Walk Faster: Keeping up Pace with Creative Destruction was published by John A. Davis (Cambridge Institute for Family Enterprise) and Thomas Steiner (Managing Partner, Baldwin Bell Green). The article describes the fast paced business world which has been rapidly changing and is characterized by even more brutality and instability than in the past.
From a general perspective, it’s true that businesses have never lived long. In the United States, 50% of all businesses started today will be dead within five years, 25% will last a decade and only 16% will survive a generation. These are not very positive or encouraging statistics. While it is true that family owned businesses fare slightly better – on average living twice as long as non-family owned corporations, the lifespan is still not incredibly long.
Davis and Steiner don’t predict business life will get any longer – in fact they expect the failure rates to actually increase over time. Due primarily to increased competition, a more challenging global landscape and less attractive demographic and social factors, businesses actually may face a more unattractive future.
That said, family owned firms can take some steps to ensure their sustainability and survival. Specifically, being sensitive to external change, by being aware and ready to quickly adapt, can enable businesses to thrive long-term. Furthermore, having a tolerance for new thinking and encouraging innovation within one’s company can also ensure survival. Finally, being more conservative and frugal when it comes to expenses is also an important way to achieve success.
Overall, the most important and effective way to ensure success is to leverage the next generation, by encouraging them, providing them with proper training and giving them space to actually innovate within the family firm. Not only will this provide them an incentive to get involved, but it will also ensure the business stays innovative, and new value is generated over time. Family firms do have many advantages, including an ability to pivot more quickly and make strategic changes with fewer roadblocks than large, hierarchical corporations. Furthermore, most family firms also have family capital that can be kept in the firm longer in bad economic times rather than being paid out to corporation shareholders who may demand returns even when it might not be the best interest of the company’s financial health. All of these factors can help family firms remain the most long-lasting form of enterprise and continuously spark innovation.
While the article may be a bit unnerving for business owners, it sheds much needed light on the realities of a changing horizon. Families need to become proactive, instead of reactive to ensure their business beats the odds!
To hear more about this topic, attend the Vision 2040 Think Tank: https://businessfamilies.org/forum/the-vision-2040-think-tank/