Lessons from Sicilian Family Business Experts how to mainstream your niche market
Family business is driven by succession and long-term family traditions. Anderson and Reeb (2003) argue that family and business are centred on long-term survival. Family businesses try to keep control among family members throughout different generations via adoption of new technologies, introduction of new products/ services, and attraction of investors from non-family environment, which is in general a sign of innovativeness and maturity of family business ecosystems. The scientific literature analysis on family business is well- established. For instance, Goel and Jones (2016) examined the dynamics of entrepreneurial activities in family business while relying on Brockhaus (1994) (who argued that family business and entrepreneurship are linked together) or Chua, Chrisman and Sharma (1999) (who tackled ownership in family business via aspects, such as control, leadership, and management).
During one week (8th -15th October, 2017), GILE Experts together with entrepreneurs/ top managers from Lithuania (Finance and Accountancy Industry), Italy (Real Estate Agents) and Malta (Education Industry) explored the peculiarities of family business in Sicily, while focusing on factors, such as commercialization of service innovations, brand power, and development of creative and real estate industries. Apart from interactive Laužikas’ seminars, participants visited two Sicilian entrepreneurs and were involved in exploratory research on the Sicilian market, its cultural and social norms as well as main impacts on service innovations.
Based on the PwC family factor Global Family Business Survey (2014) with 2484 family business experts (key decision makers in companies with the turnover of USD$5m) in over 40 countries worldwide, 40% of family business experts emphasized the role of management techniques and professionalism as a driving force of family business; however, not all entrepreneurs had a well-established strategy: only 16% of family businesses had a succession plan or a clear exit strategy in place. GILE Experts (2017) add that family firms operate in a rather isolated market with a very limited number of external shareholders; thus, they might experience a stable but rather limited financial growth. It might be affected by lack of divergent thinking, limited creativity, low productivity, and inefficient innovation system. The innovation climate of family businesses often lacks many aspects, such as healthy competition among employees and creative leadership: family members do not always acknowledge and initiate innovative activities, while the knowledge diffusion process is not smooth. Internationalization might be another weakness of family businesses, particularly in terms of the percentage of employees of foreign origin. Family entrepreneurs need to embrace main market trends and globalization effects; however, cultural and social norms do not always encourage lifelong learning in family business.
Building large family networks or vast communities of clients/ customers, family values and business philosophy help raise brand awareness and maintain long-term sustainable growth. While building local community values, family businesses should include community members into innovation processes via participative marketing, events and social media instruments. Such position is supported by Franca Canzone (2017), one of the top managers of Sicily Property Management Brokers (http://www.sicilypropertybrokers.com ). According to Canzone (2017), social capital dimensions, such as social trust, co-operation, focus on consumer value proposition, service quality or respect and right attitude, keep clients/ customers satisfied and loyal. The expert argues that personal contact with clients is critical to better understand consumer behaviour patterns, clients’ expectations and needs in order to provide high quality service and to keep all clients relaxed and connected. Social media networks help build social trust and community spirit: “Within the company’s Facebook page clients have the opportunity to know each other better, to share their adventures and experience of living in their beautiful town; they now have their sub-community within the community of Caccamo”.
The expert admits that digital marketing contributes to faster turnover growth via the growing number of clients, renovations, leads, and higher conversion rates. Franca Calzone states that “social media has been very important for her clients and friends who are one big happy family; however, like in any family/ community there are some little inconveniences and challenges to spice the life up, which make the community stronger and happier”. Canzone (2017) emphasizes the role of internationalization on innovation culture of a company: “It is so rewarding to co-operate and spend time with people of different nationalities from all over the world, with clients of different social standards, from diverse educational and professional backgrounds; this is more than anyone could expect in a normal routine day; however, It is critical to immediately discuss challenges with members who do not understand family values and Sicilian cultural and social norms, which are inherited from the preceded generations and serve as a cumulative experience how to create and maintain strong family values for future generations”.
These are the main characteristics and trends of family business worldwide; however, we should take into consideration the context of a country, industry and family itself. Based on the Family Business Governance Handbook (2008), family-owned or controlled companies are the leading form of business entities in various regions (for instance, in Latin American countries). Governmental policies, programs and educational organizations should play a critical role in the dynamics of entrepreneurship, including family businesses (GEM, 2016/ 2017), and various global family business research projects, such as STEP (Transgenerational Entrepreneurship Project, part of Babson College’s Entrepreneurship Research Conference, USA), is a great example how to acknowledge the family business potential, the levels of intentions, attitude, aspirations, and expected value-added to various economies.
Therefore, to better understand new management approaches of family businesses in specific regions, such as Sicily, it is necessary to analyse factors at macro, meso and micro levels: geopolitical situation and social and cultural norms will have a significant impact on family businesses. According to the results of semi-structured expert interviews, conducted by the team of young researchers from Vilnius University Business School (Passarello et al., 2016), Sicilian entrepreneurs have many innovative ideas; however, governmental programs and finances do not encourage the entrepreneurship dynamics. Young researchers agree that Sicily has an inadequate supply of high quality education services, which negatively affects the social image of Sicilian entrepreneurs. The expert interviews show that the Sicilian business ecosystems lack a well-established R&D transfer system, while renewable energy business opportunities are not fully explored and used. GILE Experts (2017) explain this phenomenon by the lack of entrepreneurial education in Sicily at both, early stage and post-school education levels.
In 2008, the analysis of the family business guideline, prepared by International Finance Corporation (Family Business Governance Handbook, 2008) indicated the main advantages of business control among family members:
- Peace in the family throughout succeeding generations while keeping psychological business climate healthy
- Long-term strategic directions
- Mechanism of separating ownership, control and management (via empowerment, development of specific skills and knowledge, and motivation)
- Division of decision-making processes between Family Councils and Boards and Directors
- Specific social capital dimensions, related to the family environment and local community
- Conflicts of interests regarding dividends, earnings and equity between shareholders and family members
- Necessity to decentralize decision-making process and apply horizontal management style
- Innovation philosophy and ethical codes to avoid further misunderstandings.
The emphasized opposition between family management and ownership is also mentioned by Osunde (2017), who associated family business with dual roles (managers and owners) and characterized family firms as driven by risk mitigation, as they are very sensitive to uncertainty. Within such a volatile context, sound strategic decision-making process, including monitoring and risk management, is a key condition to success. Family business should not diminish the role of innovation culture and creativity enhancement systems, as these functions are critical for consumer value proposition and employee satisfaction. Therefore, GILE experts (2017) recommend family businesses combining the sales/ marketing strategy with innovation and human resource strategies: when sophisticated innovation-oriented consumer expectations are reached, top management, worklife and innovation processes inside the organization should not lag behind global trends.
This is a market pull rather than market push strategy of a niche business, focused on cultural and social norms of a local environment, driven by quality requirements from international clients/ customers, and the necessity to implement innovative marketing (including digital marketing) techniques in order to move a business from niche to mainstream. According to Franco Leone, Sicilian entrepreneur (Sicily Property Management Brokers, 2017; http://www.sicilypropertybrokers.com ), family businesses should have a clear strategy how to switch from cost leadership to differentiation focus and later on to differentiation leadership strategies via digital and networking marketing and service innovations.
GILE Experts rely on Carlock and Ward (2001) and recommend opening family business to new strategic horizons while gaining experience outside business, employing employees of foreign origin, finding new strategic partners from various industries with rich educational background, and enhancing creativity systems among family and community members. Sophisticated clients are full of new innovative ideas; thus, a smooth knowledge diffusion process among family and community members should be marked by larger number of commercialized innovative ideas, higher service quality as well as new exciting expansion opportunities.
- Anderson, R. C.; Reeb, D. M. (2003). Founding family ownership and firm performance: Evidence from the S&P 500. Journal of Finance, 58, 1301-1328.
- Brockhaus, R. H. (1994) Entrepreneurship and family business research: Comparisons, critique, and lessons. Entrepreneurship Theory and Practice, 19, 25-38.
- Carlock, R. S.; Ward, J. L. (2001) Strategic planning for the family business: parallel planning to unify the family and business, Palgrave; Available on Internet: http://www.untag-smd.ac.id/files/Perpustakaan_Digital_1/BUSINESS%20Strategic%20Planning%20for%20the%20Family%20Business.pdf.
- Chua, J. H.; Chrisman, J. J.; & Sharma, P. (1999). Defining the family business by behaviour. Entrepreneurship Theory and Practice, 23(4), 19-39.
- GEM (2016/ 2017) Global Report, available online: http://gemconsortium.org/report/49812
- Goel, S.; Jones, R. (2016) Entrepreneurial Exploration and Exploitation in Family Business: A Systematic Review and Future Directions, Family Business Review, Vol. 29(1) 94 –120, DOI: 10.1177/0894486515625541
- International Finance Corporation; OECD (2009) Practical Guide to Corporate Governance Experiences from the Latin American Companies Circle: Governance Challenges for Family-owned Businesses; available on internet: http://www.oecd.org/daf/ca/43653645.pdf
- Osunde, C. (2017) Family Businesses and its Impact on the Economy, Journal of Business & Financial Affairs, Volume 6- 1, 1-3, ISSN: 2167-0234, doi: 10.4172/2167-0234.1000251
- Passarello, D.; Salvo, G.; Coppa, S. (2016) A volcano ready to explode against the bureaucracy chains. Working Paper, Vilnius University Business School. Available upon request: email@example.com.
- PwC (2014) Up close and professional: the family factor Global Family Business Survey, available online: pwc.com