Next-generation family business leaders recognise the opportunity of business ecosystems but do not yet know how to fully benefit, according to new Deloitte report

Large majority agreed that business ecosystems enabled their family business to innovate beyond its individual capabilities

To thrive in today’s dynamic, complex business ecosystems, many family-owned businesses will need to shift their mindset to take a more expansive view of the kinds of business relationships they can use to drive value, according to a new global study from the Deloitte Family Business Centre: Next-generation family businesses: Exploring business ecosystems.

The study showed that while most family-owned businesses view ecosystems as an opportunity for growth, a number of more-insular behaviours persist even among some organisations whose leaders view themselves as more open to collaboration.

Ecosystems offer opportunities for innovation

• A large majority (89 percent) of the 575 survey respondents from 52 countries worldwide agreed that business ecosystems enabled their organisation to innovate beyond its individual capabilities.
• Yet when asked about their actual participation in innovation projects, more than half (53 percent) said that they rarely or never partnered with other organisations during the past three years, pointing to a lingering reluctance among at least some family-owned businesses to engage with external parties.
• Further, 32 percent of the respondents said that their businesses would only work on new services and/or products with organisations with which they already had a long-standing relationship.

Commenting on the report from an Irish perspective, Daniel Murray, Deloitte Private Markets Leader said: “We have observed a lingering reluctance among some Irish businesses to engage with partnership arrangements with other organisations. Nevertheless Irish family businesses appear more willing than their international peers to partner with others on innovation. They are also more amenable to working with organisations with whom they do not have a current relationship.

“Businesses have always participated in relationships but today the number of participants is larger and the nature of the relationships can vary as digital technology and greater connectivity drive new ways to create value through networking, collaboration, and interdependence. The challenge for family businesses is learning how to participate in this rapidly changing business ecosystem while at the same time preserving their family identity and values.”

Acquisitions to access innovation

• Acquisitions were the most frequent type of business combination that respondents undertook over the last three years.
• When asked why they pursued business combinations, 30 percent of respondents cited “access to innovation” as a driver, making it the third-most-frequent reason given for undertaking a business combination.
• The study also found that family businesses place a high value on owning intellectual property (IP), with 63 percent of respondents saying that owning IP was “very” or “fairly” important to their organisation.

Outward-facing mindset required

• More than half of the survey respondents believed that they needed to change the approach of their business to collaboration, mergers and acquisitions (M&A), and alliances, either to some extent (53 percent) or substantially (17 percent).

Niall Glynn, Lead Partner for Deloitte Ireland Family Business commented: “Interestingly we know that Irish companies are considering acquisitions primarily as the means to enter new geographical markets. Efficiencies of scale and access to innovation appear to be less of a driver Therefore, there is an opportunity to increase the value that can be derived from this activity.”

“To fully exploit the opportunities presented by modern business ecosystems, next-generation family business leaders should consider adopting a flexible, outward-facing mindset that allows for variation in the types of relationships they pursue. This represents a sea change in attitude that many family business leaders themselves are aware must take place,” he concluded.