Transitioning refers to “the process of changing from one state or condition to another,” whereas transforming refers to “a marked change in form, nature, or appearance.” It is critical that families focus on transforming, as they often face external pressures that threaten their continued existence over generations. These threats may include economic recessions, technological changes, political volatility or regulatory changes.
Focusing on transitioning over time does not guarantee multigenerational success, as the business model and strategy may be rendered obsolete as a result of external shocks. Instead of being reactive, families can be proactive by driving change to create new opportunities that would be viable in the future, through regeneration, renewal and reinvention.
The modes of transformation that families can employ include:
- Strategy: setting up new product/service lines, geographic expansion, making new investments or divesting;
- Scope: driving technological change or driving sustainability measures;
- Structure: driving structural changes such as setting up a family office, or introducing governance bodies like a board of directors or family council.
It’s critical that families shift from a transitional approach to a transformational one for a couple of reasons.