Growth Classics - Solving Various Business Problems - Family Businesses

Author: Howard M. Muson (USA)
Publisher:
Publish Date: 2006-05-01
Features: Significant market changes may threaten the survival of your company, but at the same time, this crisis is also an opportunity! Do you want to seize these opportunities? Six years ago, economist Joseph A. Schumpeter at Harvard University discovered that a long-term force was gradually and irresistibly changing the market, causing dramatic economic shifts. Schumpeter viewed this force as a creative destruction, which led to the emergence of new economic models, eliminated companies that could not adapt to these changes, and fostered the growth of those that could. This creative destruction might be related to changes in large consumer groups, such as the migration of people from rural areas to cities or the entry of a large number of women into factories. For example, the increase in global travel led to a change in demand for transportation capacity, which allowed companies that could provide cheaper and faster services—perhaps even those that had never existed in the market—into this field. This change might also prompt certain manufacturing companies to invest new funds to expand their scale, enabling them to defeat competitors and acquire smaller businesses. All businesses value these crises, but I believe that many family-owned enterprises have unique weaknesses when facing them. When confronted with long-term, strategic crises that require continuous adjustments in business operations, many family businesses fail to adopt effective strategies to adapt to new circumstances. Some of these businesses lack flexibility or have an incomplete or incorrect understanding of these threats. Others, due to negligence—either failing to prepare or ignoring the crisis—find that everything is too late once they realize its existence. When facing this existential threat, too many family businesses first think of finding a lifeboat or selling their company. Many family businesses have inherent weaknesses when dealing with these crises, but strangely, some family businesses have shown remarkable adaptability in the face of these challenges. To effectively address these threats, four essential conditions are required: capital, dedication, control, and culture. Perhaps the most indispensable condition is a strong corporate culture. In such a culture, from hired employees and general managers to family members and shareholders, everyone consciously adjusts and adapts to changing circumstances. For the CEO, there is also an intangible element: the desire to manage. For most family business leaders, especially the founders, this is the desire for success. However, few possess this desire to manage. In this article, I will not only analyze how family businesses can track and respond to the various crises that threaten them but also help them find new paths for growth. Seizing opportunities For the public, most people only see how Stew Leonard Dairy in Connecticut, USA, grew rapidly, but few know that Stew’s huge success came from a crisis, which he saw as an incredible opportunity. This crisis occurred in the late 1950s and early 1960s, when the dairy industry entered a period of transformation. At that time, the application of new technologies greatly changed milk production, affecting every aspect of the process: production methods, packaging, storage, and sales methods. Ten-gallon milk cans were replaced by tank trucks, and round bottles were replaced by one-gallon paper packaging. What is important is that the way customers purchased milk changed. Previously, milk was delivered to their doorsteps by delivery personnel, which increased the price. Now, to save household expenses, customers chose to buy milk themselves at large supermarkets or convenience stores. The dairy industry entered a highly competitive, price-driven, low-margin era. As the previously established sales channels gradually shrank, milk producers had to focus on how to survive. When the pressure was still not too great, Stew Leonard, a 38-year-old farmer, had to face another imminent crisis: according to the newly announced interstate highway plan, he discovered that the highway would cut through his farm, dividing it in half! His competitors hoped that the government would expropriate their land and compensate them for the losses, so they would not suffer too great a loss when exiting the market. However, Stew saw a huge business opportunity in the milk retail market. He planned to enter this new, revolutionary retail market, but he didn’t know: What business model was the best? Where could he get the capital needed to enter the market? He viewed the impending government expropriation of his land as an opportunity, an opportunity to turn land that was difficult to liquidate and old