Digital and politics main issues for ‘next gen’ family business owners - PwC

According to new global research by PwC entitled, Great Expectations: The next generation of familybusiness leaders, the next generation of family business leaders – or ‘next gens’ - are well prepared, confident and ambitious, yet see some significant challenges ahead.

More than 250 next gens were interviewed from 31 countries, including Scotland, with 88 per cent of those surveyed wanting to do something special with the business, not just bigger but more international, more diversified and more modern. 60 per cent say they will take the business into new geographical markets and almost 70 per cent intend to bring in experienced non-family managers to help modernise and professionalise the workplace.

Thomas Clark, private business director at PwC Scotland, said: “It’s a challenging time for all age groups in the generational divide of businesses. On the one hand we are seeing the existing and established generations wanting to ensure strong continuity and service of growth as part of their legacies while others want to remain in control of their businesses for a longer period.

“All of this can be frustrating for the younger generation coming through. The ‘next gen’ leaders want to be more than just caretakers, they want to make their mark, to move the family business forward and diversify.

“Exploring new ideas, new products and even new business models in response to the challenges of the digital era – something that can seem perplexing to the older generations, many of whom are not as adept at dealing with the rapid change of business and customer engagement.

“At the same time they are experiencing more challenges - both inside the business and in the wider business landscape.”

It’s clear from the survey findings that there is more focus on how to prepare for senior roles and create the right career path – 70 per cent of next gens have worked outside the family business to gain experience. They have a deeper and more nuanced understanding of what running the family business is going to mean in the coming years and are equipping themselves with the skills to help take the business forward and are not afraid to bring in outside help to do this.

Many next gens struggle to convince their parents that the firm needs to do more on digital. Only 41 per cent believe their firm has a strategy fit for the digital world and 29% believe family businesses are slower than other types of business to keep up with new technology. Only half has ever discussed the threat of digital disruption at board level.

Mr Clark, added: “Digital is an obvious area where a generation gap still lingers. Technology and digital adoption are recognised as key components of a successful business in the future and yet can be an area of resistance with the currentgeneration.

“Scotland now has a number of businesses working well with digital strategies but the younger generations are often telling us that they find it a challenge to convince those currently in power of the need to adapt and havedigital – from online marketing and selling to cybersecurity – taken as seriously as other parts of the business. In fact, this is a challenge that many businesses in the wider business landscape are also grappling with. Wherebusinesses embrace digital and do it well, it can be a real game changer.”

Despite their growing confidence and clear ideas of where they want to take the business, these next gens still experience a strong ‘pull from the past’. Their aim is for a revolution, but for now it’s more of an evolution – at best. 40 per cent confess to some degree of frustration in trying to get new ideas accepted by the current generation and 52 per cent worry they will need to spend more time managing family politics.

Whilst family businesses can and do reinvent themselves, not all of them manage to adapt quickly, and there can be tension between respecting the processes (and the products) of the past, and seizing the opportunities the nextgeneration see for the future. For instance, 59 per cent of next gens would like to diversify their product portfolio, but 68 per cent believe their business is unlikely to make this change, even a decade ahead.

Succession is still a worry for those taking over a family business. Unknowns such as how the current generation will adapt or how the next generation will measure up are still a major factor. 61 per cent believe that it will be difficult for the current generation to fully let go when they hand over the reins – the sticky baton syndrome.