The overwhelming majority of family businesses in Asia have experienced technological disruption, but less than half are ready to adapt to the advent of big data, artificial intelligence, the Internet of Things, renewable energy or robotics.
While more than 60% of families took steps to understand the nature of disruptive technologies, only one-third have developed a clear perspective on the future direction for their own industry, a new report by Lombard Odier found.
Some 12% did not take any action at all when facing technological disruptions, while less than 30% managed to embrace “deep transformation” by integrating disruptive technologies into their existing business models. Asian families took on average 28 months to identify and respond to disruptive technology.
The report Where Technological Disruptors Meet Asian Family Businesses: Rethinking Next-Generation Leadership and Career said 94% of family businesses in Asia have experienced or foresee impact from at least one technological disruption. The top five disruptors to Asian family businesses include big data (60%), artificial intelligence (52%), the Internet of Things or IoT (49%), renewable energy (42%), and robotics (40%).
Major barriers to Asian family businesses overcoming disruption included rigid mental models, emotional ties to loyal staff and existing assets, formalisation, and political resistance. Asian family businesses also showed low dependence on resources from external capital providers, indicating their concern about control dilution.
The report said families should rethink their control mentality. Families choosing to delicately balance control and resources may stand a better chance of exploiting opportunities presented by technological disruption.
In 2017, Campden Wealth in its Private & Confidential—The Cyber Security Report found 32% of global family offices surveyed experienced one or more cyber-attacks, with a significant proportion resulting in some form of loss, such as a loss in revenue, or loss of private and confidential information. Only half (52%) of family offices had a cyber security plan in place, leaving a large number of family offices exposed. Nearly a quarter (24%) of family offices reported that protecting against cyber-attacks was one of their key priorities last year although the Campden Wealth report noted that balance left a notable proportion of family offices vulnerable if an attack hit.
“Today’s owners of Asian family businesses need to open up, embrace technological disruptions and rethink their businesses,” said tech disruption report co-author Professor Roger King (pictured), of the Tanoto Center for Asian Family Business and Entrepreneurship Studies at the Hong Kong University of Science and Technology.
“Many Asian family businesses are still in the awareness stage and remain far from formulating competitive strategies to exploit opportunities fuelled by technological disruption. External advisers and investment can be valuable in this process, yet our findings showed that only one quarter of family businesses in Asia had engaged outside expertise to manage technological disruptions. Such entrenchment could be an expensive lesson to a family business facing abrupt environmental changes.”
Generation X members took longer to recognise disruptive technologies than their Generation Y relations. Families should actively consider strategies that capitalise of Generation Y’s digital diversities and absorb home-grown digital natives in their response to technological disruption, the report said.
However, families should be mindful of other potential generational differences. Generation Y and Z counterparts were far more motivated by the concept of “being my own boss” than their Generation X counterparts. Some 34% of the next generation wanted to lead or work in their family businesses while creating their own ventures.
Encouraging next generation members of the family business to create their own ventures that leverage disruptive technologies can lead to new revenue streams for the family, the report said.
Alternatively, even exiting the business to refocus on different areas was a valid and valuable option, if well planned, to counter disruptive forces.