By: Prof. Enrique Soriano
IN A business forum that I recently attended, a noted business consultant was asked the question what makes an enterprise last from generation to generation, she said that there was so much information available about how to start a business but she wasn’t really sure what makes an organization last and what will not make it last. When the time came for me to answer the question, I provided another perspective and rephrased the question, “perhaps instead of asking what, the entrepreneur should find out how to make his or her business last from generation to generation.”
The term ‘family enterprise’ is slowly making it to mainstream business literature. The topic is mentioned in many introductions to business books on the market more than ever as well as business oriented websites on the internet. There are radio and television programs, business organizations and certified non-governmental organizations’ business and livelihood projects. The ‘start a business’ media glut has made Filipinos familiar with the word business. However, there is no accurate description of family businesses except the “ala-Chinese style” model, popularized by business tycoons like Henry Sy, John Gokongwei and Lucio Tan.
Business Must Stay the Course
The Filipinos may have graduated from the ‘sari-sari’ store to small and medium business enterprises (SME’s). But for one thing – there is less hype on how to make a business last longer. Even those who attended business oriented seminars get confused about how to start a business sometimes. So it is no wonder that the idea of how to make an enterprise endure for centuries contributes to the confusion. The bottom line is: To become an entrepreneur, one has to start a business first. And to address the many struggles of an entrepreneur, one has to contend with this statement: “Right now, I know I want to make this business work, but the how is really the challenge?”So how do we separate the start-up stuff from creating a real legacy thing? Read on.
Globally, the average lifespan of corporations has been between 40 and 50 years — a figure that has gradually been on the decline due to a challenging marketing environment. However, for family owned businesses, it is a totally different story. Predictably it almost always ends in tragedy when the founder or business leader dies without articulating his or her leadership and ownership plan to the next generation.
In Europe, it is even more alarming. A study that analyzed thousands of European firms yielded a corporate life expectancy figure of a mere 12.5 years. Companies are dying younger and family enterprises without any form of governance in their veins are most vulnerable and are prone to collapse at any given time.
For a business to have a long-lasting impact, it has to intertwine itself with several compelling but very fundamental steps. For starters, a business could not last without a vision. There is also a common terminology often referred to as the target market. Further a business could not move forward without a game plan either.
The Need to have a Vision and a Game Plan
There is a saying by Lewis Carrol that I always share to my clients, “if you don’t know where you are going, any road will get you there.” Why is business direction important? Or more specifically, having a goal or a vision? Because it puts clarity on where you really want to go as far as your business is concern? Until you can answer that question, you will always be unsure which route is better than another.
To be continued…
Prof Enrique Soriano is a World Bank/IFC Governance Consultant, Senior Advisor of Post and Powell Singapore and the Executive Director of Wong + Bernstein, a research and consulting firm in Asia that serves family businesses and family foundations. He was formerly Chair of the Marketing Cluster at the ATENEO Graduate School of Business in Manila, and is currently a visiting Senior Fellow of the IPMI International School in Jakarta.
He is an associate member of the Singapore Institute of Directors (SID) and an advisor to business families worldwide, a sought after governance speaker, book author and have written more than 200 articles and publications, including two best-selling Family Business books (Ensuring Your Family Business Legacy 2013 and 2015). You can read Prof Soriano’s business articles for free at www.Faminbusiness.com