In October 2022, the MIT Sloan School of Management hosted the Family Firm’s Institute’s annual conference for its global members who are professional family enterprise advisors and academics. The four-day event was chaired by Dr. John A. Davis, a Senior Lecturer at MIT, where he leads family enterprise programs and courses. Davis is a globally recognized pioneer and authority on issues related to family enterprise, family wealth, and family offices.
In his opening keynote, Davis spoke to the FFI conference’s central theme for 2022 ̶ Family Enterprise and the Fourth Economy: Internal and External Pressures to Change and Adapt.
Davis began with an existential question: “What is the future of family enterprise?” Offering a high-altitude view of the disruptive forces at play in today’s world, he issued a call to action for enterprising families, to develop the new mindsets, strategies and capabilities required for multigenerational success in turbulent times. He also asked, “Are you ready for your role in this new era?”
The New Turbulent World and Family Enterprise
Families and their enterprises have always needed to adapt to changing times, but the nature of change itself has changed, Davis observed. “In today’s complex and hyper-connected world, the pace of change has accelerated, and the future has become far less predictable.”
Davis has been tracking global forces of change and disruption, and analyzing their impact on society, business, and families for several years. He offered examples of the cascading effects of four global forces of change and disruption, and also described internal change drivers impacting family enterprise.
Four External Change Drivers
On the environmental front, Davis pointed to the impact of climate change and other disruptions, not only on a family’s companies, but also on their employees, stakeholders, investments, and decisions about where families will live, operate their businesses, and build their communities. “We are at a tipping point and must take action,” he warned.
Davis also stressed the importance of paying close attention to technological advances. “Digital business is a requirement,” he said. He urged owners to champion technological change, and advised family enterprises to tap into “watering holes” of technological innovation and be disruptors themselves.
Geopolitics and (de)globalization are another powerful force for change. Davis predicted that globalization will decline, in part due to growing trade restrictions, but emphasized that international networking and collaboration will remain critical, for family enterprise access to knowledge, talent and resources.
A variety of socio-political-economic factors are converging on family enterprises and families, including increased societal and political tensions, and mounting pressure to address ESG (environmental, social, governance) issues. “Enterprising families must be more forceful and more public about their actions,” Davis advised.
Internal Change Drivers
Family demographic shifts also are creating pressures to change and adapt. “More diverse family structures, reduced hierarchy and increased egalitarianism, greater geographic dispersion, greater diversity of family members, and an emphasis on individual interests are impacting family and family enterprise dynamics,” Davis observed.
A New Model for Family Enterprise Success
The changing landscape requires that owners redefine what it means to be good stewards of the family enterprise. Having an owner’s mindset today means building a future-oriented and agile family enterprise. “The traditional view of stewardship as caretaking and passing on the family’s legacy company is ill-suited to today’s world. Growing multiple kinds of value, according to the family’s values, in each generation, is the new model of family enterprise success.”
Are enterprising families ready to change?
Davis’ recent global survey suggests that the answer to that question is, No.[1] Family enterprise respondents recognize the need to change to adapt to turbulent times, but do not feel ready for it. “It’s a worrisome gap for families aspiring to multigenerational success. Families need to take an outside-in and inside-out look at their family enterprises, become learning organizations, and plan for the future.”
Learn More During MIT’s Future Family Enterprise Program
Join Professor Davis on the MIT Campus for Future Family Enterprise: Sustaining Multigenerational Success. This weeklong program invites multigenerational family teams to join other enterprising families, to become future ready. In addition to interactive classes led by MIT faculty and exchanges with global families, each family has daily, private, facilitated discussions with a family enterprise advisor. Each family leaves the program with a customized road map for addressing their challenges and navigating their next steps, confidently ready to create their future.
[1] The survey was part of the research conducted for a white paper authored by Cambridge Institute for Family Enterprise, The Future of Family Enterprise: Turbulence and Transformation in the 2020s, sponsored by Citi Private Bank.