Multi-generational Strategic Thinking
In many of our articles on succession planning, we discuss the importance of ensuring your family business has a succession plan that guides the transition of management, ownership and wealth from one generation to the next. However, even with these most basic precepts covered in a family business succession plan, that family business can still fail following a generation transition – and many do. That is because so many family businesses also fail to foster multi-generational strategic thinking – the mindset that family business owners should adapt to a changing marketplace rather than cling to solely family tradition.
While family businesses must incorporate family issues into its strategic planning, it must also begin to focus on external factors that can affect the business more and more as it moves from one generation the next. As the family business moves farther and farther from its founding roots, so must it move farther and farther from the same strategies that were in place at the time of its founding. Because of the tendency in family businesses to cling to tradition, they are particularly at risk of utilizing age-old strategies, even when those strategies becoming obsolete.
Another reason family businesses tend to get stuck in a rut is because of the leaders’ loyalty to other family member owners, especially those who were around during the founding of the business. Family business leaders must balance the opinions of family business owners (and their potentially adverse reaction to change) with the needs of evolving business conditions.
However, family businesses must, in order to survive, constantly adapt to external forces such as competition, customer needs and economic factors. It is not enough to just do things the way Dad did it because the niche or market position his business filled may be gone already or gone soon. Instead, your family business leaders must be proactively researching and investigating market opportunities and attempting to adapt and stay ahead of the curve through strategic planning.
Family business strategic planning should incorporate business development strategies that consider market diversification and market trends going forward. As we also discuss in The Alternative (Supplement) to Strategic Planning, strategic planning should not just happen at the boardroom table but in real time. In this way, your family business leaders should continually assess market opportunities and other external factors that can affect your business and then develop proactive strategies as needed to stay competitive and relevant.
You must constantly assess your customers’ needs and then compare that to what you offer relative to what your competitors offer. Do you fulfill your customers’ needs? Do you offer a unique value? If not, how can you? If so, how can you do it better? And then what strategies do you need to get your family business on the right course? Once you have strategies in place, executing them and measuring your success against them is absolutely crucial.
What this all boils down to is that subsequent generation family business leaders must behave as if they are entrepreneurs – just as the founding generation was. The family business founder created a business from scratch, developing unique strategies to fulfill a vision that was relevant to the current market – and so must you.
Contributing Sources: http://ffi.site-ym.com/resource/resmgr/best_of_fbr_english/bestoffbrii_ward_thespecialr.pdf; http://www.wealthstrategiesjournal.com/articles/2010/08/succession-planning-with-a-bit.html