Family-Owned Enterprises Struggling With IT Transformation Amid Digital Pressures

Research reveals that New Zealand family-owned businesses are at a crossroads, grappling with the challenge of modernising their operations while preserving their unique family dynamics. 

While Kiwi family-owned enterprises have long been celebrated for their resilience, deep industry knowledge, and strong connections with staff, clients and communities, they too often struggle with the demands of process change and IT transformation as family dynamics and digital imperatives collide.

“Family-owned enterprises present a unique environment where personal relationships and professional roles often blur,” says Sidharth Macherla, principal consultant at FOYI Consulting. “While these elements foster loyalty and stability in an organisation, they can also lead to highly entrenched processes and resistance to technological change.”

There is a growing body of research which highlights this complex interplay between long-standing business practices and the urgent need for technological advancement. Results from PWC’s Family Business Surveys show that, while 35% of family businesses are focused on improving their digital capability over the next two years, more than 40% actually feel at risk of digital disruption in the short to mid-term. 

This is understandable, says Macherla, as family-owned businesses face unique challenges in their digital transformation journey, including:

1. Resistance to Change: Long-serving employees, including family members, may struggle to adapt to new systems and data-driven decision-making processes. Familiar methods, even if inefficient, often feel safer than venturing into unknown territories like data analytics. This resistance can significantly slow down or even halt necessary technological advancements.
2. Lack of Expertise: Many family-owned businesses recognise the potential of data-driven decision-making but lack the tools and expertise to leverage their data effectively. Without meaningful KPI dashboards providing clear, actionable insights, these businesses frequently struggle with forecasting and proactive decision-making. This gap in expertise can leave family businesses at a competitive disadvantage in an increasingly data-driven market.
3. Justifying Expenditure: Large investments in data analysis and IT transformation can be challenging to justify, especially when external consultants demand significant upfront payments for initial assessments. For family businesses operating on tighter budgets, this 'high-risk' approach can be a significant deterrent to embracing necessary technological changes.
4. Misalignment of Technology and Culture: Traditional IT consultancies often fail to account for a family-focused organisation's unique culture, values, and interpersonal dynamics. This technology-centric approach too often neglects the crucial role that people and relationships play in these organisations, leading to change resistance, poor adoption rates, and ultimately, failed implementations.
5. Complex Family Dynamics: The intricate interplay of family relationships, roles, and long-standing ways of doing business requires a nuanced approach to change management that many traditional consultants struggle to provide. Understanding and navigating these dynamics is crucial for successful IT transformation in family businesses.

Macherla emphasises the importance of a people-centric approach to IT transformation in family businesses. 

“People are at the heart of every family business, therefore, they should be at the heart of the transformation process as well.”

“Any successful digital transformation strategy must begin with a thorough understanding of a business’s goals, challenges, and vision for the future. Fundamentally, it’s about asking the right questions and developing the right people-centric strategy, which has to be done before bringing technology into the equation.”

“Technology should complement and enhance existing strengths, not disrupt them.”

Macherla recommends that family-owned businesses consider the following strategies when approaching their own IT transformation:

1. Prioritise Business Strategy: Ensure that any analytics or technology strategy aligns closely with overall business objectives. A robust analytics strategy cannot be built without a solid business strategy as its foundation.
2. Focus on People: Put employees at the heart of the transformation process, building consensus and addressing concerns at all levels of the organisation. This approach can help overcome resistance to change and improve adoption rates of new technologies.
3. Enhance Existing Processes: Identify areas where data analytics can complement and improve current operations, minimising disruption while maximising impact. This approach allows businesses to leverage their existing strengths while embracing new technologies.
4. Seek Specialised Expertise: Look for consultants or firms with experience in family business dynamics and a track record of successful IT transformations in similar environments. These specialists can provide valuable insights into navigating the unique challenges faced by family-owned enterprises.
5. Start Small: Consider beginning with smaller, quick-win projects that can demonstrate the value of data analytics and build enthusiasm for further digital transformation efforts. These initial successes can help justify larger investments in technology and data analytics.

“People are the key to IT transformation in any organisation,” says Macherla. “Change management in family-owned businesses should focus on building consensus, addressing concerns, and ensuring that everyone from the shop floor to the boardroom is on board with the changes.”

“FOYI accomplished this by taking a ‘90-Day-Quick-Win’ approach to IT transformation, demonstrating value immediately and ensuring that there is that crucial buy-in across the organisation.”

“IT Transformation can be intimidating, but by adopting this sort of strategic, people-centric approach, family businesses can fully leverage their unique strengths to commercial advantage—while better preparing themselves for their digital future.”

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