In the world of family businesses in India, the elusive challenge of innovation in a hyper-fast and unpredictable environment is as intangible as a ghost.
In today's fast-paced and rapidly changing Indian business landscape, family businesses face a daunting challenge—the need to innovate or risk becoming obsolete. While succession planning is undoubtedly critical for family-run enterprises, their ability to generate cutting-edge products and services that cater to evolving customer demands is equally vital for survival. As Eric Hoffer, the renowned American philosopher, aptly stated, "In a world of change, the learners shall inherit the earth, while the learned shall find themselves perfectly suited for a world that no longer exists." In the world of family businesses in India, the elusive challenge of innovation in a hyper-fast and unpredictable environment is as intangible as a ghost. It's no longer just about passing the baton of power from one generation to another. Rather, it's about inventing, creating, and introducing new and relevant products and services in a given context—that's what innovation truly means. And in today's time of hyper-change, it's the only way for family businesses to stay ahead of the curve.
Recent studies reveal that only a small percentage of Indian family businesses survive beyond the third generation, a startling statistic that underscores the importance of innovation in today's business world. The challenges that family businesses face in achieving long-term success and survival are numerous, ranging from the need for strategic decision-making, to the ability to attract and retain top talent. Yet, the most critical challenge they face is their ability to innovate continually and respond quickly to new and emerging market trends.
Family businesses are known for their patient capital, which allows them to stick to their plans, be persistent and see them through. However, this very strength can also be a potential weakness in a world where innovators follow the principle of "failing fast". Failing fast is the approach of experimenting, pivoting or stopping an effort altogether based on its results. In the context of family businesses, the need for reputation management and maintaining harmony often leads to capital being patient. However, in a fast-changing, innovation-driven environment, patience can become a hindrance. Family businesses need to find a way to modify their approach to patient capital so that failure is acceptable and innovation is not hindered by the fear of losing face or reputation.
Another trait that has helped family businesses survive for generations is the desire for control. However, this can also be a barrier to innovation in a rapidly changing business landscape. To innovate in unfamiliar territories, family businesses must be willing to bring in outside talent, including hundreds of people as equal contributors to new ventures. However, this goes against the conventional wisdom of family businesses being controlled by family members. There needs to be a mechanism for multiple talented people to be absorbed into the organisation, given equal opportunities to create and generate wealth and contribute as if it were their own business.Also read: From the Bookshelves: Family business historian Sonu Bhasin on entrepreneurs who built India
The issue of control and the need for equal participation of talent are just two of the many challenges faced by family businesses in India. The key is to strike a balance between long-held beliefs and new approaches that cater to changing business environments. Family businesses must re-think their strengths and assets to ensure that they are relevant in today's rapidly evolving world.
The impact of innovation in business cannot be overstated. It is crucial for family businesses to innovate constantly to remain relevant and competitive. Innovation drives growth and creates new opportunities, and family businesses need to invest in innovation to remain successful. They must embrace the latest technologies, such as Artificial Intelligence (AI), Machine Learning (ML) and the Internet of Things (IoT), to stay ahead of the curve.
Family businesses must also foster a culture of innovation. They should encourage their employees to think outside the box and challenge conventional wisdom. Creating a conducive environment for innovation is essential, and family businesses must be willing to invest in the necessary infrastructure, training, and resources to facilitate innovation. The culture of innovation should be embedded in the organisation's DNA and should be part of its long-term vision and strategy.
Failure is an inevitable part of the innovation process. Family businesses must be willing to accept failure and learn from it. They should encourage experimentation and support their employees to take calculated risks. Innovation is not a one-time event; it is a continuous process that requires perseverance, resilience, and the ability to learn from failure.
Family businesses in India must also be willing to collaborate with external partners to drive innovation. They can leverage the expertise of external partners to accelerate innovation and bring new products and services to the market faster. Collaborations can take many forms, such as joint ventures, partnerships, and co-creation. Family businesses must be open to exploring these options and finding the right partners to help them achieve their innovation goals.Also read: From Ayodhya to Morbi, India's family businesses are thriving
Finally, family businesses must embrace the principles of sustainability and social responsibility in their innovation efforts. They must create products and services that are sustainable, environmentally friendly, and socially responsible.
Innovation should not come at the expense of the environment or society. Family businesses must be mindful of their impact on the planet and society and create products and services that are sustainable in the long run.
The imperative for family businesses in India to innovate is pressing, given that the country's economic landscape is rapidly evolving. According to recent studies, India is set to become the world's third-largest consumer market by 2030, behind the US and China. With the rise of new technologies and the increasing digitalisation of the economy, family businesses that fail to innovate and adapt risk being left behind.Dr Varun Nagaraj, Dean - SPJIMR, Professor - Information Management & Analytics.
[This article has been reproduced with permission from SP Jain Institute of Management & Research, Mumbai. Views expressed by authors are personal.]