The innovative power of the next generation in family businesses; what role does sustainability play?

In more and more family businesses, the children are succeeding the post-war generation and a new generation is taking over. This new generation has a different mindset than the older generation and has grown up in a different era, often more digital and with a different attitude to life and ‘work-life balance’ (see our blog on work-life balance in family businesses).

The older generation sometimes has more concerns about the future and associated risks than the new generation. These risks – if not due to previous experiences – are then assessed as high. As a result, the old generation sometimes tends to put a bit more faith in existing patterns and in how things have gone in the past. In other words, they may be more risk-averse. This can bite with a desire for innovation from new generations of the family business.

The dynamic between innovating change and still managing risk well is a difficult dilemma. Questions that arise are: What do we stand for as a company and as a family? Do we dare to use the innovative power of the next generation? How do we deal with the desire for sustainability in society and at the family business. (Source: Family Business Dinner 2022 / DekuyperConcepts / CliftonFinance / Wintertaling)

Renewal is a must

Especially after a period with the focus on the global pandemic, there is currently a lot of focus on renewal within the family business.

This renewal is often not only focused on the technical innovations of the company and production. It may also focus on a new market approach , a new form of communication or the loyalty of staff and end customers. Sustainability also plays an important role here for many companies.

A global survey in 2022 by PWC showed that while sustainability is a focus of attention, innovation in a broad sense is even higher among family businesses. The survey revealed that 44% of family businesses are engaged in innovation while ‘only’ 28% of family businesses worldwide are engaged in sustainability. In the Netherlands, the focus on sustainability could be even higher and innovation is also often combined with a greater focus on sustainability.

From our own practice, we know that in the Netherlands, sustainability is taken seriously at Dutch family businesses. Moreover, family businesses are less guided by external factors such as subsidies and legislation. The desire to invest sustainably stems from the fact that family businesses feel more responsible for the future generation, according to a study by RSM and Nijrenrode Business University. This focus on sustainability stems from a sense of duty, according to Roberto Flören of Nyenrode University.

A changing of the guard actually offers opportunities

As mentioned, the younger generation will often view issues such as renewal and innovation differently. New projects aimed at innovation and sustainability can be well supported by the younger generation of the family. This gets them involved in the family business on a subject they themselves are interested in and can also make a difference.

The FD of 25 April 2022 discusses the contradictions between old and new generation when it comes to sustainability and innovation. ‘ Especially the importance attached to sustainability often creates conflicts with the older generation’. ‘The older generation represented by the pater familias often determines what happens, rightly or wrongly’ it reads.

We do not recognise this situation so strongly. With many families, the sustainability agenda is actually an opportunity to involve the younger generation and give their input a face. Many innovations put sustainability first and kill two birds with one stone. A survey by the Landelijk Expertisecentrum Familiebedrijven (LEF) shows that family businesses actually score well on innovation. (Opportunities and bottlenecks in family business 2020; Ilse Matser and Judith van Helvert). The younger generation will also catch on to innovation and sustainability. They are aware that addressing these issues will partly affect their future and that of their children. They are also willing to make sacrifices when it comes to financial constraints or luxuries, or travel restrictions. This is caused by a greater awareness and willingness to start with yourself.

Generation Z and future prospects

We do understand that this effect will only become more evident in time. After all, it is precisely generation Z – the people in their twenties and thirties – that attaches great importance to sustainability and this generation does not yet have a real say in the board rooms of Dutch family businesses. Presumably, over a 10-year period, their influence will be greater and the effects of the sustainability calendar and innovations will be explicitly reflected in the policies of family businesses. In any case, this is a good future prospect that is so important especially for the younger generation.

By |2023-02-01T15:27:08+01:00February 1st, 2023|Blog|Comments Off on The innovative power of the next generation in family businesses; what role does sustainability play?

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