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Family business

How can a firm use its past to its advantage during a time of unrest? 

Published 10 April 2024 in Family business • 9 min read

The strategic use of the past in firms is more complex than previously thought, but also more powerful and could even boost innovation, according to new research.

There are many different ways in which leaders can draw on the history of their firm to advance their present-day interests in it. But complications arise when middle managers – who may care to varying degrees about the firm’s past – have different interpretations of it, not to mention different visions of the future.

This was the impetus to research the matter in a recently published paper “When top managers’ temporal orientations collide: middle managers and the strategic use of the past” which I co-wrote with Innan Sasaki and Masahiro Kotosaka.

Through a case study of a Japanese craft firm, Funabashiya, with a history of over 200 years, we examined how middle managers, specifically, use the past and came up with a novel communication process that can help turn conflict into harmony.

Middle managers are best placed to take a central role in using the past. This is because tensions over where the company has come from and where it is headed can lead to the type of unrest that can undermine the top management’s power base.

However, using a firm’s past in a strategic way to move the firm forward ultimately requires as much communication with those at the top as with those at the lower echelons. 

An organization, they found, must use its past in a way that fits its present and its future. The first step is identifying different groups within the middle management – the researchers call these custodians, prospectors, and energizers.
“An organization must use its past in a way that fits its present and its future. The first step is identifying different groups within the middle management – we call these custodians, prospectors, and energizers.”

We need to talk about the past

The Japanese sweet firm studied was undergoing restructuring as it had a new successor who was challenged by the fact the firm was stuck in its long, illustrious past. This meant it was not properly addressing present-day customer needs. 

The new CEO faced extreme resistance when he attempted to reform the organization, which ultimately led to his and the incumbent CEO’s estrangement for a prolonged period of time. This cleared the way for the middle managers to take center stage, and they set about changing the firm from being stuck in the past to strategically using its past to move forward.

Studying how the past can be used in the present in firms is nothing new. What was novel is that we found that middle managers are inconsistent from one day to the next and among each other in doing so.

An organization, we found, must use its past in a way that fits its present and its future. The first step is identifying different groups within the middle management – we call these custodians, prospectors, and energizers. The next step is fostering a willingness to see things from the perspective of those not in your group. 

Custodians:

These individuals stubbornly defend long-standing traditions in the firm, reflected in their preference for consolidated routines and hierarchies.

Prospectors:

As above, but these middle managers show the capacity to change their minds and to champion future-oriented change initiatives.

Energizers:

Newly recruited, they are not part of ongoing conflicts, making them open to understanding both the desire to protect tradition and to implement future-oriented change initiatives.

Energizers: Newly recruited, they are not part of ongoing conflicts, making them open to understanding both the desire to protect tradition and to implement future-oriented change initiatives.
Improved understanding between custodians and prospectors led to their peaceful co-existence and, more than that, it enabled the co-existence of traditional and new products
Custodians, prospectors, and energizers can clash. For instance, a prospector might voice that the speed of change is too slow, prodding custodians to leave the room. But certain conversations can change the dynamic and can even result in a custodian becoming a prospector, with this new subset being able to arbitrate tensions among these two groups. As such, some middle managers who used to be against change might even see that change actually enables protecting the past. One senior craftsman in the sweet firm said: “I took the role to initiate the required changes for the production methods inherited from the past. I did so to continue our tradition.” A general manager realized, “We were afraid of the changes in the past. We were not flexible and were attached to things that did not change for a long period.” Improved understanding between custodians and prospectors led to their peaceful co-existence and, more than that, it enabled the co-existence of traditional and new products. “While prospectors researched the latest trends in the confectionery industry, custodians began revisiting their idea of tradition in line with the firm’s future-oriented activities,” we write in our research. One planning manager said, ‘we had to catch up with the trend among the young, but I reminded the staff that our starting point should always be our tradition’.
Japan's new capitalism
“The Japanese national culture is particularly well known for long-termism. There is a widely held belief that companies are not there to make money every quarter for the shareholders, but to serve the stakeholders and society at large for generations to come.”

Fresh blood helps keep tradition alive

New employees can play an important role in finding the sweet spot for their firm between focusing on its past and its future. Their presence can re-invigorate many past-oriented employees with energy and motivation, perhaps not such that they change their values entirely but so that they become more inspired to down the traditions they cherish. 

Talent might be drawn to a firm for as much for its long history as for its tech start-up atmosphere, and these two can perfectly co-exist as was the eventual case in the Japanese firm. 

“Their eagerness to learn comforted custodians that the traditions were still valuable and valued, viewing energizers as the future of the firm because they felt, ´the younger craftspeople in the new factory will further improve what we do today. Perhaps they will change the taste by using different ingredients’,” we write.

The Japanese national culture is particularly well known for long-termism. There is a widely held belief that companies are not there to make money every quarter for the shareholders, but to serve the stakeholders and society at large for generations to come. 

Japan has fallen in economic competitiveness over the years as reflected in the IMD World Competitiveness Ranking results. But this is not to say that economies and firms that draw on their past necessarily do so at the expense of their present or future. It’s a question of balance between tradition and innovation.

Finding the right balance between the two is about leveraging the strengths of both while mitigating their potential drawbacks. It’s not about choosing one over the other but rather integrating them harmoniously to achieve synergy and build a path forwards.

It’s also about viewing the past as a strategic resource for innovation rather than a barrier to progress. One industry in which history and tradition will always matter in strategic decision-making is luxury, where heritage forms part of the DNA.

Here is a ten-step journey, inspired by the research paper, for middle managers interested in exploring the benefits of using the firm’s past in a strategic way to calm unrest and simultaneously boost competitivity:

1. Identify the custodians, prospectors and energizers in your middle-management team by asking them these three questions:
1. How do you perceive the importance of maintaining traditional practices and routines within the organization? 2. How do you typically respond to proposals for change or innovation within the organization? 3. How do you handle conflicts or resistance to change within your team or the organization?
2. Ask the custodians and prospectors to discuss out loud what they think about the company past and what they think they have inherited from it, for the good, in their work.
3. Propose a future orientation (new strategy) of the company and ask for them to verbalize their feelings about it, vis à vis how they feel about the company past.
4. Ask for examples of how they might regard the past of the firm as different, and yet equally as good, as its future.
5. Ask what elements of the new strategy provide them with high hopes for the future.
6. Bring in the energizers at this point (this includes fresh talent). Ask them how they envision the company's future while keeping in mind its both tradition and the importance of the younger generation.
7. Explore with all three groups ways in which innovation could nod to tradition.
8. Ask all three groups how some employees’ passion for the past has enabled it to overcome challenges in order to maintain an appreciation of the past in the company culture.
9. Ask all three groups how, conversely, newcomers to the firm could be appreciated separately, perhaps through the creation of a new product.
10. Keep the conversation going, and some six months down the line, re-identify the custodians, prospectors and energizers in your team by asking again the three questions proposed in step number one. Are there changes in who belongs to which group?
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This type of exercise should be done cyclically and not just as a one-off, as middle managers’ interpretation of the past in their firm can constantly change. This might be as they change position, engage with new actors and disengage with others, or as the firm finds itself in different contexts during the turbulent, and fast-paced, times in which we live.

More to explore

Authors

Alfredo De Massis

Alfredo De Massis

Professor of Entrepreneurship and Family Business

Alfredo De Massis is ranked as the most influential and productive author in the family business research field in the last decade in a recent bibliometric study. De Massis is an IMD Professor of Entrepreneurship and Family Business at IMD where he holds the Wild Group Chair on Family Business and works with other universities worldwide.

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