In the first of a two-part series, several factors that impeded innovation and are unique to family-owned businesses, largely small medium enterprises (SMEs), were highlighted. These factors included emotional attachment to a particular product or brand which rendered businesses reluctant to replace them. Secondly, inflexibility in family-owned businesses is often a hindrance to innovation. Lastly, the conservative and thrifty mind-set can often lead to an unwillingness to take on additional financing measures to fund research and development (R&D) or expansion plans.
However, it is not all doom and gloom for family-owned businesses who wish to embark on innovation. There are strengths about family-owned businesses that can successfully steer these businesses towards the path of innovation. One of these strengths lie in the organisational structure of the family-owned businesses. Employees in family-owned businesses often play multiple roles, and the rich interplay of roles encourages flexibility that can help towards quick decision-making. In family-owned businesses, decision-making is often based on intuitive reasoning rather than detailed business plans backed by detailed calculations and data. The quick decision-making process allows family-owned businesses to decide and react quickly, which is highly beneficial when radical innovations threaten the market.
Family-owned businesses often have the experience and commitment of loyal employees. This allows the business to easily build on the tacit knowledge of their experienced employees. Such benefits are especially true for family-owned businesses who have successfully developed a product or brand and are constantly seeking for continuous innovation based on existing products. Family-owned businesses can also rely on these experienced and loyal employees. With the right mind-set, these employees can proactively seek innovation and bring these opportunities into the firm.
The strength of the family-owned businesses lies in the culture and the family’s involvement in the business. They often have a set of shared values and a belief system that can be so strong that it is deeply embedded in the business. Family-owned businesses who have successfully created a family firm identity often have a culture that is strong and inclusive, with employees speaking a common language and developing common understanding. They can develop a strong sense of belonging and have a shared goal. Therefore, through developing a vision that focuses on innovation, family-owned businesses can garner the employees’ support and embark on the path of innovation collectively.
If family-owned businesses can find a sophisticated way to balance tradition and innovation, it will create a synergy that allows family-owned businesses to exploit future opportunities and master the challenges of innovation.