Their “opportunity costs” for pursuing different
career trajectories or new business opportunities are higher, and therefore traditionally they are not very innovative. “Family businesses tend to follow set routines
and established business practices,” Zawwar says. “This serves their purpose better as it makes
them more stable and less volatile to the changes in the business environment.” One reason big companies fail to set sail for
blue oceans, say Kim and Mauborgne, is that the dominant focus of strategy work over past decades has been on competition-based red ocean strategies—in other words, finding new ways to cut costs and grow revenue by grabbing market share from competitors. It is certainly plausible that a multigenerational
business, with deep roots in pursuing traditional business practices, might be reluctant to explore blue oceans, yet the opposite can be just as true.
Zawwar says business families “feel more
comfortable in grabbing a greater share of an existing market. However, their lack of interest in exploring blue oceans does not indicate a lack of ability in pursuing such a strategy.”
TAKING THE PLUNGE Some family-held enterprises consciously explore blue oceans by establishing separate strategic business units, and with great success. Last year, Germany’s €4.3 billion ($5 billion)
Eberspächer Group renewed its commitment to sail into uncharted waters. “We established our new Business Innovation
Unit and set our sights on the future,” says Heinrich Baumann, managing partner at the fifth-generation automotive components supplier. Eberspächer has a longstanding innovation gene,
which Baumann says it deftly demonstrated over a decade ago when it entered the high-voltage electrical heater market. Emboldened, it later hit the acquisition trail. “The time is ripe now for alternative drive
systems and electro mobility,” Baumann says. “Our 2016 majority stake in battery
specialist Vecture is another example of how we are gradually expanding our expertise in energy management.” Baumann adds that taxis and other livery vehicles
will soon have high levels of automated driving capability connected wirelessly to smartphones via cloud services. “So why not think about air-conditioning
systems or batteries with internet connectivity? Our aim is to build a product portfolio that will safeguard our future.”
NEW WAVES Future-proofing is a recurring theme in sophisticated businesses. Among business families, the finger of fate is often pointed at the next generation. Are they comfortable wading into blue oceans? Some commentators believe so. “I see this all the time,” says Carol Pepper, chief
executive of Pepper International, a New York- based family office.
ISSUE 72 | 2018
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