The digital transformation is being experienced in just about every sector. But which distinctive properties can help family businesses to shape these fundamental changes? We have highlighted three that family businesses can use to their advantage.
By Ron Martinek, PwC expert concerning the digital transformation in family businesses, and Bastiaan Starink, People & Organisation specialist at PwC.
The owner who phoned us for advice about digitalisation sounded rather emotional; one could actually sense his personal frustration. What had happened? His mother had ordered services from his company and had asked for them to be supplied quickly. However, a week passed before the company got round to helping her. After this experience, he realised that the entrepreneurial spirit on which the family business was initially founded, had been eroded by bureaucratic processes. So it was time to digitalise these processes, and make things faster for colleagues and, in particular customers.
Emotion can be an important driver for change. And there is no shortage of emotional involvement among managers at family businesses. Which typical properties of family businesses can help them to kick-start the digital transformation? The first thing that springs to mind is focus on long-term goals. In a previous blog, our colleague Renate de Lange highlighted PwC research showing that family businesses invested more in innovation during the economic crisis than they did prior to 2008. Such anti-cyclical policy is actually typical for companies that do not prioritise short-term benefits.
In the long-term, family businesses can use this focus as a distinctive factor in the war for talent. Meticulously building something for current and future generations will probably not sound dynamic enough to IT hot-shots with dollar signs in their eyes. However, this focus on something tangible - and the patience, investment and tenacity associated with family businesses - will actually appeal to many talented individuals who possess digital skills.
In addition, it can do no harm to examine whether the HR function is actually ready to offer flexible contracts and labour conditions. When it comes to talented millennials, many are no longer satisfied with an indefinite contract and a company car. For example, data scientists, growth hackers or business designers, whose job it is to improve user experience, want continuous opportunities for learning and training, and prefer to agree contracts for specific assignments instead of a full-time job. So continue to closely monitor new developments, and make sure contracts and conditions appeal to your youngest target group.
Besides recruiting new people, it can also be worthwhile to take a closer look at people already employed by the company. What are the hidden talents of people in the administration department whose jobs are being threatened by e-invoicing? Due to their interest in IT, it may be possible to re-train them as programmers and allow them to learn on-the-job from your newly recruited whiz kids. And what about IT managers who have known the company for years? Perhaps, with a little bit of guidance, they can develop into fully fledged sounding boards for owners, when trying to examine the strategic impact of digitalisation.
Another thing that characterises many family businesses is strong relationships with their region. Large national companies and global giants rarely forget where it all started for them. They support local social initiatives, and realise that the region is home to many of their personnel and some of their oldest clients and customers. This historical connection with the ecosystem is a unique foundation for testing new ideas for products, services and business models on a small scale. Although companies like Amazon, Facebook and Google have created online platforms where they learn to keep focusing on consumers, they are not in touch with their local surroundings in the same way as family businesses. Family businesses have the opportunity to combine the innovation and scalability of platforms with their distinctive position in the region.
Although companies like Amazon, Facebook and Google have created online platforms where they learn to keep focusing on consumers, they are not in touch with their local surroundings in the same way as family businesses.
Are you a manager of a family business that is having difficulties when it comes to assessing the platform economy, user experience and business design? Then the third characteristic will be of interest to you. Perhaps the next generation of your family has a much stronger affinity with digitalisation. PwC's Family Business Survey concluded that the legacy of family businesses will primarily be determined by involving the highly-educated and technically-minded millennium generation.
Companies need this young generation to keep pace with rapid changes in the field of digitalisation. So encourage them to gain experience with digital innovation, both within the company and outside it. For example, allow them to set up a digital start-up or digital twin, as a small-scale testing environment for ideas that could also benefit the larger organisation. Both generations can then use mutual support to move to the next level. The older generation can teach the younger generation about the existing company; and the youngsters can expose the older generation to the possibilities of digital technology. Never before have youngsters been in a position to teach so much to their parents and grandparents.
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