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Magazine

In turbulent times, family enterprises must reinvent and renew to survive

Published 13 January 2023 in Magazine • 15 min read

Family businesses have been traditionally hard-wired for longevity and stewardship, seeking to preserve and grow wealth across generations. This patient approach offers transferable lessons for all organizations navigating uncertain times. But family enterprises must also now adapt and evolve to survive. 

 

In the late sixth century, carpenter Shigemitsu Kongo moved to Japan from Korea to help construct a Buddhist temple in Osaka. Kongo Gumi, the family firm that ensued, continued to operate independently until 2006, when it became a subsidiary of the Takamatsu Construction Group. Across 1,400 years and 40 generations, and believed to be one of the oldest companies in the world, Kongo Gumi illustrates the incredible resilience of the family enterprise model, surviving centuries of good and bad times.  

However, there are unprecedented threats to this model of longevity. In a post-COVID-19 world riven with geopolitical, economic uncertainty and market disruption, family businesses are faced with complex problems, made more challenging by the unique dynamics of family relationships and governance.  

In a global marketplace, where companies can rise and fall suddenly and new competitors can transform industries in the space of a few years, families can no longer rely on the traditional approaches that have proven so successful for some across previous generations and centuries.  

The most prosperous family enterprises have shown that striking the right balance between resilience and adaptability could provide a meaningful answer to today’s challenges. This means maintaining and evolving the core business with a long-term view, financial prudence, and strong governance while relentlessly fostering the capabilities necessary to innovate and expand into new markets.  

One of the greatest challenges facing family businesses is the question of succession. They must become better at engaging, onboarding, developing, and empowering next generation talent to avoid an over-reliance on patriarch or matriarch founders and to pave the way for smooth successions that can inspire reinvention and renewal. Too many family businesses fail because they struggle with “dinner table” politics or a stubborn founder who cannot see past his or her own successful model.  

Finally, there is a need for a change in mindset. Families need to see their business within the context of an enterprise ecosystem, not just as a standalone vehicle — part of a living, breathing community of stakeholders and assets that must be managed and nurtured as a whole to withstand the pressures of the modern global economy. 

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