Innovation—Is it Really a Choice?

Last week I wrote about the critical necessity of innovation for multigenerational success in family businesses. Continuing on with this theme, here are some of the advantages enjoyed by businesses that have a culture of innovation, and some of the obstacles that block the way to this goal.

Advantages: Dexterity, flexibility and speed that comes from:

  • Deep industry and business knowledge enabling leadership to seize opportunities on the fly
  • Long-standing ties with business service professionals–bankers, accountants, attorneys–who can help with and support innovation efforts
  • Shared values, vision, and definition of success among shareholders creating swift-moving consensus.

Obstacles: Resistance to change, risk aversion, lack of focus, indecision that comes from:

  • Attachment of the family to current business structures and products
  • Tension between the older, incumbent, generation and rising-generation family members
  • Difficulties in juggling attention to the core business and attention to research, development and implementation of innovative ideas, products and services
  • The need to keep shareholders happy by continuing to provide accustomed dividends, while redirecting funds for innovation.

In his 2014 book, Innovation in the Family Business, Succeeding Through Generations, Joe Schmeider of the Family Business Consulting Group puts it succinctly: “in the most basic terms innovation is change as well as a factor associated with multigenerational family business prosperity and longevity.”

For the sake of the business, obstacles to establishing a culture of innovation must be faced and overcome.


‘Applied Innovation’—Defined For The Family Business


: a new idea, device, or method

: the act or process of introducing new ideas, devices, or methods

Source: Merriam-Webster’s Learner’s Dictionary

 Applied Innovation:

: the process of constant improvement and creative change

: a requirement for the continued success of multi-generational family enterprises

Like any other business, family businesses benefit from, if not require, a culture of innovationa culture that supports constant improvements to its products, services, processes, governance, and planning.

While the dynamics within family businesses often present obstacles to innovation, a clear view of the competitive advantages of an innovative culture can overcome them.

Next week I’ll write about these obstacles and about some of the advantages enjoyed by family businesses that support a culture of innovation.


It Is About Family

In a recent blog entry I reported my experiences at the annual conference of Attorneys for Family Held Businesses (AFHE). Through its membership of multidisciplinary family-business advisors, AFHE promotes the well being and sustainability of business families, and recognizes that family businesses can only be as healthy as the families themselves.

This theme echoed resoundingly within me the following week while I was participating in a program with Defy Ventures http://defyventures.org. Defy helps individuals with criminal histories develop entrepreneurship skills and establish sustainable lives after incarceration.

I was part of a group of seventeen volunteers who went to meet thirty-five inmates in a Federal prison. All of the inmates had been part of Defy’s Entrepreneurs in Training (EIT) in-prison program. We volunteers were there to offer them exposure to successful business people and business advisors, to help them develop social and business skills, to prepare a resume and learn the processes of business formation.

The emotions I experienced during the five hours we spent with the prisoners were intense. I was overwhelmed with the gratitude of the EIT participants. We began with an exercise designed to help us experience empathy for one another and to build community. It was here that the significance of family and a new perspective on AFHE’s mandate for helping business families came to light.

Facing each other–volunteers on one side and EITs on the other side of a taped line–we responded to a series of questions: “Who has ever been arrested ?”. All of the inmates stepped to the line, as did number of volunteers. Empathy crossed the line in both directions. “Who has done something illegal but not been arrested?” More volunteers walked up. “Who graduated from high school?” “Who has a college degree?” No inmate stepped to the line in answer to this. “Who was arrested as a teenager?” “Who experienced abuse as a child?” “Who does not know his biological father?” “Who spent time in foster homes?” “Who has a parent who used illegal drugs in their presence?”

Overwhelmingly it was the presence or lack of a healthy family that most separated the volunteers from the EITs. The absence of healthy family relationships was revealed as a formidable factor in devastating the lives of the inmates. Similarly, the presence or lack of well being of the family can influence their businesses’ failure or success.


Fifth Generation and Almost Out

Family enterprises that have continued into their 5th generation often have processes in place that helped them overcome the challenges they encountered through the years. They have a vision for the future. They have a declaration of shared values. They have governance structures, such as a family council, an external advisory board. They have a forum for family members to discuss the family in the context of the business. They have gained foresight and have learned how to address situations where family members undergo a loss of capacity. They have a funded growth plan. They have an established mindset that accepts the need to turn leadership responsibilities over to the rising generation; and the incumbent leadership has their retirement plans in place.

Often–but not always.

Here’s the story of Yuengling Brewery, an “almost casualty” rescued by a fifth-generation prodigal son.