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Sunday, 17 May 2015 17:32

Family-owned businesses ripe to drive innovation, but challenges remain

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Seth Starner, the president of the Holland-based NewNorth Center for Design in Business Seth Starner, the president of the Holland-based NewNorth Center for Design in Business PHOTO: JOE BOOMGAARD

While large public corporations have the budgets and the reputations for being innovators, they may not be in the best position to focus on transformational innovations.

The reason: The average lifespan of a corporate innovation initiative lasts only 18 months, making it difficult to bring transformational change to an organization that’s stuck in a cycle of quarterly financial results.

That’s why Seth Starner, the president of the Holland-based NewNorth Center for Design in Business, thinks family-owned businesses, especially those in the revenue range of $10 million to $50 million, are uniquely positioned to do innovation well. Starner works closely with companies from a wide swath of industries in West Michigan and beyond, but he’s currently focused helping drive innovation for family-owned businesses.

While they certainly face challenges in moving ideas to market, they have more freedom to explore innovation at a transformational level because they approach business with a more long-term perspective, one not as closely tied to quarterly financial performance.

“Here are people who are committed to their employees, but also willing to take a longer-term view,” Starner said of family-owned businesses. “If you have that mindset, then you have the right mindset for innovation. It takes longer. You don’t quite get it right the first time. In fact, you’ll probably get it wrong the first three times. But ideally, they have the patience to see it through.”

The study of family-owned businesses has elevated in recent years in academic circles, according to Dr. Joseph Horak, director of the Grand Rapids-based Family-Owned Business Institute (FOBI) at the Seidman College of Business at Grand Valley State University.

Common traits found in family businesses include a tendency to be more risk-averse and more loyal to employees, particularly during times of economic uncertainty. However, these trends tend to make family businesses less likely to invest in what can be expensive and time-consuming innovation endeavors, sources said.

Starner will be speaking at FOBI’s annual summit on Thursday, May 21 at the L. William Seidman Center on GVSU’s Pew Campus in downtown Grand Rapids. Horak will also be on a panel at the same event, which begins at 7:30 a.m.

For his part, Starner will focus his talk on how family-owned businesses can be some of the best tackle innovating if they choose to undertake the process.

“With a lot of smaller companies we work with, they have the right structure to be very successful,” Starner said.

But family-owned businesses also face their share of difficulties when it comes to fostering transformational innovation, Starner said. To start, owners of family-owned businesses must manage the constant challenge of keeping family culture and traditions in place while adapting to the needs of the modern marketplace.

Also, companies also have to look at exactly how they plan to innovate and what needs they have in terms of innovation, Starner said. Oftentimes, a team can come up with an innovative product, but the organization may need assistance in identifying other market segments where its “core strengths” can be applied, he added.

That was the case with one Southeast Michigan-based metal company that NewNorth worked with as it looked to diversify its out of the automotive industry.

“Their focus was all automotive,” Starner said. “Yet those abilities, those core strengths, can be used in a whole host of ways outside of automotive. They needed help thinking laterally: What new market spaces exist for those core strengths?”

In some instances, innovation can be even simpler than that.

When Holland-based powder-coater Techno-Coat Inc. needed some quick solutions to a handful of communication issues, President Ross Vande Wegge deployed some of the strategies he learned during one of NewNorth’s 30-week programs. To facilitate better communication, he simply encouraged his 160 employees to place ideas anonymously on Post-It notes on a whiteboard in the company’s office.

“It created some open dialogue … and simple visual communication,” Vande Wegge said. “There are a lot of different layers to innovation, from how you engage your employees or engage your customers.”

Additionally, Starner thinks that the word “innovation” has been overused and has lost too much of its meaning. Now’s the right time to redefine what innovation means within the context of West Michigan’s important family-owned business sector, he added.

“Innovation is not radical destruction, or it doesn’t have to be,” Starner said. “For less-digital, more tangible things, I think there’s still the opportunity to do (innovation) on a more gradual pace. If you have the family-owned perspective and the time that you’re willing to take to invest and take some smaller risks, then the opportunities, I think, are much larger for growth.”

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