expect growth over the next 2 years
work in one sector and in one country
see the need to innovate and keep ahead as a challenge in the next 2 years
will have made significant steps in their digital capabilities in the next 2 years
“In business it is important for people to stay optimistic, because there are some opportunities going forward, and whatever we do, we've got to find those opportunities and really take advantage of them.”
UK family businesses have performed steadily in recent years, with the majority anticipating growth and nearly 20% expecting quick and aggressive growth in the next two years. Patient capital and a long term view meant family businesses were able to take advantage of being able to hold onto their infrastructure and people during the last downturn, with many leading the recovery in their markets.
“We like to change, we like something fresh, we like to be new, we like forward thinking.”
Growth through caution may have been a successful strategy since the recent downturn, but it is not sustainable with the rise of emerging technologies in a rapidly changing global economic environment. For many of the family businesses we interviewed it is in their nature to constantly innovate though they may not recognise it as dealing with disruption. The entrepreneurial drive is simply part of their business DNA. However, new strategies will require investment. Undeterred by the prospect of the cost of borrowing rising, bank lending and credit lines continue to be the preferred source of funding, followed by internal resources.
There is also evidence that family businesses are starting to look elsewhere, with nearly a quarter now considering bringing in private equity. An attractive choice for those businesses looking to professionalise and grow. Private equity offers more than money: helping to improve governance and procedures, adding a more challenging board member, expanding the network, and helping the business prepare for succession.
“We are not scared of looking at new things.”
Until recently the innovation focus for many family businesses has been to improve their processes, to achieve efficiencies within the business, and better meet their customers needs. Conversations with family businesses for this survey suggest that this is changing.
Family businesses realise they need to adapt to new sources of disruption from emerging technologies through to societal trends around well-being and the environment. All linked, these are shifting the attention to how family businesses evolve their products, inspire their people, and rethink their channels to market. Given that many successful family businesses are already agile and able to make decisions quickly, this may feel more of an adjustment than a wholesale change.
“Our view is, no matter how good you think you are, there is something out there that is better, so keep going.”
It is in the nature of HMG Paints to develop new products. Their value of being secure, inherited from their founder, has meant they never rely on one market, for example, looking through the top 10 products sold today, not one product in the top 10 now, was there five years ago. They compete in a tough market dominated by two large corporates. It is HMG Paints appetite to keep innovating and create the next generation of coatings which has helped them build strong relationships with some of the world’s most exclusive companies. As they told us, ‘if you are not constantly thinking what’s the next thing, then somebody else will think of it and leap ahead of you.’
“We’ve got a lot of potential competitors looming, who are going to be very much more efficient than us from a supply chain perspective. We’ve got to be aware they are coming and we have to compete with them.”
Stephensons are facing new market entrants from the giant logistics companies to niche suppliers. Their response is to stay close to their customers and update their services for the digital age. One area they are investing in is data mining to help their customers better manage their costs, analysing spend and using their product knowledge to identify savings. They are also in the process of relaunching their website to include live chat so customers can get advice anytime and improve the efficiency of their deliveries for customers.
Wyke Farms have been making cheddar in Somerset for over 400 years. In the 1990s they started looking beyond the UK market overseas to France because of the consolidation in their domestic market. Today they are looking further afield to the growing affluent populations in India and China who place a premium on UK products.
"As a principle anything that we can recycle and send back we like, and the architects particularly like it. They come back because they like the sustainable aspect very much."
Lignacite have been producing concrete masonry blocks successfully for 50 years. When Giles’s grandfather sold the blocks he would demonstrate their versatility in construction by knocking in a nail and cutting one in half. Today the inclusion of wood shavings attracts customers because of the amount of carbon a block can lock up. LJ Fairburn are very aware of the value of the environmental story they can tell about their product. Their holistic approach to agriculture and farming means grain grown in the area is being fed directly back to the hens. Good for the farmer and supermarkets love it; it helps safeguard every part of the supply chain.
Family businesses with a clear purpose and set of values in daily use, a strategic mid term plan, a strategy for a digital age and a diverse portfolio are well placed to respond to disruption in their market. Their passion for the business and constant need to innovate giving them the competitive edge.
“Innovation, that can be product innovation, but it can also be manufacturing innovation; investment in people, health, safety, and wellbeing. Do we think we are doing enough for that? That’s down to me, and we will be doing more in the future. I think with sustainability and innovation, we are already ahead of the pack in the industry. I see no reason why that should hold us back though.”