Bridging Tradition & Tomorrow: Empowering the Rising Gen in Family Business
Family businesses face a unique challenge: balancing tradition with innovation to remain relevant in a changing world. Only 30% of family businesses make it to the second generation, 12% to the third, and just 3% to the fourth. Many struggle to survive due to resistance to change, leadership transitions, and the challenge of staying current with market trends and technology. This reality underscores the importance of adaptability. Yet those that embrace new trends, technology, and shifting market demands can unlock remarkable opportunities. For family businesses, sustaining growth and relevance often requires strategic expansion—whether through acquisitions or launching new ventures.
One example is Ferrero, the family-owned confectionery giant behind Nutella and Ferrero Rocher. Each generation of the Ferrero family has built on the previous one’s success rather than resting on G1’s laurels. Founded in Italy by Pietro Ferrero, the company flourished under his son Michele and later expanded significantly under third-generation leader Giovanni Ferrero. Giovanni spearheaded an expansion beyond chocolate, acquiring brands like Nestlé’s U.S. candy division—demonstrating how strategic diversification fuels longevity.
Successfully launching new ventures or pursuing strategic acquisitions requires leveraging family resources, encouraging the next generation, and diversifying wisely. By adopting these strategies, family businesses can remain competitive, expand their influence, and sustain growth across generations.
Branding
A strong, well-established brand provides instant credibility to new ventures, making it easier to gain customer trust and market acceptance. Family businesses can leverage their existing reputation, infrastructure, and financial resources to reduce risk.
Hermès exemplifies this approach. A chance encounter between British actress Jane Birkin and then-Executive Chairman Jean-Louis Dumas led to the creation of the iconic Birkin bag. Hermès’ established brand and existing relationships with suppliers, distributors, and customers created a network that helped drive the bag’s success.
Additionally, Hermès benefited from shared resources such as manufacturing facilities, logistics, and administrative support, lowering operational costs. However, to maintain brand integrity, careful market positioning and strategic oversight were essential.
Family Governance for Branding and Expansion: To ensure new ventures align with the family’s core values, businesses can establish Brand Oversight Committees—dedicated groups of family and non-family members who evaluate new ventures against the family’s brand identity. External industry perspectives can also prevent misalignments. Formal approval processes for market expansion should be incorporated into family constitutions and governance policies.
By implementing these governance structures, family businesses can expand strategically without risking brand dilution or inconsistency.
Next Generation Development
Engaging the next generation in business development is critical for maintaining continuity and fostering innovation. Younger family members bring fresh perspectives, tech savviness, and insights into emerging market trends. Establishing an internal incubator or innovation lab provides structured opportunities for younger members to test new ideas in a controlled environment.
The Mulliez family of France, owners of 130 brands including Auchan supermarkets and Decathlon sporting goods, fosters entrepreneurship across five generations. They provide internal support and seed funding, encouraging family members to create new businesses within the family holding company or invest in external startups. This structured approach has resulted in a diverse portfolio and sustained growth.
Mentorship from experienced family members bridges the gap between tradition and modern entrepreneurship, ensuring new ventures align with family values. Generations within the Mulliez family have partnered to build businesses in industries such as home décor, fashion, restaurants, and equipment rentals. Their process for formally proposing new business ideas ensures smooth transitions of knowledge and responsibility over time.
By integrating mentorship, development programs, and incubation opportunities into formal governance structures, family businesses can ensure that new ventures align with their strategic vision while allowing younger members to contribute meaningfully.
Complementary Industries
Expanding into complementary industries is an effective way to grow while mitigating risk. Rather than venturing into unfamiliar sectors, businesses can leverage existing expertise and infrastructure to move into adjacent markets. Vertical integration—such as expanding from manufacturing into direct-to-consumer retail—can enhance supply chain control and improve margins.
DL1961, a family-owned premium denim brand, illustrates this approach. Faisal and Maliha Ahmed expanded their wholesale denim business, ADM Denim, into high-quality, sustainability-focused fashion with DL1961. Their ability to oversee the full production process, from fiber to finished garment, sets them apart. Two of their three children have led the company, with their daughter Sarah first developing her own sustainable denim brand, Warp + Weft, before joining DL1961.
Market research is crucial in identifying opportunities that align with a business’s existing strengths and customer base. Formalized approval processes for pilot projects allow new businesses to launch as trial initiatives before scaling up. Diversification into related industries also helps businesses remain resilient during economic downturns by reducing dependency on a single market segment.
Parallel Entrepreneurship
A parallel entrepreneurship model—where different branches of the family manage separate businesses under a shared governance structure—enables growth while minimizing internal conflicts. This approach encourages innovation without jeopardizing core stability.
One famous example of this is the Arnault family and the LVMH empire. Each of Bernard Arnault’s five children were given management positions in separate areas of the LVMH portfolio so each of them could develop without overlapping one another’s authority. Arnault holds a monthly lunch meeting with all his children where they discuss strategy. This allows the Arnault family members to still collaborate on strategic initiatives, supply chain efficiencies, and knowledge sharing. The Arnault approach helps maintain harmony in multi-generational families by allowing different members to pursue entrepreneurial ambitions while upholding collective financial interests.
Family Governance for Parallel Entrepreneurship: To maintain harmony and strategic alignment, family businesses can implement Family Councils to ensure ventures align with shared values. Like LVMH, they can hold regular strategic meetings to promote collaboration and prevent overlapping efforts. Most importantly, they should create legal structures that grant each venture operational independence while preserving collective financial interests. These structures help multi-generational families, like the Arnaults, support independent business growth while maintaining unity.
Roadblocks to Consider
While family businesses possess unique strengths, launching a new venture comes with challenges. Addressing these potential roadblocks improves the chances of success:
- Generational Conflicts: Senior and next-generation family members may have differing visions. Older generations often prioritize stability and legacy, while younger members push for innovation. Without clear communication and alignment, decision-making can stall.
- Financial Risk: New ventures require significant capital, and family businesses often rely on internal funding rather than external investors. This can strain existing resources, especially if the core business faces market challenges.
- Brand Dilution: Expanding into new industries or launching new products under the family name carries risks. If a venture fails or misaligns with core values, it can harm the family business’s reputation.
While the path to successful new ventures is complex, family businesses that balance tradition with innovation are better positioned to thrive. By leveraging existing assets, encouraging entrepreneurial thinking, and investing in governance frameworks that support growth, multi-generational businesses can remain relevant and resilient for generations to come. By embracing these strategies, family enterprises can position themselves for success in an ever-changing marketplace.
—–
Madeline Tolsdorf collaborated in the writing of this article.
Want more content? Check out Wingspan Insights.
