Family businesses, the spine of the global economy, face a critical decision: adopt the transformative power of generative AI or risk sinking behind.
PwC’s Global NextGen Survey 2024 survey reveals a fascinating generational divide on this issue. While over 70% of NextGen (future heirs) believe AI is a game-changer, they are concerned about their companies’ preparedness. This concern stems from a perceived need for more enthusiasm and understanding from the current generation of leadership.
This gap highlights the inherent challenges family businesses face regarding innovation. Unlike publicly traded companies pressured by shareholders, family businesses prioritize stability and long-term planning.
While Generating AI has immense potential, it requires a long-term commitment with an uncertain payoff. This creates a hesitant environment in which companies need clarification on the best approach. However, the stakes are high. Generative AI offers many benefits, including faster product development, improved decision-making, and higher profits.
According to Scott Likens (PwC US), AI can “unlock a range of opportunities, including improved products and services, faster time to market, improved decision-making, and higher profits.”
The pressure is particularly acute considering the sheer economic might of family businesses. They contribute an estimated 70% of global GDP and employ 60% of the workforce. Therefore, their success in navigating the AI revolution will impact not just individual companies but the entire economic landscape.
NextGen: A Force for Change
This is where NextGen steps in. As inheritors of a massive wealth transfer, they have a unique responsibility to ensure their businesses responsibly integrate AI. The PwC survey suggests action is needed across three key areas: innovation, trust, and succession planning. And it can’t wait for the next generation to take the reins.
The transformation needs to begin now. NextGen’s enthusiasm for AI goes beyond mere optimism. They actively engage in areas like sustainability investment and R&D, showcasing a more forward-thinking approach. They recognize AI’s vast opportunities, potentially boosting efficiency, innovation, and profitability. However, they’re not blind to the challenges. They understand the potential impact of AI on the workforce and the need for upskilling.
Family businesses can leverage their unique perspective to drive innovation and secure long-term success by actively engaging NextGen in AI discussions. This collaboration isn’t just about respecting their future roles; it’s about harnessing their tech-savvy nature and openness to AI.
Challenges and Opportunities
While the potential benefits are undeniable, family businesses also face significant challenges in adopting generative AI.
- Limited Capital: Unlike publicly traded companies, family businesses often need more resources to invest in unproven technologies.
- Conservative Mindset: Stability and long-term planning are hallmarks of family businesses. Generative AI, with its uncertain payoff and long-term commitment, creates a hesitant environment.
Signs of Change:
However, there are signs that the investment landscape for family businesses is evolving.
- Healthy Growth: Despite their conservative nature, family businesses are experiencing strong growth, with 43% reporting double-digit sales increases (PwC Family Business Survey 2023). This financial strength could fuel investments in innovation.
- Private Equity Influx: There’s a growing openness to private equity (PE) investment. A PwC Germany study shows a dramatic rise in family businesses welcoming PE involvement: 90% in 2023 compared to 18% in 2011. PE firms can provide crucial capital and strategic expertise to navigate AI adoption.
The Path Forward
By embracing a balanced approach, family businesses can leverage AI’s potential without jeopardizing their core values. This might involve:
- Strategic Investment: Start small, focusing on areas where AI can provide a clear advantage.
- Upskilling Workforce: Invest in training current employees to ensure a smooth integration of AI into workflows.
- Engaging NextGen: Actively involve NextGen in AI discussions. Leverage their tech-savvy nature and fresh perspective.
- Building Expertise: Consider creating a dedicated AI team with specialists, not solely relying on IT.
Conclusion
Family businesses are at a crossroads. The traditional caution approach may serve them poorly in the face of disruptive technologies like generative AI. However, NextGen’s enthusiasm and forward-thinking vision offer a beacon of hope. By embracing collaboration, strategic investment, and a commitment to responsible innovation, family businesses can leverage AI to survive and thrive in the face of digital disruption. This transformation, led by a new generation of leaders, has the potential to reshape the future of family businesses and ensure their continued success for generations to come.
