Family Businesses, Title Insurance New York

Guest Post: Factors Influencing Entrepreneurship and Innovation in Family Business

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Factors Influencing Entrepreneurship and Innovation in Family Business by Rick Raymond of The Family Business Leader

Entrepreneurship and its integral component, innovation, are of vital importance for family enterprises in adapting to today’s dynamic market environment. Increasing competitiveness, globalization and growing marketplace demands make developing an entrepreneurial culture an essential ingredient for success in the economy. No family firm can afford an attitude of passivity if it seeks to survive through multiple generations.

Although family firms are widely recognized as a major source of innovation, over time some become conservative and are unable to see the benefits or are unwilling to take the risks associated with entrepreneurial activities. Others develop the capacity to regenerate, allowing them to renew their operations, grow new markets, develop new skills, and adopt new strategies. A wide range of factors including family dynamics influence a company’s attitude to entrepreneurship, innovation and their inherent challenges.

Founder’s Length of Tenure

While the importance of the founder in shaping a firm’s culture is indisputable, studies show significant negative correlation between the length of the founder’s tenure of control and the company’s involvement in entrepreneurship, innovation and the pursuit of new ventures. This is especially true with the founder as CEO. The dual function serves to concentrate power in the founder’s hands and leads to intensification of conservatism, resistance to change, stifling of entrepreneurial activities and aversion to risk.

Notably, systems and processes development is one area where a long-tenured CEO’s resistance to change can seriously impact innovation. In the first generation these systems were designed to meet the founder’s needs, but they may not be properly integrated with current business operations. This causes inertia to take hold in the organization. As the business and marketplace mature and the next generation proposes changes, a crisis situation can arise. Frustrated by the constraints of working with outdated and inefficient systems, competent managers–whether non-family employees or new generation family members–seek employment opportunities elsewhere where they can use their talents. With them goes their day-to-day input, variety of skills, background, knowledge and connections. The loss of these resources results in strategic simplicity that reduces the possibility of agile responsiveness to changes in the environment.

Risk taking

Because the functioning of family businesses is set for a longer time horizon, greater importance is all too often attached to maintaining the founder’s imprint and lesser importance is attached to innovation. In a highly conservative family enterprise, transition from founders to other leaders entails serious risks, the most significant of which is continuing a culture that overlooks the need for entrepreneurial activities. Early succession planning can help minimize this risk by grooming successors and nurturing their ability to innovate while sharpening their skills in creating an organizational culture that encourages risk taking.

The skills inherent in entrepreneurship and innovation are essential in successor leadership because the complexity of entrepreneurial risk taking presents a key challenge to family enterprises. Management of a constellation of variables; innovation, new ventures, and outside alliances can sharpen a family firm’s skills and enhance its ability to adapt to and profit from changes in the economic environment. However the effect of a family firm’s culture on its systems and decision-making processes can be profound.

Family ownership and involvement promote entrepreneurship

In a family business multiple members of the same family are involved as owners and managers either contemporaneously or over time. The long-term nature of family firms’ ownership allows them to dedicate the resources required for innovation thereby fostering entrepreneurship.

Research has shown that the more generations of the same owner family are active in the company, the higher the firm’s focus on innovation. Since innovation usually requires diverse knowledge bases, it has been suggested that the involvement of different and multiple generations promotes innovation by bringing fresh insights and experiences and therefore new knowledge into the family firm. Capitalizing on the talents, skills, and connections of different family members can spur innovation and facilitate venturing into new market arenas. Also members of the owner family share an incentive toward encouraging a focus on innovation because the success of their company increases their wealth.

Corporate structure and building a culture of innovation

Research findings argue that firms with a more flexible structure have higher rates of innovation. Flexibility in processes and procedures, open channels of communication, decentralization, and informal decision making, along with loosely coupled decision linkages and loosely defined job descriptions are associated with innovative activity. Family firms have the advantage in this respect in that they typically have flexible structures and decision-making processes.

Clearly defined vision and mission

The importance of a defined vision to develop its business and a business-oriented philosophy of change is key to building a culture of innovation. Other factors include consistency in decision-making on innovative projects and identification of needs in terms of opportunities to develop entirely new businesses. In this regard emphasis should be placed on training and consultancy in the areas of activity, vision, mission, competitive advantage, methods and tools for strategy implementation and control.

Strategic Planning

The foundation of innovation: a strategic plan improves the condition of the company and secures its sustainability. Research into family business shows a positive correlation between a company’s level of innovation and its commitment to solid strategic planning that includes risk-taking and innovative activities as essential elements.

Commitment and clear involvement of top executives is essential

Successful innovation is a top-level management process. The generation and implementation of new ideas requires focus and clear guidelines. To produce innovations that result in performance advantages to the company, these processes must be properly managed within the organization. Management must plan and oversee the strategic development and deployment of resources within the organization including the setting up of multidisciplinary project teams and internal communications thus maximizing idea generation and adding critical strategic complexity.

In order to gain and sustain a competitive position in the marketplace family enterprises must be positioned to actively develop and take advantage of entrepreneurial opportunities inherent in their business model. Strong family bonds, a diverse set of skills, experience, knowledge, management experience, long-term internal and external connections available within the family group are resources unique to family businesses. Committed involvement of family members where the success of the organization serves both self and family interests are factors that strongly support a culture of entrepreneurship and innovation.

Rick Raymond is principal of The Family Business Leader™ and co-founder of The Growth Team.  They help second-, third-, and fourth- generation family businesses with succession planning, family dynamics, and family business management best practices as well as closely-held businesses in transition and growth. Rick is also adjunct faculty,  Zicklin School of Business, Baruch College, City University of New York, and the School of Continuing and Professional Studies, New York University.

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Business, Title Insurance New York

Five keys to optimism in business!

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Five ways optimists think and act differently!

For anyone either in business for themselves or who works for someone else there are obviously many challenges that arise on a daily basis.

One of the keys, therefore, is to stay focused and maintain as optimistic and positive frame of mind as possible. Of course, as most of us are painfully aware, unfortunately at times that can be easier said than done!

As a guide, from the website Lifehack these are the ‘5 Things Optimists Do Differently’.

1. Optimists know that you don’t necessarily need to achieve something in order to be truly happy.

Happiness comes from within. It’s a conscious decision that you need to make, whether or not things are going the way you want them to.

If you provide a condition to your happiness, like you’ll only be happy if you’re able to achieve something, then what happens if that condition isn’t met?

Success isn’t a guaranteed factor. If you equate happiness with success, you may be happy, but this happiness stops the minute you start failing.

Give yourself the power to be committed to being happy by adapting a grateful outlook in life.

2. They avoid negative people and refrain from encountering bad vibes.

Optimists are well aware that being negative and being positive are both contagious. So, for them to create an optimistic environment, they stay away from grouchy people who always complain.

Instead, they nourish relationships with emotionally supportive and equally optimistic people. They know that life is too short to spend with people who don’t really value them, so they choose to spend it with people who do realize their worth.

3. Optimists respect themselves and their time.

In a way, optimistic people are like wild and brave souls–they are confident that they don’t need the approval of anyone else in order to live their lives. Positive people know that people will always judge them with whatever they do, so why bother pleasing people when it’s obvious that you can never please everyone every single time?

Optimists even have the courage and the confidence to say no to things that don’t really matter to them. They’re not pressured into doing something that they don’t really like, and they’re free to pursue their passion accordingly.

4. Optimists are resourceful people.

Successful entrepreneurs and optimists are both innovative and creative individuals. They know that they’re never going to have everything that they need, so they make do with what they have instead.

– Steve Jobs didn’t wallow in fear when he didn’t have enough money to fund his startup: he sold his only means of transportation, his VW Microbus, to finance it.

– Walt Disney didn’t go into severe depression when he was told that Mickey Mouse is a “giant mouse on the screen that would terrify women”; he pushed through and look at how famous and well-loved Mickey is today.

– Donald Trump was bankrupt four times (in 1991, 1992, 2004 and 2009) but his resourcefulness and innovation gave him a $2.7 billion net worth today.

5. They know that life is not fair–and they’re okay with that.

Most people feel grumpy, frustrated or disappointed because they expect life to be fair for everyone.

Why does Justin Bieber have a lot of haters? Because a lot of people don’t like the fact that he gets millions just by performing and doing his hair flips regularly.

Why are there a lot of complainers all over the world? Because they feel that they’re self-entitled to everything that their neighbors have.

Why are there crime scenes? Because people feel like they’re not given equal treatment (such as equal money with the rest of the society), they should just go ahead and make things equal. By taking the matter into their own hands, they commit crimes instead.

Optimists are not like these people. They know that life is never going to be easy–it’s never fair and it’s never predictable. In fact, they expect life to be unfair and unpredictable most of the time! They accept the fact that their friends may be given more money, that some celebrities are given more fame, and that some of their loved ones are more successful in terms of romance.

And you know what?

They’re okay with that.

Source

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Business, Business management

Business and management thoughts from Richard Branson!

Few entrepreneurs have enjoyed the overwhelming success of Richard Branson, making the opportunity to learn from his ideas, thoughts and experiences incredibly valuable!

Whatever line of work we are engaged in, whether it’s running a law practice, a title insurance firm or an ice cream stand, there are certain fundamental business principles that should be driving and guiding us all.

That said, given the career of Richard Branson that has been highlighted by both overwhelming success and by the diversity of his businesses, his thoughts are at the very least worth listening to.

These are some tips concerning business in general from the serial entrepreneur.

1) Guidelines for business 101!

Regardless of any changes in the way that business today is conducted sparked in large part by quickly and ever changing technological advances, there are five fundamental guidelines that Branson adheres to:

1. If you don’t enjoy it, don’t do it. You must love what you do.
2. Be innovative: Create something different that will stand out.
3. Your employees are your best asset. Happy employees make for happy customers.
4. Lead by listening: Get feedback from your staff and customers on a regular basis.
5. Be visible: Market the company and its offers by putting yourself or a senior person in front of the cameras. (Source)

2) Importance of networking early and often!

‘…To get started, attend industry events and meet key players; join regional business associations and start learning about local market conditions. Also remember that you can meet potential mentors at schools, clubs and business groups. Someday, when you get stuck or when something goes wrong, these contacts will be the people you’ll turn to for help. (Finding investors is a step that follows: People buy from people, so if you’re limited in terms of who you can access, talk to and sell to, well, you probably won’t get very far.)…’ Read the entire article here.

3) Tips for growing a small business!

First, know your mission. At Virgin this was often about shaking up the established markets and providing something of great value and service. In Innocent’s case it was about creating great juices to help people lead healthier lives – and doing this in a fun way.

Second, make sure you get the basic structure right. Know what you are going to do. Many times partners can provide the back office, the infrastructure or the raw materials. By building strong relationships with such suppliers, you are free to scale the operations without heavy calls on your capital.

Third, get the right team at the top. It’s hard to get this right first time. Many small businesses fail to grow because they don’t identify team members who can no longer keep up. It’s sometimes necessary to part company with senior managers who cannot develop the businesses, painful as that may be.

Fourth, a strong purpose and a sense of ethics give the company a solid foundation. In Innocent’s case the focus was on leaving the planet a little better than they found it. This simple but effective message resonates with both staff and customers, whether they number 10 or 500 people.

Fifth, no matter how big you are, details count. Just as I remain obsessive about traveling on our planes and visiting our businesses with my notebooks to chat with staff and check the little touches that make our experience unique, Richard Reed and his partners do the same. They regularly check everything from the lids on their bottles – which ask customers to “enjoy by” and not “use by” a certain date – to the carpets in their offices, which are a distinctive Astroturf.

Finally, listen to your customers and act on what you hear. I’ve always asked our staff for their views and now I track our social media channels to see how our business and brand are doing. Innocent makes a virtue of asking their customers for their views. They use the feedback to inform growth and keep them connected. Read the entire article here.

Michael Haltman, President
mhaltman@hallmarkabstractllc.com
516.741.4723
http://www.hallmarkabstractllc.com

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