Taking the family business global

Moderated by Rick Badie

Typically, the term “family business” connotes mom ‘n pop-type operations with a few employees, slim profit margins and an inherent desire to keep operations simple. Our lead column implores such businesses — of all sizes — to capitalize on traits that can help them enter the global market and claim some of the international pie. A companion piece suggests that even innovative businesses have to earn the public’s trust. The third column notes the importance of including Millennials in discussions about our region’s future.

Globalize family businesses

By Torsten Pieper, Joe Astrachan

Family businesses are the prevailing form of business around the world. No other business produces and employs more people than family businesses. They give more to their communities, hire more, lay off less, have progressive employment practices and they do so regardless of the generation of ownership. And while their business would be worth something if sold, the typical family business owner cares far too much about their employees and communities to consider selling unless compelled to do so by banks, taxes, regulations, or other outside forces.

For all their strengths, U.S. family businesses tend to not be global in nature (less than 1% export), preferring the relative safety of a single political system, a single currency and a relatively homogeneous and business-friendly culture. But, maybe they should be more oriented to selling to consumers in other countries.

We say this because accepting and overcoming a challenge, such as internationalization, leads to vital growth and development. Difficulty requires discipline. Discipline is a critical factor that would enable businesses to continue to serve the interests of stakeholders.

A good example of this self-imposed discipline can be seen in the Mittelstand, mostly small-to-medium-sized firms in German-speaking countries, notably Germany, Austria and Switzerland. These family-owned businesses enjoy strong positions in foreign markets and account for 19 percent of total exports by German firms.

In the Atlanta region alone, more than 250 German firms call the United States their second home. Many of them belong to the Mittelstand, but they also include global players such as Porsche, also a family business.

One of their key attributes that allows them to pursue what business schools in the U.S. might teach as non-conventional strategies consists of the very fact that they are family owned. Such ownership adds a long-term perspective that goes beyond short-term profit maximization and leads to value creation that can take years to establish.

Furthermore, risk is carefully weighted against potential benefits, resulting in a generally more conservative financing structure (not surprisingly, many Mittelstand firms are 100 percent bank debt free). Less debt is also a challenge that requires discipline to overcome. There can be many benefits of low debt, particularly in coming out of a slowdown in the business cycle. While companies in most of the world were faced with repaying massive amounts of bailout money and debt, the German Mittelstand coped with relatively minor impairments thanks to conservative financing.

A second success factor is family businesses prefer centralized decision-making for financial and strategic decisions. This is not to imply that they operate autocratically. Input is embraced yet processed centrally to assure that decisions align with the business, family values and vision.

Values are typically shared by family and non-family employees and often extend to suppliers and customers. A climate of high internal trust enables the business to focus on the outside and most importantly its customers.

In international business, the characteristics of family businesses in terms of private ownership, conservative financing, centralized strategic decision-making and trusting relationships prove particularly useful. Hence, the decision to internationalize can be made quickly and decisively against the potential risks and corporate naysayers.

One additional point: Family relationships often facilitate new export relationships. Families like to do business with families. It provides reassurance to customers when owners representing their company maintain relationships.

While exporting is now a strategic choice and not at all a necessity, it will likely not always be so optional. Advancements in technology and communication, paired with greater permeability of national boundaries, make the world increasingly flatter.

Globalization is the new norm; and engaging in international trade will likely become, and already seems critical to, survival. Family businesses are best poised to take advantage of the opportunities presented by export and going global, and we believe they would be wise to pursue this strategy sooner than later.

Torsten Pieper and Joe Astrachan are Kennesaw State business professors affiliated with the school’s Cox Family Enterprise Center.

Earn rights to innovate

By Alicia Thompson, Steve Olson

Atlanta has gained recognition as the technology hub of the South. In fact, according to the city of Atlanta, the metropolitan area ranks 12th in the nation for tech startups. Established global brands including the Coca-Cola Co., Microsoft and most recently WorldPay, are investing in Atlanta’s entrepreneurs by building “innovation centers” to attract and retain them.

As world-class talent flocks to the city, our start-up and venture capital communities continue to grow. Companies are creating partnerships with our leading universities to develop research-based innovation. Atlanta is becoming one of the best cities in the country for innovators.

You might think, like Amazon.com CEO Jeff Bezos, that consumers welcome all this innovation. “New inventions and things that customers like,” he says, “are usually good for business.” While this sounds good on the surface, it’s partially true. National and international findings of the 2015 Edelman Trust Barometer reveal that the public regards business innovation warily. In the new era of skepticism, Bezos’ optimism does not ring true.

Consider the pace of bringing new products and services to market. While that pace has never been faster, the Trust Barometer found that, by a two-to-one margin, people feel it’s too fast. Consumers think companies don’t take enough time to vet and test new technologies. Even more alarming, the survey found more than half of the respondents believe greed, money and business growth goals are the real motivations behind innovation. That’s two times more than those who say business innovates in order to make the world a better place or to improve people’s lives.

The essential question for Atlanta companies dependent on new-product innovation is how can they increase trust and earn the right to innovate in the public’s eyes? To invent is no longer enough. Companies must forge a new compact with individuals and demonstrate that their innovations are safe and deliver societal and personal benefit. Eighty-one percent of those surveyed believe business can make a profit and improve society. Companies must also be transparent and demonstrate they are committed to protecting customer data.

In the world of the Internet, cloud and social media, there are no secrets. The information is out there and consumers will find it. Transparency fuels trust. Survey respondents indicated a desire for clear actions that increase trust in innovation. For instance, sharing the test results of new innovations builds trust. Smart companies will make those results available for review and garner outside validation. Partnering with credible third parties such as universities will also boost trust levels. Blended with consistent long-term efforts to communicate benefits and protect data, transparency creates long-term positive changes.

In the new era of skepticism, however, communicating with consumers and the public must change. When bringing a new innovation to market, you’ll need a more diverse array of spokespersons than just the CEO. The 2015 Trust Barometer revealed that only 43 percent of respondents trust the CEO; More than half don’t.

Whom do they trust?

Employees outside the leadership team, as well as technical experts, such as engineers, enjoy high levels of trust. So do employees who appear to be “a person like themselves.” Seventy-percent of respondents said they trust company employees.

Here’s the bottom line for business:

Knowledge and understanding beget trust. Atlanta-area businesses must lead rather than just operate. Building trust is essential to successfully bringing new products and services to market. Building trust in business innovations requires that companies demonstrate clear personal and societal benefits, behave with integrity and engage transparently with customers and stakeholders throughout the process.

Alicia Thompson is general manager of Edelman Atlanta. Steve Olson is executive director of the Georgia State University Center for Ethics and Corporate Responsibility.

Millennials help shape our future

By Brant Aden, Amol Naik

Sometime during 2015, the number of Americans in the age group called Millennials will exceed Baby Boomers. Millennials will shape the culture, form and success of our communities in a profound way.

They are the generation born from the late 1970s to the mid-1990s. The Pew Research Center declares them the most ethnically and racially diverse cohort in the nation’s history. They are better educated than any generation before them and have never known life outside the digital era.

For the Atlanta Regional Commission, the regional planning agency for the 10-county Atlanta region, it’s an imperative to engage residents in this 18-to-35 age group.

A couple of years ago through its New Voices initiative, ARC began engaging Millennials by conducting interviews and hosting community conversations with a broad cross-section throughout the Atlanta region. Our goals are to engage, listen and understand.

First, we hope to understand specifically how they are different from previous generations. Second, we want to hear what they want for metro Atlanta today and in the future. Last, we need to learn just how they would like to be involved in helping shape the region.

What we have learned so far is promising and somewhat concerning. This generation knows the language of smart growth – livable, walkable/bikeable, mixed-use communities. They want to live in places that reflect these traits, be it urban or suburban settings. They see transportation solutions, especially transit, as important drivers of where they will choose to live in the future. They are unencumbered by barriers or silos; in fact they see no reason for any OTP/ ITP comparisons.

However, this group, sometimes called “the microwave generation,” has more expectation for immediacy and responsiveness. Herein lies the concern: If Millennials don’t find what they want in metro Atlanta, now or in the near future, they will move to places that offer these qualities, whether they have a job or not. We have limited time to attract and retain these diverse, well-educated and committed leaders.

What we have learned so far from New Voices is just the beginning. Recently, we held the first gathering of ARC’s first Millennial Advisory Panel, a group of 135 leaders from the 10-county region. More than 300 Millennials applied to be a part of this panel; the response and interest has been overwhelming.

The charge of ARC’s Millennial Advisory Panel is two-fold. First, it’s to help ARC shape The Region’s Plan, the long-range regional plan to “Win the Future,” to be adopted in 2016. The panel will examine and provide ideas to build a world-class infrastructure, an innovation economy and healthy, livable communities. Their second charge is to bring other Millennials into these discussions.

If we want to thrive and grow as a region, we need Millennials to join many other voices at the policy and design table. Target destinations that create a sense of place, energy and opportunity for this generation will be the winning regions of the future.

Brant Aden and Amol Naik co-chair the Atlanta Regional Commission’s Millennial Advisory Panel.

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