Following on from a founder

Imprinting the past on the present

A common trait within companies that see the value in continuity and perpetuating the influence of the founder, is that employees feel as if they are working for the original owner no matter how much time has elapsed since they left. To harness the power of the founder’s influence, these companies take steps to ensure that their defining attitudes and behaviors are imprinted onto the firm and its culture. Artefacts such as statues, pictures, and photos act as visual prompts that help to create and maintain emotional bonds with all stakeholders. Organizational rituals, traditions, products, and sometimes processes may be innovated, but essentially leave “the way we do things” the same. Stakeholders put themselves in the founder’s shoes when making decisions and take comfort from doing so. Shared storytelling of the founder’s past acts and endeavors reinforces sentiments of inspiration, reverence, and loyalty. Through these mechanisms, the founder’s behavior strongly impacts both current and future decision-makers within the organization and ultimately preserves their legacy. Strategic decisions remain consistent with the original vision of the founder, creating alignment and reinforcing the identity of the business as a family business.

Not only is this important in terms of competitive advantage but having a strong identity as a family firm is one of the dimensions of socioemotional wealth, a key component to all family businesses. Alongside financial goals, family businesses will measure their wealth and success by a number of non-financial goals, such as passing the company to the next generation, preserving the reputation of the family name and standing in the community, or maintaining family harmony.

Getting the balance right

While deference to the past can be advantageous, there is a balancing act to be had. To remain strictly within the confines of the business as defined by the founder would stifle innovation and any sustainable competitive advantage. Managers are often told that in order to make way for the future, the past has to be dismissed. However, an obsession with the future risks losing the benefits that past knowledge can bring. Just ask Chinese scientist Tu Youyou—The Nobel prize-winner didn’t have a medical degree or any training abroad in modern techniques but found a cure for malaria by instead turning to ancient medical texts from the Zhou, Qing, and Han dynasties.

There are plenty of examples of family businesses which achieve being innovative while remaining anchored to their history. The arms manufacturer Beretta has passed through 16 generations of the same family. It dominates the shotgun market thanks to its mix of traditional walnut materials and innovative technologies that enable superior performance. Lavazza, the coffee maker, has been a family business since 1895. Its traditional coffee mixing process, still used today, was invented by Luigi Lavazza in 1910. Meanwhile, the company continues to launch innovative products such as ISSpresso, the first capsule-based espresso system able to work in extreme conditions, including in space.

These businesses consider their history a resource, in the same way they might human or financial resources. They are able to take past knowledge, and both internalize it for everyone from the top manager to the youngest employee, and reinterpret it, blending it with more contextual aspects and new technology to create innovative new products. This process, known as innovation through tradition, relies on activities such as communication through storytelling and cross-generational family gatherings, whether formal or informal, where the founder and the history of the company is recognized.

In addition, it is ingrained into the corporate culture that the past and the future be seen as elements that mutually reinforce rather than oppose each other.

Such an approach has huge potential in terms of value creation and capture. In an uncertain and turbulent world, people often take comfort in the past, and are attracted to companies that can display lineage to a perceived “golden age.” Embedding the history of the founders into the bedrock of the company also provides a unique standpoint, which most competitors cannot replicate.

Most of these approaches can be adopted by any business that has a history regardless of whether it is a family business. It’s simply a question of recognizing the role of the founders, and not allowing those traditions to disappear.