Technological Disruptors to Asian Family Businesses

Family Business Succession and Industrial Revolution 4.0 (IR4.0)

In human history, remodelling brought by IR4.0, technological disruptors and coronavirus outbreak, family business succession is unparalleled. Even the business life cycle is getting shorter and shorter as things happen in life so drastically.

What is so special with IR4.0? It is the way things are changing so erratically. Nowadays, with the computing power of your smartphone, it can outsmart computers.

With the current situation all over the world, are family businesses doomed the way we understand it? If not, how should business owners prepare in order to sustain and avoid disruptive waves?

IR4.0 and Family Businesses

The issue on IR4.0 is very important especially to Asian family business owners since most Asians tend to value family unity using it as the glue to keep ties together.

How will the next generation be able to preserve the concept of traditional family businesses given today's generation is better-educated and tech-savvy?

Research Questions:

The research made by Professor King and Jeremy Cheng is “Where technological disruptors meet family businesses”. Below are some of the research guide questions.

• How should Asian family businesses prepare themselves in relation to technological disruption so as not to become “a thing of the past?
• How do Asian family businesses embrace technological disruption? What are the barriers?
• What can next-generation leaders do to tackle disruptive challenges?
• What is the impact of technological disruption on the next generation’s careers? How to prepare the next generation for a successful career in the disruptive era?

Research Methodology

The research was based on quantitative data from a survey of 119 rising-generation members from family businesses covering seven Asian markets.

Qualitative data came from interviews with three next-generation leaders from different countries, industries, and career trajectories [Eu Yan Sang (SG) - traditional chinese medicine; Metta (Thailand) - aluminum, tech, MFO; and LAC (Japan) - information security]

Asia’s Technological Disruption Landscape

There are 4 disruptive technologies on average having an economic impact on family businesses (Big Data, AI, IoT, Renewable energy and Robotics).

94.1% of family business surveyed have experienced or foreseen disruptive impact

Generation	Recognize a new disruptive technology	Devising a responsive strategy / plan to disruptive technology	Executing the response strategy / plan
GenY (1979 - 1991)	5-80 months	6-45 months	11-27 months
GenX (1964 - 1978)	11-54 months	12-36 months	16-56 months

Asia’s Disruptive Technology Landscape

Asian family businesses are moving from awareness to execution in their responses to technological disruption. They have yet to embrace deep transformation by integrating disruptive technology into their business models.

They lack aggressive and long-term resource commitment to manage technological disruption. Natural strength of long-term orientation should be refocused which allows reaping the benefit.

Asian family enterprises have demonstrated low dependence on resources from external capital manifesting clearly their concern about control being diluted. Major barriers include rigid mental models, emotional ties to their legacy business.

IR4.0 and Next-Generation Preference

The issue is heightened by the fact that the next generation are better educated and many of them do not want to go back to their family businesses especially those in sunset industries.

Our research showed that 70% of the next generation preferred to start their own ventures and want to be horses - Alibaba (Jack Ma) and Tencent (Pony Ma)

Next-generation Leadership in Tackling Disruptive Challenges

If there are takeaways for family enterprise owners and leaders from Professor King’s talk, is this:

• The family enterprise owners must hold a clearer vision of the role of technology in the business model;


• Selective adoption of technologies to keep the fundamental values of the family business;


• For really deep transformation, integrate disruptive technologies with the existing family enterprise business model, if appropriate.


• Break the control mentality;


• Bring in institutional investors, venture capital, or private equity;


• Establish a wider span of partnerships and alliances beyond their industry;


• Engage external advisors wisely.

The talk suggests remaining small and agile to explore and exploit opportunities as they arise. This can be achieved through corporate restructuring, use of family members to invest, or by creating spinoffs or start-ups.

Impact of Technological Disruption on Careers for the Next Generation

The next generation tends to “stay home” when they see their family businesses as capable of managing technological disruption. Highly capable next generation will however have higher career mobility. They may be frustrated by the conviction that they will not be able to bring any change to their family business and choose to “break free”

Results show a strong intention for the next generation to create their own venture. Families should grab opportunities to turn next-generation start-ups or spinoffs into disruptors and help the families build a new portfolio of businesses.

The next generation should know their own strengths, limitations, and aspirations. Even an exit is valid and valuable if well planned. Family business tenure should not be a life sentence.