Taking the family business digital
By TERENCE QUEK
The Business Times, 11 August 2023
IN A world driven by technological advancements and digital disruption, businesses are adapting to remain competitive. Family businesses, an important pillar of Singapore’s economy, are no exception. How can traditional enterprises based on personal relationships and trusted networks transition to a digital future and reap the benefits of digital transformation?
The 2023 Gartner Board of Directors Survey of global boards found that while 89 per cent of board directors say that digital business is now embedded in all business growth strategies, just 35 per cent of board directors report that they have achieved or are on track to achieving digital transformation goals.
Digital transformation refers to the integration of digital technologies into all aspects of a business, fundamentally changing how it operates and delivers value to customers. It is no longer enough to introduce new digital tools into parts of the company. Businesses need to move past digitisation and instead digitalise their entire operations to capture new digital business opportunities.
Family businesses in Singapore are lagging in digitalisation efforts, both in the region and around the world, according to a 2021 survey by PwC. Of more than 2,800 family businesses surveyed globally, 80 of which were Singaporean, only 29 per cent in Singapore were confident of their digital capabilities, as compared to 38 per cent globally and 33 per cent in the Asia-Pacific.
The same study found that the next generation has a greater role in 46 per cent of digitally strong businesses. They are also educated and equipped with the knowledge of how digitalisation brings greater business and wealth opportunities, as well as the ability to transform their companies.
Going digital entails leveraging digital tools and platforms to streamline processes, enhance operational efficiency and improve customer experiences. It requires a mindset shift and an organisation-wide effort to embrace new technologies and build a culture of innovation.
Going digital can start with some of the following steps.
First, establish a digital vision. Family businesses need to develop a clear view and plan for how they want to leverage digital technologies to achieve their goals.
Whether initiated by the board or management, the buy-in of the family owners is critical to ensure a common platform and set expectations. This involves setting specific objectives and identifying the areas where digital transformation can have the greatest impact.
Second, build digital capabilities. Developing digital capabilities will help family businesses effectively navigate the digital landscape. This may involve upskilling employees, hiring digital experts or partnering with technology providers. Boards need to keep abreast of new developments to ask management the right questions to ascertain and mitigate risks the firm may inadvertently be exposed to. Directors should be able to challenge and nudge management to be more ambitious and tap into opportunities created in the wake of digital transformation.
Third, enhance online presence. Establishing a strong online presence through websites, social media platforms and e-commerce portals allows family businesses to reach a wider audience and engage with customers in a more personalised manner.
As Mark Tan, second-generation CEO of geomancy consulting firm Way Fengshui Group found, this can lead to increased brand visibility, customer loyalty and, ultimately, business growth. Remote working platforms can also help the company tap on staff beyond Singapore’s borders, digitalise intellectual property and content, and develop technology to deliver its services and products.
Fourth, streamline operations with digital tools. Adopting digital tools can improve operational efficiency, automate processes and facilitate data-driven decision- making. Equipping staff with a means to capture customer information and insights can help the company improve customer service quality, capture important distribution insights and manage stock levels and inventory.
Way Fengshui Group saw its topline double with no compromise on margins. By digitalising and putting knowledge previously held by a select few into the system, the resources of the experts were freed up, allowing for greater scale and efficiency. The traditional high-touch and personality-dependent nature of family enterprises may present challenges in this digital journey. Hence, it is important for clear leadership roles to be established and to guide the transformation process.
The role of the board is to provide leadership and set strategic directions and goals, which should include an appropriate focus on value creation, innovation and sustainability. It should also establish and maintain a sound risk management framework to effectively monitor and manage risks and achieve an appropriate balance between risks and company performance.
In summary, boards should approach emerging technologies as a strategic imperative, not just an operational issue. At the same time, board leadership should collectively develop continuous technology-specific learning and development goals and realign board structure and composition to reflect the growing significance of technology as a driver of both growth and risk. Board members should insist on frequent and forward-looking reporting on technology-related initiatives and periodically assess the organisation’s leadership, talent and cultural readiness for technological change.
Co-creation is key between the board and management. For family firms, the transformation is not just about digital strategy but about challenging the fundamentals of the business.
The writer is the CEO of the Singapore Institute of Directors.