The coronavirus disease 2019 (Covid-19) has affected all businesses and industries, albeit in differing ways. The family business category, however, has been left out of the public discussion, says José Liberti, a clinical professor of finance at Kellogg. “This is in part because detailed data on family businesses can be tough to come by”, Kelogg Insight reported.
The recent staging of the 2021 Asian Family Enterprise Excellence Conference, where I was panelist for the topic on “technological disruptors to Asian family businesses” together with the keynote speaker, Professor Roger King of the Hong Kong University of Science and Technology, was opportune. It highlighted how Asian family businesses should gear towards sustainability and resilience in braving the new world with the pandemic. The conference also aimed to be a place of convergence of families in businesses.
Prof. King shared his landmark 2018 study titled “Where technological disruptors meet Asian family businesses”, which surveyed 119 Asian next-generation family business members and three in-depth case interviews. It revealed key barriers that Asian family businesses faced in dealing with technological disruption as well as practices and strategies developed by next-generation leaders to keep their family businesses at the top of the game. The technology disruptors considered and corresponding percentage of respondents who named them were big data (60.5 percent), artificial intelligence or AI (52.1 percent), Internet of Things or IoT (48.7 percent), renewable energy (42.0 percent), and robotics (40.3 percent).
The findings included surprising data on how family businesses responded to disruptive technologies. One is that “it takes approximately 28 months for Asian family businesses to complete the entire technological disruption response cycle, from recognizing a new disruptive technology, devising a response strategy or plan, to executing the strategy or plan”. Furthermore, Generation X family business members took longer to recognize a disruptive technology than Generation Y.
A striking finding is that “Asian family businesses show low dependence on resources from external capital providers in relation to investment in technological disruption, clearly indicating their concern about control dilution”.
Another interesting finding is that “Asian family businesses show a reasonable level of agility, embracing new ways of thinking and accepting changes to existing managerial and financial practices and structures”. This is probably true when younger generations are given a chance to influence the decisions of Generation X owners.
Some of Prof. King’s prescriptions include breaking “the control mentality and avoid entrenchment to bring in new resources and thinking, introduce institutional investors, private equity, or venture capital; establish wider alliances and partnerships outside their industry; engage external advisors wisely”.
Another is to “hold a clear vision of the role of technology in the business model; adopt/adapt technologies selectively to maintain the fundamental values of the family business; [and] integrate disruptive technologies with your business model for deep transformation, if appropriate”.
While the study was conducted pre-pandemic, the prescriptions presented are still applicable for family businesses to adapt to and deal with technology disruptors. But family business owners and members need to consider the speed of technological change that is happening, especially with the impact of Covid-19. Advances in machine learning and 3D printing, for example, have accelerated.
Virtual reality (VR) and augmented reality (AR) devices and gadgets are becoming more advanced, capable, and cost-effective by the minute. The possibility of using a VR/AR devices to interact with customers or co-workers has become much more plausible and will provide richer interaction. The virtual experience may provide another source of revenue or be a sales tool to entice customers to experience it for real.
Family businesses should recognize the capability of the younger generation to assimilate technology and integrate it into the family business. According to a recent KPMG report, families came together across the generational divide to address the immediate impact of the pandemic on their business. Seasoned family leaders recognized the value of their younger, tech-savvy family members who prompted new ways of thinking about the future of their business.
Lastly, family businesses should bring in external talent, be they consultants or professional managers, who can be sources of fresh ideas and innovations. As our consulting experience reveals, it is laudable that family businesses are open to this.
The author is founder and CEO of Hungry Workhorse, a digital and culture transformation consulting firm, and is a Fellow at the US-based Institute for Digital Transformation. He teaches strategic management in the MBA Program of De La Salle University. He can be reached at email@example.com.