Mitzi Perdue

Entrepreneurs in the Family Business: Without Them, You’re at Risk!

Entrepreneurship is essential for a family business to thrive. According to Bobby Stover, EY Americas Family Office Leader, “A family business that doesn’t find new opportunities is a family business at risk.”

Family Businesses Must Adapt to Survive

As a market leader in advising and guiding family businesses, EY knows family businesses face unique challenges. For example:

• Their business model may be going the way of the buggy whip factories — or even print newspapers.
• Their financing model may no longer work. Today, medical devices cost so much to bring to market that a family-owned business may no longer be large enough to obtain financing on the scale necessary to compete with the giant publicly owned medical device companies.
• The function they provide may be replaced by software and automation. Accounting and financial services are examples of industries that face extraordinary technological disruptions.

Stover can cite countless other examples where businesses must seek new business models if they’re to survive. The challenge is maintaining the entrepreneurial spirit from one generation to the next.

EY’s NextGen Academy Incubates Entrepreneurs

To meet this need, 10 years ago EY founded the EY NextGen Academy. Groups of young people, 35 at a time and ages 18 through 35, get to spend a week learning about entrepreneurship with top business school professors.

The program meets once a year, and it starts with youngsters 18 to 22. In this group, participants answer the question, “What’s the biggest problem in your company?” They’re then asked to think of entrepreneurial solutions.

Stover is continuously surprised by how innovative and valuable their answers are. When he listens to these young people, it reminds him of how it was young people, often working in the family garage,  who started some of the biggest companies in the world today.

The next group is the 22- to 27-year-olds. “We let them know,” says Stover, “that while there are great innovators who just got it, like Tesla or Einstein, most people get to the best answers by going through many iterations and trials.”

Some impressive practical solutions emerge from these sessions. In one case, the professor urged all the students to take a problem and flip it on its head, imagining that the problem was actually an advantage.

One youngster’s family business was a meat packing plant that was plagued by the high cost of waste disposal.  Guided by his professor, the young man decided to look at the offal as a benefit.

In a highly impactful eureka moment, the young man suddenly realized that the nitrogen-rich waste products could be a perfect feedstock for a new business in fertilizers and fuel. As a result, he transformed an expensive disposal problem into what turned out to be a highly profitable sideline for the family business.

The third and final group in the EY NextGen Academy is the 27 to 35 age group. “This is where they have to think about all the stakeholders in the team,” says Stover.

“This cohort,” he continues, “gets to pretend that they are leading the company. Their assignment is to facilitate actions that take into account groups such as the company leadership, the family members who are working in the company, and family members who don’t work in the company.”

As Stover points out, “It’s a whole other dynamic, when you’re working to be entrepreneurial while having to take into account the stakeholders. At this point, they’re building on everything they’ve learned in the previous two sessions.”

Stover’s colleague Lauri Oinaala, EY Global Next Generation Leader, agrees that the program has a powerful cumulative effect. “EY NextGen Academy develops the knowledge of the next generation of leaders by connecting them with their global peers, leading entrepreneurs and family business leaders,” he says.

If you are a member of a family business and have family members who would benefit from these classes, visit http://www.ey-nextgen.com/ or contact Alexander.Seehaus@de.ey.com  for more information.

 

Mitzi Perdue is a professional public speaker, author and businesswoman. She is the widow of Frank Perdue and daughter of Ernest Henderson, cofounder of the Sheraton Hotel Chain. She started the family wine grape business, now one of the larger suppliers of wine grapes in California.