Family Business

Use these tools to foster innovation within a family business

February 16, 2013 

The success of a family business, and perhaps any business, is predicated on its ability to innovate. However, the nature of a family business many times can suppress creativity and the generation of ideas that are essential to long-term success.

Family businesses don’t start as a family business. They begin from someone simply trying to generate an income. Sometimes, they experience a flash of insight into a market opportunity, other times they stumble into it.

At the same time, the capacity for risk of the business founder is clearly very high – they may not have much to lose. However, for those who do become successful, the more success, the less risk the business owner is willing to take on. Thus, the openness to new ideas may be lacking.

The typical response I receive from a second- or third-generation family business owner as to why they do something a certain way in the business is, “Well, that’s the way Dad always did it.”

However, this is not managing a business, it is minding a business. And it can be very dangerous. I had a client where one of the senior managers stated that he was rather disinterested in shaping the future because his ideas had been slapped down for so many years.

There are two key obstacles to having an idea-friendly work environment in a family business: an owner not allowing it and the next generation being afraid to bring ideas forward.

What’s in the way?

Let’s look at what we can say about family business owners: As the leader they can best see how a change here can impact something over there; they have tons of experience and have seen what works and what does not work; they built it, so it is their baby; they are depending on the income, and they grow more risk averse as they begin approaching retirement

By their very nature they are not overly receptive to new, half-baked ideas. (I would contend that all ideas are half-baked, that is what makes them ideas and not plans.) The next generation senses this, or has experienced it directly, and can be skittish about sharing new thoughts.

Nonetheless, owners do want to see the business transfer to the next generation, and hopefully will come to the realization that the future growth of the business depends on the capacity of the next generation to generate ideas, and successfully implement them.

Taking a look at the next generation, we need to recognize that they are going to have their own style, and that is OK. The goal is to have them build on the foundation that is set, and thus will require “new world thinking.” They are also going to want to make their own mark.

Finding good ideas

So what steps can an enlightened family-business owner take to foster ideas from the next generation?

1) Convey to the next generation that the company does need ideas and innovation to be successful in the future.

2) The owner must allow the next generation to run with some ideas (even if you think it might fail or have little impact). This is how people learn.

3) The owner must be encouraging, not critical, and helpful. One way to do this is having them run a brainstorming session with the employees, following the standard rules: no criticism, encourage wild ideas, go for quantity, idea piggybacking is good.

4) Task the next generation with developing the strategic plan. This will force them to think outside the box.

5) Task them with figuring out how they are going to double the revenue of the business – this puts practicality on the strategic plan.

6) Implement ideas through pilots.

This encourages ideas and their implementation while minimizing risk and cost.

Innovation has been and always will be the game changer. Certainly it must be balanced with having efficient operations. But the long-term success of any family business is predicated on creating an environment where the next generation has their antennaeup for and wants to work on new ideas to improve the business.

Henry Hutcheson is a nationally recognized family business speaker, author and consultant in Raleigh. He can be reached at Familybusinesscarolina.com.

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