In the numerous conversations I have had with both the current and next generation of family business leaders and their families, we have discussed topics as diverse as the smooth transition of leadership from one generation to the next, family charters, setting up family offices, tax and estate planning, growth, strategy, and the overall speed of change in the market.

Long-term trends are fundamentally altering the global business environment, driven by public policy and exponential rates of change in digital infrastructure.

Simply put, we are breaking with the past faster than ever.

This seems to be at odds with the ethos of many family businesses, which look for longevity, sustainability and, ultimately, the passing of the leadership baton to the next generation. Today, contemporary business is frequently about agility, innovation and digitalisation. All of our existing assumptions are being challenged, and family businesses too need to challenge themselves. This is an important responsibility for the next generation.

Given this backdrop, we are particularly interested in exploring with family businesses the power of disruptive forces in their markets. For our NextGen Survey 2017, we conducted in-depth interviews with over 250 future leaders of family-owned companies across the EMEA region, the main focus of which was how disruption is perceived and managed in the family firm.

Well-equipped to anticipate disruption

The results of the survey told us that family companies seem to be aware of the disruptive changes that occur in their markets. In fact, 65 percent of respondents claimed that their family members have a high level of awareness about disruption.

Some 48 per cent of interviewees expect disruption in their markets to occur within the next 2-3 years. About a quarter of the total number interviewed expect to lose market share, while half expect to retain their position.

Interestingly, in most family businesses, the potential for disruption is considered regularly. More than 70 per cent say they discuss disruption with family members. But we found that there are significant differences in the frequency with which these discussions take place.

The leadership challenge

Overall, the results indicate that the next generation of family business leaders seem to be well-equipped to anticipate disruption, have a clear view about the direction of their industry, market and business, and understand the nature of disruptive change. However, two major limitations were identified: leadership and governance were reported as too concentrated within the Board of Directors and family group, and in some cases it was reported that there was a general lack of the skills required within the employee group to thrive in a disruptive environment.

The biggest challenge is internal

As part of our survey, we also asked respondents to identify the top three issues that are most likely to cause potential disruption to their family business. Changing family relationships was seen as the most important and succession issues the third most important; both of these are internal factors. An external factor, disruption in the market, was in second place.

Family relationships as a potential disruptor accords with my experience of working with family businesses - if emotions within the family become negative and the problem is not properly addressed, in-fighting and conflict can persist, creating a toxic and potentially unstable environment. In extreme cases, the wealth of the family may be eroded, family members and non-family employees may decide to leave, the family business itself may fail.

Nearly three-quarters of family companies claim that succession itself can be a cause of disruption. Again this is something that resonates with my experience - during a period of leadership stability, the strategic objectives of the family company are typically clear. However, during the process of leadership transfer, the new generation brings fresh ideas to the table. Whilst this is an incredible opportunity for disruptive innovation in the family business, when managed poorly, I have also seen it result in inter-generational clashes.

Building on 'Familiness'

When radical changes and disruption emerge, family businesses face additional 'family-related' challenges compared to non-family businesses; but they can also play to their strengths, build on their 'familiness', and achieve competitive advantage.

In particular, I would highlight how family businesses can benefit in times of disruption. Their structures can facilitate quick decision making, and their autonomy based on the way most of them are financed allows them to react quickly to opportunities and make 'first to market' strategic decisions. This is an immensely valuable asset in these times of rapid disruption.

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