In today’s rapidly changing world, digital transformation is no longer an option for business families – it’s a necessity. By embracing technology and integrating it into all aspects of their operations, business families can improve efficiency, enhance their competitive edge, and ensure their long-term sustainability.
However, any transformation, never mind digital transformation, can be a complex and daunting process.
To help family businesses navigate the transformation journey successfully, two prominent family business leaders shared their journeys as part of a panel discussion at the recent KPMG Private Enterprise South Africa family business conference, in partnership with KZN Top Business and Cox Yeats Attorneys.
The panel discussion included the views of the chief executive officer (CEO) of a successful technology-enabled family business, alongside the views of the CEO of an agriculture focused family business which has embraced technology to enable its transformation, and its growth, globally.
We share below some of the key takeaways from the insightful panel discussion, including the Q&A discussion with the conference delegates (which included other prominent South African family businesses).
Start with a Business Transformation Needs Analysis
Before embarking on any digital transformation initiative, it is essential to conduct a thorough business transformation needs analysis. This will help to identify the specific areas where technology can make the biggest impact and to develop a roadmap for implementation.
For business families, it is imperative to perform the needs analysis for both the operating family business(es) and the family office, where there is a formal operating structure in place.
People and Technology are Interdependent
Digital transformation is not just about technology; it’s also about people. One needs to have the right people in place to implement and manage the digital transformation initiatives.
Employees need to be trained on how to use the new technologies that are being implemented. This training will help to ensure that the technology is effectively implemented, and the business is getting the most out of the investment.
For a multi-generational business family, the skills required to understand the transformative power of technology provides an opportunity for the strengths of the upcoming generation to be developed and embraced.
Embrace and Integrate Technology and Identify the Key Data Points
As has been proven, unfortunately to the demise of many businesses, digital transformation is not just a ‘plug-and-play’ solution. It’s about integrating those technologies into all aspects of the business, starting with the operations and decision-making processes and including key stakeholder relationships. This integration is enabled where there is a culture and environment where employees feel empowered to embrace change through innovative technologies.
Another key implementation risk is the need for data. Without data any digital transformation initiative is likely to fail. One needs to identify the key data points that will help to track progress and make informed decisions.
Finance Needs to be Part of the Decision-Making Process
Digital transformation can be expensive, so involving the finance team in the planning and decision-making process is important. They can help to assess the costs and benefits of different technologies and to make sure that the business is getting the most value for money.
This involvement is where the expectations of the family working outside the business need to be considered. The additional reinvestment into the family business should be appropriately communicated, specifically the impact on the dividends to be distributed to the family shareholders.
Manage Technology Risk
There are a number of risks associated with digital transformation, such as data breaches and cyberattacks. It is important to have a disaster mitigation/recovery plan in place, which includes a risk register, to manage these risks. For a business family these risks run across the family and the business, and the risk register should factor in all key stakeholders working with both the family and the business.
Continuous Review of the Transformation Strategy
Digital transformation is an ongoing process, so continuously reviewing the strategy and adjusting as needed is essential. This process will help to stay on track and to achieve the desired outcomes, with the long-term view most business families have.
Governance Underpins Successful Transformation
Good governance is essential for any business, but it is especially relevant for family businesses that are implementing their transformation strategy, enabled by technology. Strong governance processes, for the business, the family, and the owners, should help to ensure that the transformation decisions are made in a transparent and accountable manner.
The transformation journey should allow for the interests of all stakeholders (including the family and owners) to be understood and protected, while ensuring the long-term sustainability of the operating business(es). This transformation process includes the upcoming generation and reiterates the importance of the succession plan, to allow the business(es) to continue to grow and thrive for generations to come.
Concluding Remarks
For the family behind, and those that work with/for, a family business, we all know that each family business is unique due to the family dynamics. The insightful panel discussion and robust discussion with the delegates in the room confirmed that should these principles be followed family businesses can embrace technology to enhance the transformation of the business for long-term sustainability.
Embracing digital transformation is not just a technological shift but a mindset change that empowers family businesses and family offices to thrive in the ever-changing digital landscape and pass on a thriving legacy to future generations.
The value of attending the KPMG Family Business Conference in person cannot be underplayed as attendees were able to hear firsthand the stories and insights from the leaders of prominent family businesses, engage on pertinent questions, network with likeminded individuals from across the country and even secure business deals. This series of articles has been prepared to capture some of the key takeaways from each session at the conference.
We are Here to Help
In addition to providing you with the platform to learn and engage with other family businesses at the annual conference, KPMG Private Enterprise family business advisers understand that family dynamics can make it difficult to come to an agreement on the best strategy for growth.
There is not a one-size-fits-all answer, our advisers can help you explore all of your options and find the approach that is right for your business and the family.
Alan Barr - Head of Private Enterprise: alan.barr@kpmg.co.za
Creagh Sudding - Lead: Business Families: creagh.sudding@kpmg.co.za
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