In Part IV of this series, we continue our look at some of the major reasons why many family businesses have failed and may fail yet if such issues are not effectively addressed.
We've Always Done It Like This: Failure to Innovate
Sometimes a family company that has enjoyed decades of success feels quite confident in its formula for success, so much so that it may not recognize when change would benefit it immensely. While some second or third generation owners can't wait to change the running of the business when it becomes theirs, others refuse to do anything differently which, in time, can result in an operation in dire need of an update. Social media is a good example where some businesses have rushed to take advantage of its platforms while others have ignored these networks to their peril. Failing to establish an online presence is a conflict that many family-run businesses now face. Of course, innovation or change takes many forms, but the family business is often challenged to embrace the business need to innovate.
No Structure, Little Strategy
For some family businesses, the only structure is the family structure. Perhaps there is one leader or a leading couple--husband and wife or siblings, for example. Sometimes a business will thrive without a business-type structure for a generation, but often this will change after succession and with the growth of the family. Without clearly defined roles, problems tend to arise. Secondly, a lack of long-term strategy is an obstacle for many family businesses. Is there a five-year plan? Is there a plan to operate regionally? Globally? Designing an effective strategy and working towards its business goals is a tenet of many businesses, but one that is often neglected by family-run businesses.
Every business faces vulnerabilities. Often the challenges come from the outside such as the economy. The family owned and operated business comes with a set of challenges, however, that don't typically apply to other types of businesses. Family firms that are able to successfully navigate these challenges into their third generation, therefore, have much to be proud of--and possibly much to teach other families struggling to keep their businesses afloat.