What will family businesses look like 20 years from now? One thing’s for sure: the sector won’t look the same. For a start, family businesses will be in different sectors, moving away from traditional areas like manufacturing to things like software development and social media. And their management and ownership teams will be different.
According to a recent MGI study, the percentage of family businesses in manufacturing, the traditional heartland of family business, has halved from 40 per cent in 2003 to 20 per cent in 2013. So we can expect fewer in manufacturing, although it’s true to say that the manufacturing sector itself is likely to be a lot smaller. No surprises there.
But according to specialists, the big change is in the way family businesses are now being inherited by siblings. It’s come a long way from the tradition of primogeniture -- where the business was passed on to the oldest son.
This is likely to transform the sector. It could become more unstable, but much more creative and dynamic, and place family businesses in different markets.
Lucio Dana, a family business analyst, says parents are now in a completely different position from where they were years ago. “They are much more concerned about fairness and equality,” Dana says. “Also, the kids are more vocal and there have been cases where they would take the parents to court.”
That of course leaves family businesses with many more stakeholders, which Dana says could make them more unstable and less likely to be passed on to the third and fourth generation.
But family business consultant Jon Kenfield says the trend could create new markets for family businesses in the future.
“Rather than flogging the traditional stuff and being in areas like manufacturing and professional services, they will be looking to spark off each other to create sibling teams,” Kenfield says.
“The ones that succeed will be the ones that harness the creative juices of what will be a better educated group of people, who have a much broader range of skills than their parents and they’ll be looking for new products.
“It might be software development, it might be social media services, it might be hospitality that they will need to do at a higher level.”
“The successful ones will leverage off the fact that they are sibling teams and they will leverage that into a more innovative form of developing businesses which we haven’t even thought about yet. “
While Dana says it could create more instability, Kenfield says siblings often combine well because each has different skills.
He says he has often found that in a family where there are three kids, one is the creative spark with all the ideas, another is the one who gets on with all the customers because they have that sort of personality and the third does all the back room work.
“They are a natural complement,” he says. “If you follow the idea that Australia is going to become the gateway to Asia, a lot of what they do will be to develop new services. A lot of them will be service based, not product based, around the use of technology and then the other ones will be in a range of a services which pick the areas that cannot be outsourced like local services.”
He says this will create a big shift for family businesses. In 20 years’ time, the sibling teams could take them to a completely different space.
“At the moment [the family business sector] is quite secretive and it’s very paternalistic and I think that’s a recipe for death. It will have to become more open to meet the market and understand the client needs which it’s good at doing,” Kenfield said.
“Family businesses have always been close to their customers but what they haven’t necessarily done is respond to those client’s needs.
“What the next generation will do is say ‘there is a great big market out there, we can penetrate that market by looking at demand based business rather a supply-based business.’ They will become more open and provide best teams and use the smarts of their education.
“They will look at what some of the big companies have done like the Googles and Microsofts and the Apples and they will use some of the principles behind those to be innovative and creative and then use the family.”