In terms of the Family Business Act, a Family Business is defined as a business which is managed by at least two members within the same family, none of whom hold more than eighty percent of the issued share capital in the company. This definition in itself indicates that Family Businesses can range from micro businesses to large successful multinational companies.
Business growth is dependent on a diversity of elements, some of them beyond the control of the family behind the business. One of these elements is the evolving ecosystem in which SMEs operate. This has far-reaching effects on the typical family business and whether it will grow and thrive depends very much on the ability of the business to adapt to technological changes, innovation, and the changes in demand of consumers.
The digitalisation, or digital transformation, of our economy is one of the key challenges faced by many family businesses today and changes in technology require that this transformation takes place rapidly and nimbly so that the business can remain ahead of its competition or, at least, on a level playing field.
For family businesses, the transformation to digitalisation presents more hurdles than other businesses not involving family members, but it needs to be faced at some point in time.
Every family business has a number of static values and traditions which remain constant and never really change. A clear sense of values and purpose is generally an advantage, but it may also present difficulties because it is not always easy to find the right compromise between keeping these constants in place while seeking to quickly adapt to a rapidly-changing market.
Family businesses need to be open to a transformative culture which encompasses the ability to accept change and do something about it. New technologies have a disruptive impact that is transforming business and the world as we know it.Â Often, the new generation can help the family business adapt more rapidly and this is one of the main reasons why well-planned succession in family business is critical to the survival of the family business. A well-structured plan on how to pass the management of the family business to the next generation is crucial.
Family businesses also need to be open to the possibility of passing on the ownership and management of their family business to professionals, whether members of their family or even others outside the family. Being open to recruiting new talent from outside the family itself and to collaborating with third parties will help ensure that the family business is better equipped to face new realities.
Back in March of this year, when the Covid-19 pandemic showed up on Maltaâ€™s doorstep and the implementation of precautionary measures took place, many businesses started to realise that resting on oneâ€™s laurels is never an option in business. Taking a comfortable back-seat, simply because business is doing well, often results in the business having to struggle for survival when unexpected events occur and disrupt the economic environment it is used to. All businesses, including family businesses, need to be open to innovation and transformation which will help them adapt to new realities.
Over the past months many family businesses realised the importance of digital transformation and having an online presence, of resorting to e-commerce to give them access to a larger, global market, as well as the importance of re-skilling and creating alternative revenue streams, in many cases through the use of modern technologies.
Openness to transformation and adaptation is not a matter of choice. Whether digital, technological or a response to market demand, transformation is a necessity on which the very survival of the family business depends.Â