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Is Adaptation or Disruption the Secret to Longevity?

How successful family businesses develop cultures to create disruption from one generation to the next

Large family businesses create cultures that are agile, foster innovation and reward fresh thinking, according to the “Is adaptation or disruption the secret to longevity?” report from the new EY Global Family Business Survey 2018. All these conditions fuel disruption in the marketplace, but interestingly, few (12 percent) global family businesses identify themselves as disrupters. EY is YPO’s Strategic Learning Advisor.

“The world’s largest, and often longest-lasting, family businesses have long learned to adapt and innovate — how else would they still be a force in today’s competitive markets? They formalize incentives and rewards for disruptive ideas and manage operations for the long term,” says Marnix van Rij, EY Global Family Business Leader. “This long-term and entrepreneurial orientation may be intended to create a lasting legacy for the family but also results in creative and prosperous businesses.”

Respondents from top global markets believe they are entrepreneurial (68 percent), foster agility and change (67 percent), and allow for failure in the pursuit of improvement (61 percent). They use social media (68 percent), incorporate big data (65 percent) and employ robotic process automation (50 percent) in their efforts to keep pace. In other words, they develop cultures with great capacity to create or harness disruption from one generation to the next.

“Is adaptation or disruption the secret to longevity? discusses how family businesses are growing without outside equity, where they intend to invest to capitalize on disruption, and the importance of the next generation when it comes to identifying disruptive threats. It also offers a series of action points to help family enterprises prepare for the future.

“It is not surprising that family businesses are planning today to protect tomorrow’s businesses from disruption. An eye on opportunity and a focus on long-term strategy — as well as an enviable agility to move forward — have long set family businesses apart from their non-family counterparts, says Carrie Hall, EY Americas Family Business Leader.”

Many of those surveyed recognize the role the next generation can play when it comes to identifying disruptive threats. Thirty percent of respondents say they are utilizing younger family members’ talents “a lot” today — with another 15% indicating they rely on them “a great deal” for help identifying trends that could reshape the marketplace.

“Family cohesiveness is a key ingredient in generating better financial returns for family business. The next generation grew up with the digital revolution and is used to change. It has a role to play when it comes to identifying disruptive threats or trends that could reshape the marketplace,” says Joseph Astrachan, Ph.D. Professor Emeritus, Kennesaw State University. “Younger family members are digital natives and ready to rethink everything. They can make a real contribution to enhancing the innovation agenda. Engaging them early can support continuity and increase family cohesion, which are related to superior performance.”

This report is based on survey results gathered from 589 of the world’s largest family businesses in 23 top global markets.

Delve into the insights from the EY Global Family Business Survey 2018

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