Where innovation meets business
Patriarchs of family businesses and next-generation members discuss how innovation is key to moving forward, and the challenges in breaking barriers and embracing change
Family-run businesses have for long been - and continue to be - a major driver of the Indian economy. While some have survived generations and are still considered pillars of the industrial growth of India, some others have failed to sail through the test of times. This has happened either due to their inability to diversify or for not being foresighted enough. The second edition of the ET Family Business Forum - presented by NxtGen Datacenter Solutions and Cloud Technologies -- kicked off in Bangalore with the first roundtable discussion of the year with precisely this agenda in mind - to discuss 'Innovation and the Entrepreneurial Spirit' in family businesses. In other words, how essential it is for family businesses to embrace change and move ahead, and keep the entrepreneurial flame burning as newer generations come into the business.
The discussion began with views on the importance of the first-generation foundersto be open to innovation and diversification, and the freedom they must give to the next generation to implement changes. So, while in some families the generations have been able to put their heads together to take the company forward, some have stagnated, unable to iron out their differences.
In the case of Liberty Shoes, the biggest problem is to involve the growing number of family members in its core business. This has forced it to encourage entrepreneurship within the next generation. As Anupam Bansal, the company's MD, puts it, "It's a struggle for the gen-next start something on their own as it is easier to work in an already established set-up. But in a span of 8-10 years, the new businesses will strengthen their roots and some of them may succeed. This will give them a sense of ownership of their project and encourage risk-taking." On the other hand, Alok Gupta of Graphisads believed that more family members joining the business means more hands, which can help manage the organisation better.
Bansal also made clear that the next generation must not set up a competing business to its core shoes business. But others on the panel such as Ashvini Chopra of BCCL and Rajiv Khaitan of Khaitan & Co. disagreed, and felt that it was better to have competition from within the family than from outsiders.
It appeared that although most of the next generation members were more exposed and open to innovation, they were not really the decision-makers. This restricted their ability to bring about key changes. However, there is another side to it. The wisdom and experience of the older generation cannot be overlooked. They need to be convinced about the changes or innovation that the younger generation wants to implement.
The panel also felt that caution needs to be exercised about 'over diversification or innovation'. It's important to know whether the company needs to diversify and, if it does, at what pace. Sometimes, trying to achieve changes too fast can be fatal to the company. Parimal Merchant of SP Jain Institute of Global Management supported the theory: "If too much attention is paid to unnecessary diversification in terms of creating additional businesses and brands, when will our firms become global names?"
Most of the panellists agreed on technology becoming more and more crucial to their family businesses, just as in any other business. From law firms, to jewellery designing firms, to government-to-citizen businesses, all thrive on technology. Rajiv Khaitan of Khaitan & Co. gave insights about how advances in technology has revolutionised functioning of courts by simplifying processes.
Technology also got a thumbs-up from the realty sector when both T. Harshavardhan of Kumari Builders and Nibhrant Shah of Isprava explained how their companies thrived on it. These companies are not only embracing technological advancements but also concentrating on sustainability. So, while Kumari Builders used technology for better advertising of their products, Isprava is offering fully-automated homes with pre-emptive maintenance.
The discussion concluded on a thoughtful note about start-ups becoming crucial to pushing the growth of family-businesses wherein they may collaborate with each other for strategy linkage. One of the biggest examples of future associations cited was the Walmart-Flipkart deal, in which a family-run company took over a start-up and took the model globally. The panellists agreed that there was nothing wrong in family start-ups getting funded externally and trying to come and disrupt the businesses, or a family business funding it internally. They felt all of this would fuel economic development.
Handling Disagreements Between Generations
“In our case, the 3rd generation has completely taken over the business, and we try to be on the same page. Yes, there are differences. My brother really had to be convinced about our shift to the ERP system as he still believes in the old style of book-keeping but eventually he understood it's imperative to march ahead”.
— Chandramohan Pishe
“Differences among generations is not related to the size of the family, I know of families wherein even two members can't survive each other. In fact, a big reason why family businesses fail is because the concerned members can't see the future correctly and innovate to survive”.
— Rajiv Khaitan
“I have seen that most of the next generation members are more open to innovation and want to match up to global standards. But they are not really the decision-makers. So, though they are being encouraged by the actual promoters of the family business, the ability to influence the decisions still stays with the older generation”
— Shanti Mohan
“Business is never 'I'; it is always we, where different people complement each other differently. The word entrepreneurship challenges the older generation, which by the way has a lot of wisdom. So, if they are saying no, it means they are not convinced and not because they want to discourage you”.
— Piramal Merchant
"We are into advertising and in 1994 the business split, but everyone is still into advertising. We do have disagreements within us but it's all a healthy discussion. In fact every Sunday, the entire family comes together and holds a long discussion about the businesses”.
— Alok Gupta
Innovation in Family Businesses
“Innovation has a lot to do with how much the head of the family is open to changes. Even my father wasn't convinced about taking Cream centre pan-India, but now we are spread across 12 cities with 40 restaurants”.
— Alisha Shah
“It's actually the culture within the company that decides whether to ensure innovation or not, it's not really determined by the fact that it's family-led or not”.
— Ashvini Chopra
“We are encouraging the 3rd generation to do some out-of-the-box thinking either for expansion or working independently. We want them to innovate and have even made the family fund available to them”.
— Darshan Dave
“We were forced to innovate when the realty sector saw a slump. But it's crucial for the founder of any family-run business to give freedom and place trust on the second generation for the organisation to grow”.
— T. Harshvardhan
“Every family business should have a council of independent advisors who give perspective of what is happening around the world. Most family businesses are too focussed internally. They need to have a global outlook”.
— Vikram Doshi
Role of Technology in Innovation
“Technology, per se, is a tool for innovation; it's an enabler to evolve. Our very nature of business needs us to be absolutely in tune with the latest trends in technological advancements.We understand both the business of technology, and the technology of business”.
— Bhaskar Varma
“In a business like ours which deals with government-to-citizen services, technology plays a vital role. We have to constantly be in tune with latest technology and new products to stay ahead of competition”.
— Shikhar Aggarwal
“Right from designing to the delivery of the product, we are totally dependent on technology.If we plan to become a global brand, we certainly need to innovate, both in terms of technology and processes”.
— Darshan Dave
“Unlike the old players in the realty sector, we have a tech team in place and soon signing a deal with a company which will revolutionise the way homes are built. On the sales side, we are getting into fully-automated homes with pre-emptive maintenance”.
— Nibhrant Shah
“It is satisfying to see that we are generating employment, and we have very aggressive plans for the next five and ten years”.
- —Bhaskar Varma, Co-Founder, NxtGen Datacenter Solutions and Cloud Technologies
- —Anupam Bansal, MD, Liberty Shoes
- —Darshan Dave, Founder, Diosa Jewels
- —Alok Gupta, Director, Graphisads
-Vidhu Shekhar, Country Head, CFA Institute
“Our switch to the franchise model wherein we provide the expertise to run the brand made us expand so quickly without any external funding and still keeping it within the family”.
- —Alisha Shah, CEO & Director, Ice Cream Works
-Vikram Doshi Partner, KPMG India
“Diversification is crucial in family businesses. Competition must be encouraged within family members for overall growth of the business”.
- —Ashvini Chopra, Senior VP & Head-Family Office, BCCL
-T. Harshvardhan Director, Kumari Builders
“There is absolutely no need for younger generations to branch out from their family businesses when they have the opportunity to grow within the company and also make the company grow”.
-Shikhar Aggarwal, Joint MD, BLS International
“If somebody from the family business is told to try on his own, actually a lot of injustice is being done to him. There has to be a lot of handholding and cross-thinking, and that is the crux of the family business”.
-Parimal Merchant, Head of Family Business, SP Jain Institute of Global Management
“Family businesses have grown only by inducting professionals and empowering them. For instance, our firm, which was established in 1911 in Kolkata now has offices in Kolkata, Mumbai, Delhi and Bangalore with 700 professionals working together”.
-Rajiv Khaitan, Senior Partner, Khaitan & Co.
“We have no plans to diversify as such, but we want to focus on strengthening the core business. The fourth generation members - who are yet to join the business - talk about taking us global. And I don’t believe in discouraging because it’s their future “.
-Chandramohan Pishe, Senior Partner, PN Rao
“Most of the next generation members are more exposed and open to innovation, but they are not really the decision-makers. The ability to influence the decisions still stays with the older generation”.
-Shanti Mohan, Founder, Lets Venture
“I founded Isprava on my own though my father has been running multiple businesses and his greatest fear was that decay may set in with new generations joining. So, he always wanted us to do something on our own”.
-Nibhrant Shah, Founder, Isprava