Actions and initiatives for entrepreneurial families as they navigate the pandemic economy.
What has changed forever in family enterprises? Everything and nothing, in a manner of speaking.
There has been tremendous upheaval in world markets. COVID-19 has seen to that. Yet it could be argued that little has changed insofar as enterprising families prudently taking long-term views of their businesses.
If anything, business families are looking even farther forward as they anticipate economic recovery and acknowledge that resilience is an ongoing and worthwhile project that requires flexibility and tenacity.
The crisis has accelerated the decline of established sectors, pushing families to adapt their business models sooner than they’d expect, says University of Ottawa’s Peter Jaskiewicz1. We could see more merger activity, more targeted R&D, and an uptick in internal restructuring as families adapt to shifting markets.
Other changes? Economic devastation wrought by the pandemic has forced families to look inward. “The crisis has led to deeper reflections on big questions,” Jaskiewicz says. “Questions of who we are, who we want to be, why we are in business are asked more frequently in enterprising families these days.”
Supply Chain Woes
The pandemic has sent shockwaves through key industries with airlines, hotels and hospitality hit particularly hard in the wake of lockdowns. Even bedrock segments such as real estate have not escaped its crosshairs.
The construction sector, and its subset of infrastructure maintenance, home renovation, and commercial building projects, continues to suffer from supply chain disruption. “They can’t get the raw materials required or, if they can, the cost has rocketed,” explains Sirius Financial Services’ Susan St. Amand2, who warns that longer project completion times and higher materials prices threaten to undermine demand.
That’s cause for concern. Thousands of small and medium-sized family enterprises support roughly seven million Canadian construction sector jobs and account for more than 60% of the industry’s GDP among all SMEs.
It is unclear how many entrepreneurial families are embracing the climate of unpredictability to, say, push into new business lines, but some are studying their corporate playbooks with a deeper interest in exploring new directions, adopting new technologies or retooling factories to pivot and endure.
“Families realize that they must find a way out to survive, no question about it,” says Kavil Ramachandran3 of the Indian School of Business. “There is nothing like a long-term strategy for them.” And what might that be? If the hoped-for V-shaped recovery actually emerges, this year’s volatility may one day be remembered as an economic blip.
React and Regroup
Time will tell. In the interim, the pace of recovery has been leisurely. Canada’s economy added 378,000 new jobs in September, enough to push the unemployment rate down to 9%, but a far cry from February when the jobless rate was 5.6%, before COVID-19 walloped the economy.
As the pandemic peaked last spring, enterprises were forced to act decisively. With the livelihoods of tens of thousands of workers at stake, and equal numbers of consumers spooked by social and economic chaos, short-termism made sense. Survive today. Regroup tomorrow. Repeat.
Now the second wave is here. A worrying 56% of small businesses state they will not easily survive a second round of further restrictions or lockdowns, says the Canadian Federation of Independent Business.
Business leaders are at turning point. “Many [family enterprises] are now talking about long-term strategy and vision with heightened interest and awareness,” says Deloitte’s Michelle Osry4, whose clients are treading carefully regarding cashflow planning, operations and investment. “A few of my clients have started to refer to their plans as version 2.0.”
A Resilient Future?
In other words, they’re building resiliency, which in itself is fast becoming a competitive advantage. Regardless of any crises, resilient organizations deliver on their vision and brand promises, says research analyst Forrester, which has identified five pandemic-induced trends it claims will shape business and technology over the next decade.
One trend is businesses and governments investing in “what was once impossible to drive the future of work.” The pandemic has revealed the ability to do things that once seemed unfeasible, including shifting entire workforces to remote working.
2020: The year the city-centre office died
This could boost regions around global economic hubs as firms shed more than a quarter of their city-centre office space. Longer term, the redistribution of work will result in the further global emptying and repurposing of offices. Years from now historians might look back at 2020 as “the year the city-centre office died.”
Business leaders are embracing new, iterative ways to engage customers. They are adapting to new ways of working, investing in technology innovation, and revisiting their business resiliency plans with urgency.
As they emerge from the pandemic, family enterprise leaders are leaning on their advisory teams. Those with flexible governance structures are adapting quickly. “Innovation has kicked into top gear,” St. Amand says. “The rising generation is developing new ideas, they’re more engaged in learning from stories of the past.”
Their past, learning from it, and adapting, could be every family enterprise’s best weapon. A quest for resiliency could define how enterprises operate, grow and defend for years to come. That and a greater willingness to experiment. “Many of my clients did not focus previously on e-commerce,” Osry points out. “This is now in sharp focus.”
So may be a greater willingness to accept, prepare for, and conquer radical change.
For more information on the Family Enterprise Barometer, visit our page.
- Peter Jaskiewicz is a Professor of Family Business and Entrepreneurship at University of Ottawa, Canada
- Susan St. Amand is the Founder and President of Sirius Financial Services, Canada
- Kavil Ramachandran is a Clinical Professor and Executive Director of the Thomas Schmidheiny Centre for Family Enterprise at the Indian School of Business
- Michelle Osry is a Partner, Family Business Advisory, at Deloitte, Canada