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Lessons learned from 100 plus year-old family firms

By Professor John L. Ward  (September, 2006)

Professor John L. Ward

Professor John L. Ward

How does the family-controlled business of over 100 years old differ from widely-held companies? 21st century companies – both family-controlled and widely held – should focus on adaptability as a core skill to develop. Adaptability should be considered as a competitive advantage. A root competence for adaptability is the ability to liaise with and resolve paradoxes. For example, at the core of future success is the capacity to balance execution and exploration. 

  • Paradoxes are not like problems, which can be solved. They are, rather, something that need to be managed by finding balance and fresh insights.
  • Both realism in decision-making and optimism for implementation motivation are important as examples of the adaptability paradox.

Adaptability goes beyond the definition that it is “the capacity for internal change in response to external conditions.”

Adaptable companies:

  • Have resilience – the ability to absorb an external shock.
  • Search proactively – not just respond to the market but have antennae up looking for new ideas.
  • Have dynamic capabilities – make change and tradition important.
  • Are tenacious – have the ability and courage to “stick out” difficult times.

Learning from ant colonies
Organizations can learn from ant colonies. In good times, a small percentage of a colony’s work force is biologically dedicated to going out and looking for new sources of food – exploration. A larger percentage is devoted to harvesting its food from the sources it already knows about – exploitation. In bad times, more of the “exploiters” change and become “explorers”. In fact, the ant colony is always both exploring for new resources and exploiting its existing resources. It is the balance that changes in response to the environment.

Key organizational barriers to adaptability

Inflexible paradigms – Having successful past rules and paradigms of experience makes one resistant to change. Additionally, the more involved one is to having created the paradigm, the more resistant one is to changing it.

Complexity gridlock – Having large, diverse, decentralized systems that are all integrated can lead to a “traffic jam” of decision-making since more people have to reach agreement on decisions.

Focus dependency – Having focused and dedicated resources can make one too specialized and unable to see outside one’s particular box.

Over-optimism – We have a tendency to attribute our successes to decisions and actions that we made rather than to outside events; in contrast, we attribute our lack of success to bad luck.

Professor John Ward teaches this topic in the CEO program and the Leading the Family Business program.

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