Fostering innovation in your family firm
Even if your family enterprise faces no immediate threat of disruption, innovation should be part of your strategic plan. Finding new lines of business can increase your customer base and provide revenue to counteract dormant cycles in the core business.
What can your company do to encourage innovation? Here are some suggestions:
• Teach your NextGens about responsible risk taking. Start by putting them in charge of a relatively low-risk project and allowing them to fail, if that’s what ends up happening. Be supportive and help them analyze what went wrong. This will give them confidence to continue taking risks that are necessary to succeed in business.
• Start a “family bank” to fund entrepreneurial ventures outside the family firm. Establishing a source of family funding that requires accountability (via a business plan, payment terms, etc.) will encourage entrepreneurship in a formal, professional way.
• Take advice from your non-family executives and independent directors. They know about opportunities and risks beyond the walls of your headquarters.
• Make innovation part of your strategic planning. Set aside time and space to brainstorm new ideas.
• Inform your family shareholders about what innovation entails. There will be start-up costs, and it will take time before a new venture pays off. Explain your rationale for green-lighting new projects.