Is Family Business A Model For The Future?

Published on 27th February, 2019

Written by Farida El Agamy –
General Manager at Tharawat Family Business Forum.

After attending a recent entrepreneurship forum, I was compelled to reflect on the following core question: will family businesses have a place in the Next Economy?

The continuing relevance of the family ownership model in an era increasingly defined by technological transformation is a complex topic. In general, global media outlets exhibit a bias towards content on tech startups and leading conglomerates, which can give the impression that family firms are struggling to face today’s business challenges.

History gives us an alternative perspective. Family businesses were the backbone of the private sector through the 19th and 20th centuries. Their continual pursuit of growth, progress and prosperity played an integral role in building the global economy we know today. The family ownership model was successful, serving these businesses through three industrial revolutions (steam, electricity and ICT). Family firms were able to take advantage of each stage of development effectively commercialising opportunities as they arose. Today, family firms are the most frequently encountered enterprises worldwide, accounting for approximately 70 per cent of the global GDP.

Today, family firms are the most frequently encountered enterprises worldwide, accounting for approximately 70 per cent of the global GDP.

Despite historical evidence pointing to the efficacy of family ownership, however, there are theories that see the model becoming a thing of the past. To some, the technological shift we are experiencing represents an insurmountable challenge for established family firms. They believe the size and structure of these businesses won’t allow them to adjust to rapidly transforming economic conditions, and as such, they won’t be able to accommodate their consumer’s changing expectations.

Indeed, some characteristics of family-owned businesses could negatively impact their role in the fourth industrial revolution. In some cases, family businesses tend towards a more conservative approach when it comes to embracing innovation. Gaps in the dialogue between generations could slow down the decision-making process, and stakeholder considerations might hinder the timeliness of any necessary changes. These limitations, however, are outweighed by the advantages of family ownership, which are:

-Deep-seated industry knowledge

-Resilience and entrepreneurial drive fostered by family history and values

-Swift decision-making mechanisms

-Access to several generations of talent, and 

-The invaluable goodwill of local and global marketplaces 

These attributes will be crucial factors in sustaining success through the fourth industrial revolution. Utilising these characteristics will enable family businesses to fully leverage their favourable historical positioning. Owners, of course, must be prepared to implement structural and strategic changes, review business models and move forward with an open mind.

Owners, of course, must be prepared to implement structural and strategic changes, review business models and move forward with an open mind.

Ensuring the continuation of family business lies at the very heart of Tharawat as an organisation. To further explore this question as an institution, we started the programme “The Future of Family Business” in 2017. Through this platform, we are deepening our understanding of the traits that will best serve family businesses in the Next Economy, and creating an invaluable dialogue between owners from all over the world.

Family businesses are by no means exempt from the macroeconomic trends reshaping the world of business. They will feel the impact of industry disruption, and family ownership is only one factor influencing a family firm’s chances of success. However, international research both in mature and fast-growth markets shows that family businesses can adapt to changing economic conditions. Despite the uncertainty that lies ahead, my belief that family firms are extraordinarily well positioned to take advantage of this technological shift is unshakable. Family business is a model of the past and for the future.

Note: Research available on macro-economic impact of family businesses focuses heavily on European and North American economies.