Globally recognized authority on family wealth and enterprise matters – Prof. John Davis – offers pointers on preparation for new challenges and opportunities in the age of turbulence, along with concepts for multigenerational family enterprise success.
From the digital revolution to globalization and the drive for greater sustainability, family enterprises need to adapt and pivot to survive and thrive in the coming decades and beyond. The next generation could play a vital role in the reorientation and retooling of the family business that’s necessitated by a changing operating environment.
Award-winning academic, Chairman and Founder of the Cambridge Family Enterprise Group, and the lead researcher of Citi’s whitepaper – The Future of Family Enterprise: Turbulence and Transformation in the 2020s – Prof. John Davis believes such success will require a commitment towards developing a business model, family governance and culture that includes all generations and types of talent.
Citi Latitude invites you to receive grounded recommendations on shaping the future of the family enterprise in an engaging session with John hosted by Alexandre Monnier, Global Head of Family Office Advisory at Citi Private Bank and observe its five key actionable takeaways.
Always be cognizant of how the world is changing and its implications for the future of your family enterprise, as well as the partnerships it requires to ensure success and your role as a next generation family member at the heart of it all.
Awareness about this evolving world will help you come to terms with why we need to do some, if not all, things quite differently to survive, and especially to succeed. In our experience, never before have we seen a period like the present where both generations’ perspectives are more needed. Therefore, there is particular pressure on getting family generations to partner in order to navigate week in, week out on a number of factors. These may range from the planetary environment right down to personal security and cyber security. But if you close your eyes or step away for a year, or even months, and come back to look at the landscape that’s relevant to your family enterprise – several of these factors will have changed. That’s what we call a world of constant change with multiple factors influencing your business, investments, philanthropic and social impact activities, and your family itself.
What we are also experiencing is an age of hyperconnectivity with increasing diversity due to the mixing of peoples from all walks of life. We see diversity in terms of age, changing gender roles, workplaces, and even diversity within our families. Additionally, another profound change we have noticed in enterprising families is how they have become geographically dispersed over the past generation. No one is perhaps better placed to handle this shift than the next generation.
Barely two generations ago, families would largely be found huddled around the place where their primary business was. Today, in those same families, you'll see members living not only in different parts of their country, but internationally, and then the family branches remain international. It implies that the family is under profound change, so is business enterprise and wider society itself. How to respond to it all is the big question the next generation must come to terms with, in partnership with their elders, and manage four different forms of capital – business, financial, philanthropic, and family – in a hyperconnected world. Think of it as a metaphorical portfolio that needs careful guidance, nurturing, and, of course, investment by budgeting for family talent development, all of which will be relevant for shaping the future of the enterprise.
If a family only focuses on running a good business and not on building a vibrant and supportive enterprise, then their company typically does not survive more than a generation and a half, even if it has a good business model. That’s because there are other things that are necessary as a foundation with flexibility being one of them, something the next generation will be instrumental in bringing to the table.
For this to happen, the next generation members must figure out not just what's in their family enterprise in the present day but also what should be there that maybe isn't today. You will need to think about how the enterprise needs to evolve between 2022 and the end of this decade. That’s because futurists and strategists expect the decade of the 2020s to be the most turbulent and transformational decade, perhaps in centuries, not just decades. While the shift may have started with COVID, we should expect that this level of change, turbulence or disruption – however you choose to describe it – to continue and maybe even intensify.
Next generation family members can be active agents of change for the enterprise and prepare it for the future by developing an “owner mindset”. Changes families face will be both external and internal. Leading external changes could be volatile economies, digital advances, industry changes, diseases, political instability, and environmental change. Key internal changes may include leadership, generational differences, and transfer of wealth.
Handling these will require the next and previous generations to accommodate and partner with each other to build something of interest and value that brings sustenance and success. It is here that the “ownership” dimension comes into view. We know that periodically decisions float up to the owners that only they can make – about building a new facility, business diversification, new ventures, etc. An inability to anticipate change will hurt the family enterprise. It is why the next generation must be ownership ready – and be ready to pivot in a new business direction, ready to show-up, understand, support and be proactive. Ways of contributing and showing that you care for the enterprise include internships, apprenticeships, joining corporate initiatives, serving on decision making committees (when you are too young to join the board), or indulge in other forms of engagement with the wider enterprise, such as emphasis on digital transformation of the business (which is only going to speed up not slow down), or perhaps become involved with family philanthropy and perform well there.
The next generation also needs to get the family talking. Not just the people in the business or key owners, but occasionally the whole family talking about what you are doing as a unit, to be good at what you are doing, helping the community or the world in various ways, and ultimately building something that every member is proud of. This is particularly important because the threat that the next generation will wander away and not take their family enterprise seriously is huge.
We know that your education, current worldly experience and networks that you've established in your lives, apart from the networks established by the senior generation, are designed for a lot of the changes we are witnessing – in technology, markets and social issues, than in previous generations. Channel this into a partnership tool to bring inter-generational perspectives to the table and create a more cohesive and joint vision for where the enterprise needs to go. Finally, approach it all with a mindset that is financially realistic and remember never to lose sight of five transformation strategies for family enterprises that we have touched upon variously in this session: