NZ family businesses face challenges in digital transition

Research indicates that family-owned businesses in New Zealand are struggling with IT transformation amidst digital pressures.

Sidharth Macherla, principal consultant at FOYI Consulting, commented on the unique environment of these enterprises, noting that "family-owned enterprises present a unique environment where personal relationships and professional roles often blur." He added, "While these elements foster loyalty and stability in an organisation, they can also lead to highly entrenched processes and resistance to technological change."

The PWC Family Business Surveys highlight the conflict within these businesses, with 35% focusing on enhancing digital capabilities over the next two years, contrasted by over 40% who feel at significant risk of digital disruption in the short to mid-term.

This hesitance towards change is exacerbated by several factors. Resistance to change is considerable, with long-serving employees and family members finding it difficult to move away from familiar, albeit inefficient, methods. In this regard, Macherla pointed out that this resistance "can significantly slow down or even halt necessary technological advancements."

The lack of expertise in data-driven decision-making also poses an issue, limiting businesses' capacity to forecast effectively and make informed decisions, potentially leaving them at a disadvantage. Without access to KPI dashboards that provide actionable insights, businesses often struggle in an increasingly data-driven marketplace.

The financial strain of IT transformation discourages many family-owned enterprises. High upfront costs demanded by external consultants for assessments make this a daunting investment for businesses operating with tight budgets. Describing the situation, Macherla noted this as a "'high-risk' approach," which acts as a deterrent to adopting necessary technological changes.

The clash between traditional consultancy approaches and the familial culture of these businesses is another hurdle. Such technology-centric methods, which ignore the cultural fabric of family businesses, frequently result in change resistance and failed implementations.

The complex dynamics of family roles within these businesses necessitate a tailored change management approach, an area where traditional consultants often fall short.

Macherla asserts the necessity of a people-centred approach to IT transformation in family businesses, explaining, "People are at the heart of every family business, therefore, they should be at the heart of the transformation process as well." He elaborated, "Any successful digital transformation strategy must begin with a thorough understanding of a business's goals, challenges, and vision for the future."

He added, "Technology should complement and enhance existing strengths, not disrupt them."

Macherla advised family-owned enterprises to align their IT transformations with business strategies, concentrate on employee involvement, improve existing processes, seek expert guidance tailored to family business dynamics, and start with manageable projects to build momentum for further change.

Highlighting a proven strategy, he shared, "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."

He concluded, "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."