Facts aren’t always welcome.
Such as the fact that, in family businesses, many members of the Next Generation have little desire to take over the running of the business. It’s not what baby-boomer owners want to hear when they are looking to retire, having spent years of their lives in growing successful enterprises. But the reality is that younger people have other aspirations and so business-owning families are engaged in a fight, like it or not, for the attention and interest of their younger members. One of their best weapons in that fight, but so far an under-used one, is ‘family intrapreneurship’. This offers younger people a way to fulfil the common aspiration of leading their own venture that can make the world a better place – yet it does so within the support structure of the mother-company and with the active involvement of other generations.
"Family intrapreneurship stimulates new business models as well as an innovative culture, helping both the mother-company and its daughter-companies compete in a fast-changing world."
According to a recent survey by the University of St Gallen and EY Family Business Center, only 5% of recent graduates who belong to business-owning families intend to be a successor in their family’s business five years after finishing their studies. It seems that there’s not much hunger to step into the shoes of previous generations who work in well-established businesses.
This is partly because those businesses are perceived to be, frankly, rather ‘dull’ compared to the buzz of tech start-ups. But it’s also because there are so many options available to the well-educated, and often internationalised, offspring of successful business families. These days there’s a battle for talent and young people know it. Employers are making great efforts to attract top talent, including offering flexible working conditions and more consideration for family commitments.
This is unfortunate for family businesses who find themselves being outflanked on what was one of their points of difference. And it’s particularly unfortunate because of the timing. The biggest transition of ownership in history is slowly unfolding as the mighty baby-boomer generation retires. Within the next 10 years, it’s estimated that 70% of private businesses will transition ownership.
Relatively few family businesses are set up for succession. In fact 38% of current owners have only an informal plan for succession while 52% have no plan at all. Just one in 10 owners have a formalised written succession plan. No wonder it’s been described as a ticking time-bomb.
To be fair, the current generation have plenty to think about apart from succession. They are also having to cope with a world that is changing more rapidly than ever. In many industries, the most in-demand occupations and specialities didn’t exist 10 or even five years ago. One estimate is that 65% of children entering primary school today will ultimately end up working in completely new job types that don’t yet exist. So family businesses need to be delivering more innovation at the same time as addressing succession plans. It’s a daunting challenge. The good news is that it’s possible to tackle both issues by implementing the concept of family intrapreneurship.
‘Intrapreneurship’ is about a mother-company providing a support system – technical, operational, emotional and financial – to an intrapreneur who starts a new venture (the daughter-company). Another term for it is corporate entrepreneurship. Businesses with an intrapreneurial posture are distinctive because of their efforts to be creative, break down barriers, and develop an eco-system for innovation.
Companies of all types are seeking to become more intrapreneurial. This can be seen in the development of new campus-style workplaces that deliberately encourage people to mingle across disciplines and come up with new projects. It’s also seen in recent re-organisations of some of the biggest tech companies. Think of Alphabet Inc. with its wide variety of subsidiaries, with Google being just one of them.
The concept of ‘family intrapreneurship’ includes the additional element of different generations working hand-in-hand on intrapreneurial ventures, with the Next Generation being empowered to create and deliver new sources of sustainable growth. The younger people can legitimately feel they are running their own venture and earning the kudos of being a first-mover. Yet they are doing this within the context of the family business rather than being completely separate from it.
"Supporters of family intrapreneurship point to its record of success. For example the Mulliez family of France has continually started businesses in related fields – often in retailing – and their companies are now said to employ well in excess of 350,000 people."
Recent data suggest that intrapreneurial ventures, supported by a mother-company, are much more likely to succeed than do-it-yourself entrepreneurial ones. Speaking very broadly, entrepreneurial ventures have a 20:80 success rate whereas the chance of an intrapreneurial venture succeeding is more like 80:20.
So what’s needed for family intrapreneurship to take hold within a business-owning family? The current generations need to adapt their risk perceptions and decide to empower others. They also have to be prepared to move from the driver’s seat to the passenger’s seat, to become mentors rather than doers, and to adopt a more transparent and innovating attitude.
The Next Generation, meanwhile, needs to be ready to take personal initiative while accepting the support structure of the family business. They must be open to the idea of working with other generations, which will be a stepping stone to their on-going involvement in the mother-company, even as they push forward with daughter-companies.
"There also needs to be openness to a different set of Key Performance Indicators (KPIs). The nature of intrapreneurship is that some projects take a long time to become profitable, if they ever do. This has to be built into expectations. The comment of Arthur Ochs Sulzberger, who was a member of the family that owns The New York Times, is very relevant to intrapreneurial ventures: “If you don’t occasionally make a mistake, you aren’t trying hard enough.”
As family intrapreneurship becomes a mind-set within business-owning families, there is potential for making a huge difference to the wider economy. Imagine if every business were to give birth to one more business. With twice as many businesses, all trying to serve customers, think of the impact on tackling the day-to-day problems of the world.
It’s an exciting prospect and, driven by the combination of the innovation imperative and the succession time-bomb, it could become reality faster than you might expect. Family intrapreneurship is a concept whose time has come.
