Why family businesses need to embrace the ecosystem

  • Family businesses are more open to working with outsiders, but appear slow to put their words into practice.
  • They are reluctant to risk losing their grip on IP, yet can't take full advantage of innovation on their own.

Published: 26 June 2018

Family businesses today can no longer restrict themselves to a cozy network of trusted collabora¬tors. They must adapt to a business ecosystem characterized by fluid, complex cross-border and cross-sectoral interactions. Their strong, longstanding networks have been a conventional strength, but can today leave family businesses less able to adapt to change. To advance, they need to consider different roles, relationships and modes of interaction.

The Next-generation family businesses: Exploring business ecosystems survey found more than half of next-gen family business leaders see opportunities in the wider ecosystem to grow, and enhance their ability to innovate. They are also increasingly looking to work with outsiders – nearly half of respondents said they would work with "any orga¬nization that has a good idea", and many are now interacting with more third parties than ever before.

"They should seek out new ways to create value and engage more broadly with the ecosystem – through networking, collaboration, and interdependence – while preserving their identity as a business as well as their family cohesion and values," explained William Chou, Deloitte Private managing partner, Deloitte China. "This can mean investing in the right third-party technology; forming new relationships, partnerships and alliances for growth; developing new services or prod¬ucts to maintain market leadership; or absorbing external innovations to fend off the risk of obsolescence."

They are looking to make acquisitions, but are also considering strategic alliances and joint ventures, albeit to a lesser extent. "Most of the time it's about business growth, but it's interesting that 30 percent of respondents view tie-ups with the ecosystem, in whatever form, as a way to access innovation," added Peter Lee, Deloitte Private family enterprise consulting and family office leader, Deloitte China. "An acquisition means innovation will be 'kept in the family', but other forms of relationship, even if fleeting, can be more beneficial."

Less positively, although the survey indicates family businesses are more open to more collaboration and innovation, it also suggests they have not yet, or may be unsure how, to put these words into action.
More than half of respondents are not partnering with third-parties on innovation projects, and only a quarter have put a digital transformation strategy "solidly in place", with 40 percent still finalizing their approach or yet to decide one.

There are a couple of possible reasons for this. First, family businesses often feel that through collaboration, they will lose control of their intellectual property, something two-thirds of respondents said it's important to hold onto. Second, they can still view digital innovation as a tool for incremental improvements, rather than an opportunity to be truly innovative.

Peter Lee commented: "Ownership of digital assets isn't essential for success, but the ability to access op-portunities from digital assets owned by others will be. This means family businesses have to develop new ways of forming relationships and interacting with others."

"They need to think about how to inte¬grate diverse technologies and information systems," concluded William Chou. "But they must also figure out what their purpose is in the digital age, and how it might change their business models – there are new frontiers to explore; family businesses won't be able to explore them alone."

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