Renewing entrepreneurship across the generations

http://www.ifb.org.uk/ One of the main competitive advantages a family firm can create is developing a powerful entrepreneurial culture, where measured risk taking and innovation are part of the corporate DNA. It’s a theme the IFB has seen crop up again and again during the IFB Family Business Challenges seminars that are currently running across the UK. Owners are concerned about how to maintain innovation and entrepreneurship as a core value across generations. The evidence is when a family business fails to innovate and adapt it often loses its way.

Two examples, one from each side of the Atlantic, demonstrate how family business renewal is achievable.

One well known UK family firm where entrepreneurship was put back into the business is £175m turnover Timpson Group. Only a generation ago its core activity was shoe retailing and the owners had a 'steady-Eddie' approach to business. The incoming generation was more restless and sensed that to be good stewards they had to up the ante in terms of innovation and risk-taking. The business model today thrives on the father-and-son team of John and James Timpson and their ‘upside down’ empowered management culture. The business no longer sells shoes - a decision was taken in the late 80’s to exit this business - throwing up the question what next. Now they offer customers valuable services such as watch repairs, key cutting and dry cleaning.

Third generation US family business Radio Flyer, makers of children’s bicycles and scooters,was faced with a business that was stagnating. To transform the situation Robert and Paul Pasin reconnected with grandfather Antonio’s values. By rediscovering his passion for innovation and pleasing the customer they saw the Chicago-based business recover its former glory. Getting the people culture right was challenging however, with many loyal employees leaving the business. But Radio Flyer has been rewarded and is once again revered by America’s children as a favourite toy. Like Timpson, the firm also wins accolades as a great company to work for.

Entrepreneurship – ‘If it isn’t broke, break it’

http://www.ifb.org.uk/ How do owners come to terms with selling a successful business? At a dinner co-hosted by Mike Southon, FT entrepreneurship correspondent and Beermat Entrepreneur co-author, the issue was debated by a group of enterprising business people. One of these explained how he was still struggling to come to terms with the void in his professional life following the successful sale of his business a few years ago.

When any family firm faces the same situation how does the family cope with the emotional stresses of deciding a sale, possibly after generations of ownership? Is the family prepared to sell the best business they will possibly ever own? When the family name is above the door the shadow of all who have toiled to build the business looms over their shoulders.

In any family business there can also be a magic glue present –shared values that bind the family owners together. All these factors can create a compelling set of reasons why deciding upon a sale may prove to be the hardest decision the family have ever faced.

Perhaps enterprising families however, should heed the motto of the dinner’s co-host Guy Rigby, an entrepreneurship mentor whose motto in his new book From Vision to Exit is, ‘If it isn’t broke, break it’. Successful family business owners heed this good advice constantly by challenging the status quo, whether they are considering exiting or not. Regularly they ask themselves - why is the family in business together?

Following Rigby’s advice, even if a sale is not on the cards, it is vital in today's hyper-competititve markets to ensure that there is a culture in your firm that embraces change. Finally when struggling to reach consensus on a big decision, such as selling the business, you will need experienced independent directors on your board to offer dispassionate advice.

Entrepreneurship in the family office

http://www.ifb.org.uk/ Family offices, perhaps driven by the need to support an expanding shareholder base, are turning more to entrepreneurship. This theme emerged at the recent IFB 7th Annual Family Office Forum Roundtable chaired by Family Office expert Daniel Goldstein.

While entrepreneurial activities are inherently risky a ‘stay rich’ approach will not usually generate big enough returns to create significant new pools of family wealth. Family offices face other pitfalls, such as a lack of new ideas or over investing, sometimes leading to stagnation or decline.

There is also the risk that family members become over dependent on dividends and are lulled into complacency and a false sense of financial security. Balancing a traditional financial investing strategy with an entrepreneurial approach can therefore play a central role in giving the family office a new lease of life.

A good starting point is setting out the family’s values - particularly making explicit the family’s appetite for risk taking. Keynote speaker and family adviser Francois de Visscher (pictured left) encouraged families to reach beyond ‘outer wealth’ such as assets and find ‘inner wealth’ embodied in the family’s values and legacy.

When successful families put family office entrepreneurship into practice they encourage those next generation family members, who have the passion, knowledge and drive, by lending them moral support and resources.

Once embarked on its entrepreneurial strategy the family office must stay focused: one boss, one team, one board for every project or investment is the answer according to one successful family. Failure should be expected, but as long as lessons are learnt it is not the end.

By each family office discovering its own entrepreneurial strategy not only can wealth be created, but family values will be sustained potentially paying rich rewards over the long-run.

Family business entrepreneurs: the pros and cons of family support

http://www.ifb.org.uk/ The recent sell-out IFB Next Generation International Convention on entrepreneurship was a tremendous success as 185 young delegates from 25 nations listened to inspiring speakers on starting up companies, intrapreneurship in an existing business and emerging social enterprise models. The consensus seemed to be that today’s young family business members want to make their own mark in the early stages of their careers, either by working in a non-family company, or increasingly by setting up their own business. Choosing the entrepreneurship route is becoming more popular; it gives the young person more independence and is a great way to prove yourself, at a stage in life when there is often little to lose.

One of the most active questions discussed was the pros and cons of having “family support” when starting a new business. Advantages include access to capital, ready-made networks, other support that the family (and perhaps its business) can provide and the pressure to succeed. On the downside many felt that using family resources including funding could lead to a lack of independence and thus a loss of freedom for the entrepreneur.

Lara Morgan, founder of toiletries success story Pacific Direct, told the story of how she broke away from her father’s firm at 23 and never looked back eventually selling her business for £20M. She argued strongly in favour of having full control over one’s destiny without anyone looking over your shoulders. Others argued that family entrepreneurs should welcome family support. If a family member starts a new venture family capital and networks can be invaluable; but if the family are investors care needs to be given to the governance system that should give the entrepreneur the freedom to manage, with a good board in support.

Entrepreneurship - the pursuit of opportunity

http://www.ifb.org.uk/ I’m looking forward to hearing the opening address by Professor John Mullins, of the London Business School, at the IFB’s Next Generation International Convention 2011 in January. The convention’s theme is Entrepreneurship – the pursuit of opportunity and as associate professor of management practice in marketing and entrepreneurship, Mullins is an acknowledged expert in the field.

Professor Mullins will be developing some themes from his latest book Getting to Plan B, where he debunks the form-filling, spreadsheet-driven mentality popular in business planning. Mullins believes that entrepreneurs should adopt a series of ‘stress tests’ to their initial ideas so that any weaknesses can be corrected. He suggests that the real success of companies such as Google, PayPal, Starbucks and others was that they were prepared to rip up Plan A and make radical changes to their business model.

Cover via AmazonHe has also identified two other key criteria for any successful enterprise to assess. First many business people see fast-growing markets as a good area to explore, but Professor Mullins wants people to realise that the more important side of the equation is to ask whether customers will actually buy your product. Secondly if you’ve satisfied yourself on that question then you have to ask if you can build a sustainable competitive advantage in that industry – otherwise you might find a bigger player comes along and wins the day.

We feel sure that insights such as these will inspire and enthuse the next generation family members who attend the Convention 28-29 January 2011. It will be a great occasion for delegates to hear from a line-up of international speakers about entrepreneurship in all its forms - whether its starting a business, looking to set up a social enterprise, or just learning more about entrepreneurship.

You can hear more from Professor Mullins about these ideas on this video.

Trust - a source of competitive advantage

http://www.ifb.org.uk/
This week’s IFB national conference has the theme Trust: A source of competitive advantage. Our view is that family businesses are uniquely placed to be at the forefront in the drive to revive trust in UK business.

Progressive family firms place great importance on a clear set of values, such as:

• Entrepreneurship - having a can do attitude

• Respect for People - fostering a strong workplace environment

• Social Responsibility - engaging with local communities

• and Sustainability - taking responsibility for the environment

Combine these values with a sense of stewardship, of being in business to succeed in the long-term and we have created a solid foundation for Trust. And this is of course Trust in the widest sense with all stakeholders; customers, employees, the supply chain, the public and indeed Government.

Knowing how family firms are perceived by the British public is important so the IFB commissioned a YouGov survey– over two thirds of the public recognise the important role family businesses play in economic growth and employment (68%) and almost two-thirds believe family businesses provide better customer service than other types of business (62%) – a key measure of trust in a business.

Sector firms of course, have to deliver strong business performance, but there is a growing and understandable pressure from society to broaden the measurement of success, beyond profits alone.

The benefits of a high trust organisation are immense: highly trusted companies can maintain strong levels of employee morale reducing staff turnover, absenteeism and associated costs. Their brands can achieve high trust status with the consumer. Mars and Beaverbrook the Jewellers are two family firms speaking at the IFB conference on how they are achieving strong trust.

But family firms have their challenges, such as;

• Improving decision-making, both at the owner and the business level through more robust governance

• Ensuring that the transition of ownership between generations is planned and doesn’t disrupt the business

• Making sure there is no glass ceiling for employment opportunities for non-family employees and being open to ideas and innovation

What we see is that the best family firms are embracing these challenges while building and sustaining high trust organisations.