6 reasons family businesses must embrace digital transformation
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Digital and data offer tantalising opportunities for Australia’s family businesses to reach new markets and offer new services and products. While only a minority say they currently have strong digital capabilities, an increasing number are now focused on addressing this.
If any family business owners had lingering doubts about the impact of digital disruption, those were surely swept away last year. The pandemic prompted many businesses to try new digital tactics to reach and serve customers. Many valuable lessons were learned along the way.
At PwC Australia, we helped numerous family businesses through that process and, time and again, we saw how those with strong digital capabilities and access to good data performed better. With further market disruption and change inevitable, family businesses in Australia must make deeper digital transformation a strategic priority. In doing so, they will set their businesses up for lasting success.
Private businesses - including family businesses - are an incredibly important contributor to our economy here in Australia. In fact, 70% of all businesses in our country are privately-owned. They are the backbone of our business community and have a unique ability to innovate.
Compelling reasons why digital transformation cannot wait
Our research suggests that, while only 15% of Australia’s family businesses have strong digital capabilities, almost half (48%) are now focussing on major improvements. These businesses are recognising the powerful combination of factors that mean deep and systemic digital transformation cannot wait:
The first factor goes right back to the fundamentals: The success of any business depends upon its ability to meet demand. Now more than ever, the external market is demanding that businesses engage digitally. (One example: family businesses that supply large retailers often have to meet minimum communication and traceability standards that require some element of digital sophistication.) Businesses that can respond to demand will not only retain their existing customers, but also open themselves up to new and larger markets in Australia and overseas. They’re also less likely to be disrupted by new market entrants.
The second factor is more inwardly focused: Digital transformation allows family businesses to refine back-office operations and, in the process, achieve efficiencies and save money. All of which keeps a business lean and competitive.
Third on the list, and also internally focused, is talent: A growing body of evidence shows that people are increasingly making career choices based on the opportunities to upskill and keep pace with emerging technology. But Australian employers remain particularly slow at addressing this. A global study by MIT CISR found that 58% of Australian firms fail to provide their people with both the technologies and capabilities to work effectively in the digital world (more than double the global figure of 27%).
Fourth, digital transformation sets family businesses up to remain agile in the future. Business models that have survived for decades may not remain fit for purpose in the years to come. The right technology and processes allow owners to obtain real-time insights into the business, identify trends, and make informed decisions to propel their organisation forward.
Closely related, is the fifth factor: Investor expectations. Increasingly, investors are seeking businesses that have sophisticated and rigorous KPI reporting, analysis and insights. Digital transformation enables family businesses to generate accurate, quality reports that investors can rely upon to understand what KPIs are being measured, how frequently, and how management is responding. (At PwC Australia, we’ve been involved in many pre-sale conversations where investors have insisted on such rigor).
Finally, there is the very real threat of cyber-attack. Family businesses that have not lifted their digital capabilities can be a soft and lucrative target for cyber criminals and other threat actors. Such incidents can cause significant (potentially catastrophic) operational, financial and reputational damage. On the flipside, robust cybersecurity can reduce cyber risks and send a message to the market that a business is safe and trustworthy to deal with.
Digital transformation is an investment to safeguard the long-term future
As we alluded to at the beginning of this article, the pandemic forced Australian businesses to adopt new digital tactics to address short-term issues. About a third of family businesses (31%) have already developed and documented a long-term roadmap for digital transformation, and many more will soon follow suit.
Family businesses are most likely to succeed when they have a clear understanding of the scale and scope of the transformation required.
Owners are increasingly aware that digital transformation requires more than one individual or department to take the initiative. It requires more than a patchwork of apps that solve specific problems. And it requires more than just back-office solutions for admin, such as processing orders or closing the books at month-end.
Digital transformation requires everyone and everything to adapt, so that the business can keep up with the exponential evolution of technology. Proactive owners are challenging their own mindsets and starting to see Information and Communications Technology (ICT) as more than a sunk cost that makes the business work more efficiently.
Genuine digital transformation will change the working life of everybody from the boardroom to the mail room. Often, it reinvents a business’s entire ICT systems, to provide insights that give owners the confidence to change the way things have always been done and unearth new ways to generate more value and revenue.
Time and cost barriers can be overcome
Of course, digital transformation requires financial investment – but the good news is that the costs have dropped dramatically in recent years. Some of the analytics tools that multinationals were spending millions of dollars developing a decade ago are now available as standard SaaS tools with equivalent capability for a fraction of the cost.
Cloud and server technology also costs a fraction of what it once did. So it’s relatively inexpensive to implement Enterprise Resource Planning (ERP) systems that connect every part of a family business. The results can be a ‘win’ for everyone:
Owners gain a more comprehensive view of how their business is operating.
Staff encounter fewer obstacles and require less workarounds, which boosts morale and productivity.
Suppliers get a clearer idea of future demand and lead times.
Customers enjoy a much more seamless and satisfying experience.
Digital transformation also requires an investment of time but that’s not a commodity that most family business owners are blessed with. Understandably, their focus is often on ensuring the business continues to grow. So, it’s important to generate capacity within the business (either internally or through consultants) who will dedicate themselves to delivering the transformation at speed – with minimal disruption to day-to-day operations.
In short: digital transformations are an essential step for every family business, but owners do not need to undertake them alone. We’re always happy to have an exploratory chat or answer any initial questions.
Meet our Private Clients leadership team
Growing a family business can be demanding, exhilarating, and intensely personal. No matter where your business is on its journey to success, we can be at your side with the insights and solutions you need to stay fit for growth and moving forward at the right pace.
