How Asian family businesses respond to four global challenges
Although certain business challenges are universal to family offices across the globe, the way in which Asian family businesses experience, prioritise, and tackle them is unique. We deep dive into four key global family office challenges and how they are experienced within the Asian family office context, reflecting upon the unique set of underlying influences that shape the Asian response.

By Francois Botha
Published on Simple October 23, 2020

Although certain business challenges are universal to family offices across the globe, the way in which Asian family businesses experience, prioritise, and tackle them is unique. Despite an increasingly globalised business landscape, there is still a distinct set of socio-cultural and economic factors at play.

The accelerating pace of change, succession, the demand for innovation and increased social and environmental awareness are emerging challenges being discussed in board rooms across the world. But when it comes to assessing the potential impacts and prioritising actions, Asian family offices need to consider influences and circumstances unique to their business environment and culture.

We deep dive into four key global family office challenges and how they are experienced within the Asian context, reflecting upon the unique set of underlying influences that shape the Asian response. And what the West and East might learn from each other.

Surviving And Thriving In The Face Of Accelerating Change

Unlike some European businesses which are moving into their fifth or sixth generation, Asian businesses are generally at a younger stage of their business life-cycle. This is mostly due to the fact that Asia’s business boom took place more recently in the 1980s. Asian family businesses tend to have a greater appetite for risk as a result and are considered more dynamic, flexible, and faster in their decision-making.

Although certain business challenges are universal to family offices across the globe, the way in which Asian family businesses experience, prioritise, and tackle them is unique. Despite an increasingly globalised business landscape, there is still a distinct set of socio-cultural and economic factors at play.

The accelerating pace of change, succession, the demand for innovation and increased social and environmental awareness are emerging challenges being discussed in board rooms across the world. But when it comes to assessing the potential impacts and prioritising actions, Asian family offices need to consider influences and circumstances unique to their business environment and culture.

We deep dive into four key global family office challenges and how they are experienced within the Asian context, reflecting upon the unique set of underlying influences that shape the Asian response. And what the West and East might learn from each other.

Surviving And Thriving In The Face Of Accelerating Change

Unlike some European businesses which are moving into their fifth or sixth generation, Asian businesses are generally at a younger stage of their business life-cycle. This is mostly due to the fact that Asia’s business boom took place more recently in the 1980s. Asian family businesses tend to have a greater appetite for risk as a result and are considered more dynamic, flexible, and faster in their decision-making.

It’s crucial to acknowledge, however, that Asia is a very diverse region and vast generalizations are not necessarily accurate nor appropriate. Although there is a strong emphasis on agility and flexibility in emerging economies like Vietnam and Indonesia, a more balanced approach is observed in established markets like Hong Kong and Singapore. In these established economies, governance structures are considered just as important as swift decision-making.

“There are still enormous growth opportunities in Asia, but the need for speed and agility is essential to success in these economies. Businesses have had to learn to operate differently in the context of structures and processes. Not that they do not want to have them, or they don’t see the value in them! But because the balance is tipped slightly differently to thrive in the dynamic markets that we operate in.”Felicia Heng, former Executive Director of Family Business Network (FBN) Asia

The Succession Challenge

Whilst some European family businesses are tackling their fifth or sixth wave of succession, a large portion of Asian family businesses is only now reaching first-generation maturity. The succession challenge has therefore become a sudden priority focus within the Asian family office sector. In Asia, there are unique cultural dynamics which impact the level of sensitivity, risk, and complexity associated with succession management.

Although from a business culture perspective Although the business culture in Asia is considered to be dynamic, paradoxically the family context is known for being hierarchical with fixed rules for lineage. There is commonly a lack of collaboration and dialogue within the family business structure. Succession becomes a rather tricky topic to navigate within Asian family businesses.

“Many first-generation family businesses are run by leaders who are very attached to their positions and find it very hard to let go or facilitate a phased hand-over successfully. Inter-generational dialogue is also a significant challenge affecting succession as often the next generation are forced into businesses whether they are motivated or not. There are generally rigid rules attached to succession which often discourage the younger generation who have a stronger entrepreneurial intent. This rigidity is probably one of the key reasons why studies are indicating that only 20 to 25% of Chinese next-generation members intend to join their family business”.Denise Kenyon-Rouvinez, Wild Group Professor of Family Business at IMD Switzerland and Singapore

The generation gap is indeed a global phenomenon affecting all countries and cultures at times of succession. However, a deeper look at Asian family dynamics reveals a clash of the traditional older generation with the increasingly western, consumerist next-generation. The generation in the east far exceeds that of the West.

This not only affects the ability of Asian businesses to effectively manage the succession process but also can create internal conflict when it comes to business strategy and evolution. In a fast-changing consumer environment, the next generation is not only the upcoming workforce but also the new target audience.

Balancing The Focus Between Innovation And Operational Excellence

Many of the more traditional family businesses in Asia can attribute a large chunk of their success to the ability to create strong monopolistic business models. Being first to market or being able to quickly achieve a large share of the market, has created many strong dynasties.

The focus of some of these dynasties is on preserving their positions and wealth, by placing emphasis on operational excellence rather than innovation. As we have seen so often in recent times, this is not always the most prudent approach. ‘Defense as the best form of attack’ is not necessarily an appropriate strategy in a world of business that is evolving at an increasing pace.

Entire industries can become obsolete in the space of a few years if innovation is not prioritized. The paternalistic command-and-control model which is so often seen in Asian business needs to make way for a more agile, versatile, and dynamic mindset.Fortunately, the strong focus on education and self-development in Asian family businesses has resulted in the next generation gaining access to the best schools and the most modern business training and development programmes. The next generation resultingly tends to focus more on cutting-edge technology and start-up investments, as well as developing new ways of engaging customers through social media, digital transformation, or brand-building.

Embracing and nurturing the next-generation of leaders goes hand in hand with a more open-minded and innovative approach to business which significantly enhances the ability of Asian businesses to succeed in the future. Across the globe, the priorities of the next generation are certainly very different from their baby-boomer predecessors – the innovation agenda is just one example.

Increasing Environmental And Social Consciousness

Sustainability has become a popular business buzzword in recent times. For previous generations, sustainability would be limited to reactive compliance, but today it means so much more. There is an undeniable socio-cultural mindset shift towards ethical, social, and environmental practices across the globe. Consumers, employees, and investors alike are putting pressure on organizations to consider what is best for people and the planet rather than just pursuing a profit-driven agenda.Going forward, companies will need to define and align their business and investment practices to a greater ethical purpose if they want to enjoy sustained support from people who purchase their products and employees who work for them. Within the Asian family office sector, the trend towards sustainable practices is emerging strongly within the next-generation. Once the younger generation return from their tertiary education at institutions like Harvard and Princeton, they often want to do things differently and more sustainably.

This trend is further influenced by the significant income inequality that many Asian countries experience, as well as the environmental concerns of exposed coastlines and agricultural systems.

Lessons From The East

Asian family businesses experience a very different set of socio-cultural influences that shape the way they do throughout their lifecycle. Hierarchy and generational gaps make topics such as succession challenging to handle. But the West can too learn from the East, in their focus on a strong family unit, legacy, and the part they play in a rapidly evolving economy.

  • A focus on long-term value: Asian family businesses tend to look for long-term relationships with very loyal employees. According to research from Heidrick & Struggles, the average CEO tenure in Asia is the longest globally – 5.7 years in comparison to 3.9 years in North America. People who work for family businesses tend to stay in their companies longer, especially at a senior level, which gives the companies a greater level of stability.
  • The importance of relationships: Family relationships are exceptionally important in Asia. As a result, companies do not let process and structure replace the need for human dialogue.
  • Capacity for risk-taking: The speed of business is exceptionally fast in many Asian countries, creating an environment with a higher capacity for risk-taking. This is a contrast to a more cautious decision-making approach in Europe

The Same, But Different

The pace of change, need for succession, and growing environmental consciousness, are key universal challenges that family offices across the globe are being confronted with.

Yet the unique family and business culture in Asia has a big influence on the ways in which Asian family businesses respond to these challenges. A younger family business segment and a rapidly evolving economy make for a more agile and dynamic approach. Nonetheless, the stark generational gap can pose a significant challenge to succession planning. Best practices and knowledge sharing, however, should not follow a one-way street. Western family businesses should indeed take not on both the risk-appetite and the high importance of family relationships which position Asian family businesses well for future growth.

About the Authors

Francois Botha

Simple Founder. Strategy Advisor

Francois believes that the next generation of family leaders need new, simple tools and trusted experts with a fresh outlook.

Connect with Francois Botha View Francois Botha Profile

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