruptive threats or trends that could reshape the marketplace. Younger family members are digital natives and ready to rethink everything. They can make a real contribution to enhancing the innovation agenda. Engaging them early can support continuity and increase family cohesion, which are related to superior performance.”
Family Businesses Remain Catalysts for Job Growth
Family businesses recognize the need for talent, both inside and outside the family, to be nurtured — and retained. The EY survey points out that roughly 50% of all global family businesses intend to create jobs in 2018, with 10% expecting increases of greater than 5%. In the US alone, this would outpace the U.S. Congressional Budget Office 2017 estimate of 2018 job growth of around 1% for the US.
The hiring plans for family businesses are grounded in their optimism for the world economy in 2018, with 59% predicting growth in their local economies and a mere 7% predicting a contraction.
Marnix van Rij, EY Global Family Business Leader, says:
“It’s good news for the global economy that family businesses have plans in place to continue embracing change into 2018 and beyond. They are the world’s economic backbone — not to mention job creators. More than half of all family businesses intend to create jobs this year. They appear to be uniquely positioned to thrive in disruptive times.”
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