Almost 50% of the next generation of heads of family-owned businesses expect that the market in which they operate will face disruption in the next two to three years. More than a quarter also expect to lose market share to new entrants, according to the results of Deloitte’s recent NextGen survey, published this week.
Deloitte talked to 268 family-owned businesses mainly in Europe covering specific challenges such as succession but also growth, strategy and the accelerated speed of market changes.
“The exponential pace of transformation in digital infrastructure is driving fundamental and rapid changes in the global economy. Long-living values and processes become outdated faster than before, which poses a challenge to some tradition-oriented family businesses,” elaborated Georges Kioes, partner and family business leader at Deloitte Luxembourg.
A majority of the next generation leaders of family-owned companies feels well prepared to anticipate disruption, said the report. The survey shows that they have a clear picture of the direction in which their industry is moving and that they understand the nature of the disruptive forces in the market and in their company.
They indicate two big challenges: first, the structure of leadership revolves too much around the family/management. Second, there is a lack of skills among employees to optimally perform in a disruptive environment. “17% of future family business leaders believe their employees are not ready to face disruption, while 35% think they only partly have the necessary skills. These findings show that there is still some work to do in preparing all members of family businesses to be ready for disruption. Nonetheless, the feedback we received from Luxembourg survey participants is that disruption is perceived as an opportunity rather than an obstacle,” said Georges Kioes.
According to the next generation of family business leaders, the biggest disrupting factor for family-owned businesses is not market disruption (20%, but the changes in family relationships (24%). While 73% state that succession is a natural moment of disruption, it is also seen as the biggest disrupting factor by 14% of all interviewees.
The next generation leaders say they are more aware of the meaning and effect of disruption than the previous generation. Interviewees indicate that the biggest advantage family-owned businesses have in times of disruption is that they are ‘fast’ and ‘agile’ when compared to other organisations.
