Technology is transforming the way family enterprises think about the future - 6 minutes read
Family enterprises have traditionally used technology to enhance their ability to compete; their ability to navigate this next wave of digital transformation, including AI, will be key to retaining some of those competitive edges.
Understanding and communicating the opportunity for change can be key to successfully preparing for the future.
An expert from Deloitte explains how best to manage that digital transformation.
Family enterprises have historically focused on legacy, pride in what they built, and passing down success through generations. Many of these companies grew large before the digital age and still operate much as they have for decades, relying on established practices, relationships, and ways of doing business.
But the world is changing, fast, and family enterprises now actively need to embrace new technologies and digital transformation to prepare the next generation for the future.
However, the challenges in doing so can sometimes be considerable for businesses set in their ways. Switching from legacy systems and processes to innovative digital solutions requires major executive buy-in, employee training, cultural change, and financial investment that some family-run firms may balk at.
"Their very nature means sometimes they don't have the luxury of significant budgets," said Adrian Batty, the global Family Enterprise leader for Deloitte Private. And they've lived through prior tech booms without necessarily realizing the promised benefits, meaning they're sometimes circumspect about leaping at the next big thing.
That inherent conservatism can work against businesses looking to make the leap into the digital future. But some forward-thinking family businesses and family offices are preparing for the future by embracing new technologies like artificial intelligence and the broader digital transformation. The urgency to move more quickly is being driven by the next generation of leaders who have grown up in the digital age and are far more comfortable with newer technologies.The scale of the change
According to the 2023 North America Family Business Report, roughly a quarter of family businesses say the priorities of the next generation leaders joining the company are to increase use of technology and digital transformation.
And they're increasingly pushing against an open door. The report found that 84% of family businesses are already embracing new technology in some form.
The reason so many family businesses are eagerly embracing technology already is simple, Batty said. The unique structure of family enterprises allows them to implement changes quickly when the leadership commits to a technology strategy.
"With fewer people involved in decisions, it can be quicker to get executive support to make decisions around what they will and won't do," Batty said. "When there's executive sponsorship of making a change, it can have a really positive impact on an organization's ability to digest the change."
This nimble structure gives family enterprises an advantage in adopting new innovations when the leadership sees or endorses the potential benefits. To date, new technologies have released the greatest benefits in cost optimization and activating growth initiatives. Batty has seen companies transform supply-chain operations by implementing advanced logistics modeling and tracking, unlocking new benefits to their bottom line. Other businesses have used AI to take over customer service tasks like fast food drive-thru ordering, with higher accuracy than humans.Boom or bust?
But new technology also brings challenges. Implementing major systems can be expensive for businesses without large IT budgets. And bringing along employees unaccustomed to new innovations requires extensive engagement and training.
Sometimes, Batty said, "new technologies are put in place, and people then try to operate the old way inside them." With family enterprises, where staff may be significantly longer-tenured than elsewhere, and turnover and employee churn is likely to be lower than non-family-run companies, reception to change may be frosty. That will have a significant impact in years to come, as a recent report by Deloitte in Australia shows 58% of people are already using generative AI — with students nearly twice as likely as employees to use it. When those students graduate into the world of work, they're highly likely to want to use generative AI in their jobs, leading to potential conflict and disruption for their employers.
On top of that, Batty admitted that the black box nature of AI can be difficult for some people to trust. But with the proper safeguards in place, AI and other emerging technologies offer huge opportunities to improve operations, reach new markets and provide better service.
The next generation is key to pushing family enterprises forward in the digital era. According to Deloitte's 2021 European Family Office Report, 55% of family offices globally already invest in AI. And 53% plan to increase investment in AI, more than any other technology.
On the family business side, the North America Family Business Report shows 26% said AI has already changed their business and 49% believe it will in the next five to 10 years.A generational divide
"Younger generations who want to engage more with technology are agitating some of the older generations in family enterprises to experiment and get comfortable with it," Batty said. "There's significant upside if you can get it right. Those family enterprises that invested prior to COVID-19 responded better and are in a much stronger position today but it is not too late to start."
He suggests family enterprises start small by identifying use cases to test and learn. It could be as simple as finding simple, repetitive tasks that could easily be improved by new tech and automating them. From there, begin to broaden the areas of the business can where technology can play a role at scale — but be aware that leadership must align behind the technology strategy and prepare to reconfigure operations to get the most out of innovations.
With passion for their legacy and proper planning, family enterprises can set themselves up for success far into the future. The next generation's hunger for digital transformation will push these agile businesses to adopt the technologies needed to remain competitive. Though change brings challenges, family enterprises that embrace emerging tech thoughtfully can build on their proud histories with an innovative eye to the future.
But as anyone who's been involved in running a family business or family office will know, emotions can run high among relatives. Such significant change requires buy-in from all members of the family. "The willingness of the people to want to change," Batty said, is critical to any business transformation's success.
"Family businesses aspire to grow and establish a legacy that will last into the future," Batty said. "They are investing in making sure that they remain top of class."
Click here to learn more about how Deloitte Private can help thriving family enterprises transform ideas into action.
This post was created by Insider Studios with Deloitte.
Source: Business Insider
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