Staying the course isn’t always enough – family enterprises must adapt to an ever-changing world to be competitive and ready for the future.
In brief
- The willingness to keep up with real-time change is critical. Not doing so can leave family-owned firms lagging in the marketplace.
- Megatrends like digital, risk management, regulatory, NextGen and philanthropy are essential and relevant to family firms for potential success.
- Embracing risk in lieu of avoiding it will better position family enterprises to head off disruptions and enhance business growth.
- Family enterprises, including family offices, blend tradition with innovation. The pandemic was a stark reminder of the speed of change and the fragility of systems that cannot adapt.
The world is not just evolving; it is transforming rapidly and unpredictably. Megatrends such as technological advancements, regulatory shifts, and demographic changes are not isolated forces, but interconnected ones that are shaping our world. To thrive in a globalized economy, family enterprises must adopt a forward-looking, hyper-focused approach to resiliency.
Here are five megatrends that family enterprises need to keep their eye on and plan for:
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Digital transformation: Embrace it
Private capital is on the rise, placing family businesses at the forefront of a changing environment. With increasing immigration, rapid technological progress, and a growing reliance on a smaller workforce, the need for adaptability is not just a choice, but a necessity for these enterprises.
To navigate this shift, these businesses need to integrate technology into their core strategies for growth and resilience. This includes implementing robust data management and security to safeguard vital information while allowing necessary access. For family businesses, the digital revolution means more than just adopting new tech — it means a fundamental transformation in operations, engagement, and value delivery. A digital-first mindset, characterized by agility and continuous learning, is essential.
Looking ahead to a future with artificial intelligence, the metaverse, and Web 3.0, family enterprises must explore the limits of what’s possible and prepare for a blended digital-physical reality with new avenues for innovation and connectivity. Adapting is not just about surviving; it’s about thriving in a digital-centric world where adaptability equals success.
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Enterprise risk management: building resilience
A robust enterprise risk management (ERM) system is crucial in today’s unpredictable landscape. Simply identifying risks is inadequate; businesses need to be adept at early detection, response, and recovery from unexpected incidents to maintain resilience amid volatility.
Traditional risk management methods fall short. Even large global corporations struggle to create sustainable risk strategies, highlighting the necessity for a more dynamic approach. ERM must be woven into a company’s fabric, with a focus on comprehensive risk handling.
Companies should appoint a risk steward responsible for overseeing risk management across the organization and fostering a unified, proactive approach. This individual should have a clear grasp of the company’s primary risks and the following attributes:
- The skill to dismantle organizational barriers and collaborate across various operational levels
- An understanding of the organization’s risk tolerance and how to incentivize leaders to agree on a standard risk definition
- The ability to align risk priorities with overall business performance
Whether enhancing current systems or introducing new ones, adequate data and technology infrastructure should:
- Establish a shared risk ecosystem with a unified taxonomy and data model
- Streamline and automate risk management tasks, reducing effort and training requirements
- Eliminate redundancies, phase out outdated systems, and leverage optimized technologies like cloud services and advanced analytics
- Ensure systems are robust enough to endure disruptions and recover quickly – resilience is the future of risk management.
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Regulatory environment: anticipating change
A global perspective is crucial when considering megatrends. With regulatory environments in flux, international organizations that are informed on the latest global developments, like the World Economic Forum, can provide crucial guidance for family enterprises seeking to identify and get ahead of the next megatrends.
By following their lead, family enterprises will be better equipped to anticipate and plan strategically for these changes. Additionally, proactive family enterprises are at the forefront of initiatives such as public-private partnerships as a means to address societal issues.
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Rising generations: the future of leadership
As Gen Z enters the workforce and ascends into leadership roles, new viewpoints and priorities emerge found in EY data from the 2024 Live Work Play Study. Their inherent digital fluency, practical mindset, and drive for meaningful change are poised to influence the direction of family businesses. Understanding the unique motivations and behaviors of each generation is crucial for cultivating a workplace culture that capitalizes on the diverse strengths of each generation.
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Philanthropy: a new approach to giving
The approach to philanthropy is evolving, with an increasing focus on strategic giving and measurable impact. Family enterprises have the opportunity to leverage their wealth for social good, which requires careful consideration of how funds are allocated.
The rise of social welfare organizations, such as 501(c) (4)s, offers a new avenue for advocacy and partnership, allowing enterprises to contribute to societal change more directly and meaningfully.
Moving into the future
Family enterprises and offices must evolve from a risk avoidance mindset to risk resilience. By understanding and preparing for megatrends, family enterprises can turn potential disruptions into opportunities for growth.
Family enterprises should incorporate the following action steps into their strategic planning:
- Develop a proper risk management framework: Establish a comprehensive risk management framework that goes beyond simply identifying risks and includes strategies for managing and mitigating those risks effectively.
- Get smarter about generations and human behavior: Enhance your understanding of different generations within the family enterprise and their behaviors. This knowledge can help you tailor approaches that resonate with each generation and manage family dynamics.
- Think globally: Avoid being insular and recognize the importance of thinking as a global citizen. Even if the enterprise or office does not operate internationally, global events and trends can have local impacts, and it’s crucial to be aware of and plan for these.
- Anticipate regulatory changes: Stay informed about potential regulatory changes and understand how they may affect the enterprise. Large organizations often struggle to keep up with regulatory changes, so thinking ahead and preparing for these shifts is essential.
- Support better regulation through public-private partnerships: Engage in public-private partnerships to address issues collaboratively rather than relying solely on regulation. Both sectors will develop more effective and targeted solutions than regulations that may not fully address the underlying concerns.
Let us embrace these trends not as threats but as the path forward to a more robust and dynamic future.
Summary
Traits like resiliency, agility and proactivity are paramount in navigating the speed at which the world moves in terms of technology, regulations and demographics. Family-owned firms should strive to be forward-thinking and focused on harnessing the opportunities for success that come through megatrends.