Strategic Renewal in Family Businesses: The Entrepreneurship and Inertia Duality

Strategic Renewal in Family Businesses: The Entrepreneurship and Inertia Duality Leif Melin Centre for Family Enterprise and Ownership CeFEO Jönköping...
6 downloads 0 Views 998KB Size
Strategic Renewal in Family Businesses: The Entrepreneurship and Inertia Duality Leif Melin Centre for Family Enterprise and Ownership CeFEO Jönköping International Business School, Sweden

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

Structure of the presentation • • • • •

Characteristics of the family business Families as entrepreneurial units Strategic ways of thinking Family business cultures …and inertia

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

The family business is a global phenomenon but there are many types of family businesses

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

Selfdestructive habits of good companies (Jagdish Sheth, 2007)

• Competitive myopia • Nearsighted view on competition

• Territoriality • Internal cultural wars

• Denial (of problems) • Cocoon of myth and orthodoxy

• Arrogance (towards change demands) • Pride before the fall

• Complacency • Success breeds failure

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

“CEOs are often directly responsible for the selfdestructive habits their companies develop. This is most likely to be the case with founding CEOs, or CEOs who refuse to retire, or who ‘clone’ their successor.” “Family-run businesses, where the ‘genetic influence’ is strong, are likely to fall into selfdestructive habits.” (Sheth, 2007)

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

Family Firm Disadvantages • • • • • • •

Messy governance structure Nepotism before competence Spoiled kid syndrome Family conflicts Resistance to change Financial constraints Succession dramas

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

A logic of family ownership Predominant beliefs and values in family owned businesses – a coherent mindset held by family business leaders/owners Consistent across industry, size, generation, life cycle, listed/privately held, governance structures, etc.

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

The Family Ownership Logic • Active and visible ownership • Stability in ownership and power – Often implying a strong culture

• Long term strategic perspective and direction • Multiple ownership goals – Including CSR-related goals

• Skepticism to and/or limited availability of capital markets • Flexibility in governance structures – Including fast decision making

• Identification - Psychological/emotional bonding

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

The Family Ownership Logic in Action

Arbesko leading firm in Northern Europe on

occupational and safety shoes Peter Geisler, fifth generation owner and CEO of Arbesko

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

Active and visible ownership If there is anything I know, it is to steer these companies because I can do that down to the tiniest screw. I know absolutely everything that is going on in different parts of the company

Stability in ownership and power • I think that the power and the control I have over the capital and the possibility to do whatever I want with this capital is a freedom – there is a sense of freedom for this responsibility that I would not easily let go. • Our main track is absolutely to keep this company as a family business over the generations. Offers to sell come about once every six months…but why should I?

CeFEO

Center for Family Enterprise and Ownership Jönköping International Business School

Long term strategic perspective and direction If you reflect on your ownership, it is not that easy. You must think 10 to 20 years ahead. The goal is to have a longterm survival structure... We may never, never ever, go to rest in our ambition to develop the company. Because if we start to wait and see we will be ‘dead meat’. Then some devil will come and eat us alive.

Skepticism towards capital markets I have never had in my mind to be introduced to the stock exchange market. No, I do not intend to be listed. Rather I have been thinking why I believe this company should not be listed on the stock exchange.

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

Flexibility in governance structures We often sit at the kitchen table talking about our business, my two sons and myself talking business. If I want to enter a new market, then the decision can be taken ten minutes later. So it’s often a very short distance to new decisions.

Identification – psychological bonding Ownership is more metaphysical, much more an idea. I have difficulties explaining it; I have no need to sit and to look at my shares – that is totally uninteresting. To me it is rather the process of developing the company that is exciting, not the amount that it is worth – that is rather unimportant.

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

”Despite the successful growth, we need to continue to see H&M as a small business firm. We need to continue to be in close contact with our customers and understand what they want. The way to future success must happen through our proved practices”

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

Entrepreneurial families

• Researchers have paid little attention to the family as a unit of analysis and a context for entrepreneurial activities

– The family business is seen as an outdated, conservative form of enterprising (e.g. Chandler, 1990; Landes, 2006)

• But the family businesses represent both the dominant form of business organization, and a massive pool of resources for strategic renewal, entrepreneurial development and new enterprises

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

Entrepreneurial Families Entrepreneurial Orientation in Family Businesses • EO consists of five dimensions; risk taking, proactiveness and innovativeness, autonomy and competitive aggressiveness. • The role of culture for EO • Family culture and family business culture

• The role of family influenced resources for EO • Knowledge; social capital

• Transgenerational entrepreneurship is crucial in succession processes

CeFEO

Center for Family Enterprise and Ownership Jönköping International Business School

Indiska ”When Anders and I joined the business, we started seeing things with fresh eyes. We started a product development which had not before existed in Indiska”. ”The old Indiska is still there, it’s the base. But then there are different development possibilities. The ”mothership” is still there, but from it different small sprouts can grow…” (Kicki, 2nd generation)

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

The STEP Project

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

Strategic dialogues between family members enhances the possibility to transfer entrepreneurial capacity over generations On of two sons about a business trip to China where his brother joins him and his father for the first time: We will show him how it works in China, and we will also go to Hong Kong for three days. And during lunches and dinners we will eat in good restaurants and discuss business and the company’s future that will end up in an ongoing discussion during the rest of the trip.

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

Strategic ways-of-thinking - a cognitive perspective A cognitive map - a mental structure that… … distinguishes ’problematic’ stimuli from the myriad of information available … helps the individual to make sense/create meaning … facilitates interpretations of different situations … guides individuals’ sensemaking to be map consistent … fills in ’white spots’ when information is missing

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

Strategic ways-of-thinking New CEO Former CEO Our plan was to concentrate on At my entry as CEO, the firm was too narrow in product what we knew best, in the range, a restriction in terms product where we are no.1… of growth. The primary objective is to We have to find other maintain our position in possibilities with products this industry.. that have a steady growth in We are in the last development demand stage of our investments in It is important to be among the this industry…no best and biggest in this industry. We can grow prerequisites for a further bigger by acquisitions… development

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

The strategists’ ways-of-thinking Quite stable set of beliefs and thoughts about strategy… …that contains different strategic themes (eg. growth mode, dominance or niche)

…that is based on the life experience and personality Represents all combined cognitive schemes/maps that an actor is using in the strategizing process… …and the whole repertoire of emotional influence

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

The IKEA founder, Mr Kamprad IKEA’s competitive advantage is built on changes in the whole system of activities - evolutionary changes

- limited customer service - self selection by customers - modular furniture desing - low manufacturing costs - ample inventories, focus on logistics - in-house design …but do IKEA have capacity for radical changes?

CeFEO

Center for Family Enterprise and Ownership Jönköping International Business School

The H&M business recipe • Atmosphere and vision • Market responsiveness • Flat organization, small and multidisciplinary project teams • Continuous experimentation – Seeks questions/problems every day to find new solutions – Explores different views (explorative learning)

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

Successful culture and leadership

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

Organizational culture and family businesses • The dominant values, beliefs, norms and standards defining what members of an organization care about, how they do things, and their judgements on what is right, wrong and desireable • The family is a strong institution for the transmission of values over generations • Close relations between family and business • The culture and its core values impact the strategizing

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

Family business cultures Often strong cultures - stable, influential

Founder and family influenced - founder-centric becomes owner-centric culture - long-term commitment

Does this mean that the culture is resistant to change or could it still foster radical change?

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

A founder-centric, strong culture, often autocratic, centralized, with long tenure for the family CEO – The founding entrepreneur may become a stabilizing force that counteracts change

”When faced with a crisis, the leader continue to operate as in the past - often with more vigor than before” (Dyer) – The entrepreneur-led family firm may eventually loose its entrepreneurial capacity

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

But the culture in itself is not hindering change! ”Our founder has provided us with a unique company culture with a high level of creativity, a willingness to change and think creatively - a unique state of mind and one of the keys to our success ” The BIM Spirit ”These factors have helped develop a flexible organization with a stream of new products and concepts in our industry.”

CeFEO

Center for Family Enterprise and Ownership Jönköping International Business School

The BIM case The son about his father, the former CEO: “…he tries to get the novel thinking going in the organization; he tries to get people to be a bit more open. He participates in discussions, interacts with researchers, takes part in sales meetings. He tries to influence everyone to open their eyes and not think too narrowly.” To sustain the entrepreneurial spirit is central!

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

Some conclusions on culture and change in family businesses • Importance of being aware of and question taken-for-granted values, norms and traditions • Explicit and open cultures may foster change (vs implicit and closed) (Hall, Melin & Nordqvist, FBR 2003)

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

Finally, the capacity for change in the family business; to overcome inertia… …in strong and stable family business cultures …in successful strategic ways of thinking …in established power positions among the family owners

CeFEO Center for Family Enterprise and Ownership Jönköping International Business School

Suggest Documents