How to Lead German Family Businesses to Digital Sovereignty?
A big part of the German economic output is generated by family businesses. When it comes to digital transformation, the important small and medium-sized businesses have an immense need to catch up. The SME experts Katrin Schwarz and Oliver Stiefenhofer are doing everything to change this. It is their mission to develop family businesses in a sustainable way so that even their grandchildren will be willing and able to further develop the business. One key success factor for this “Grand-Children-Capable Business” is “Digital Sovereignty”.
In our interview with the two managing directors of the Düsseldorf-based AYB | About Your Business GmbH, we focus on future capabilities, the importance of digital sovereignty and the key challenges and success factors of transformation projects of German based family businesses.
How capable are german family businesses for our grandchildren and what role does digital sovereignty play?
In the past, sovereign action was a characteristic of the SME. In the context of digitization a certain disorientation is evident. It is not clear what, how, with whom and why to do in order to successfully pass the company on to the next generation. Many companies are externally determined by customers and driven by competitors. The sovereignty, the proactive advancement and the courage to leave the comfort zone in order to gain experience for growth – that has been lost to some extent.
Being digitally sovereign also means being aware of your strengths and weaknesses and being open to cooperation. Those who do everything themselves will not be successful – unfortunately the topic to solve is nowadays far too complex.
Digital sovereignty is not only a question of technology, but also of people and organization with its respective interactions. Only when these factors are balanced will the company be successful and fit for the grandchildren’s future.
Your focus is on consulting for family businesses. How would you describe their characteristics?
The Corona crisis has proven how innovative companies can be. We wish this innovation back for Germany. Digital sovereignty requires a certain willingness of the organizational form. Family businesses, with their strengths in innovation, leadership and willingness to make decisions, offer optimal conditions. They have a strong culture of values that are not financial driven. This is about quality, flexibility and responsibility of the family, but also towards the employees and their families to pass on the company well or even better. This value-driven continuity is different from the profit-driven quarterly thinking of listed companies. Family businesses think in longer periods, across generations. They are faster and more resource-oriented. It is a different way of working together. An own DNA, a strong mutual trust evolves – in the employees and vice versa. The culture of values, this strength, the trust of employees, is an incredible value.
Why is digital sovereignty so important for family businesses?
Family businesses grow in generations: Usually, the founder had a brilliant idea, which is developed or managed over the next generations. Some companies tend to rest on past successes or have no clear family strategy or succession plan. In addition, the view of one's own business model is different from that of organizations managed with external expertise. First they have to feel the need for digitization. Innovation is driven by different perspectives. Therefore, family businesses increasingly need an external view of their business. Moreover, the issue of digitization is so complex that it cannot be solved by one patriarch alone, as it was in the past. This requires the integration of collective intelligence within the company and external partners. And the more diverse the employee and management structure is, the more innovative and successful it will be.
Which digitization topics bother SMEs the most?
You can't limit it to technical subjects. Often companies are stuck in process optimization. The things that would really be necessary are not done. In some areas innovations are encouraged, but these remain isolated solutions and the questions of dependencies or on which part of the strategy they contribute remain unresolved.
Some deal with innovation of products and services, but there is still a lot of catching up to do in terms of changing business models. The right connection to new business models, to innovations, to focusing on the customer, to looking at future markets, to bringing platform ideas into place – all this is still a long way to go.
How do you approach a transformation project?
We use a very systematic analysis to explore the following dimensions: Strategy, Processes & Efficiency, Innovation & new Business Models, People & Cultures, Partners & Image. And we determine the digital maturity level. Afterwards we analyze the challenges and fields of action in a pragmatic in-depth analysis and jointly create a clear picture for the future. We then have a clear plan, a digital roadmap, of what we want to achieve over the next few years. Projects and measures are derived and tracked from the strategy, which is regularly reviewed. Solyp 4.0 supports us in this process with various key figures, KPIs, surveys, feedback etc., ensures holistic monitoring on all issues and makes the transformation manageable. In this case, there is no alternative to transparency: pointing out dependencies and critically questioning what contributes to which part of the strategy. It is a constant pursuit of defined steps that lead to digital sovereignty at the end of the day.
This requires a lot of commitment and experienced people on site to change cultures, mindsets, long-standing ways of working and to bring missing skills into the organization. That often takes years. In the course of the projects, we bring leading experts from our cooperation partners into play at the right time for the respective topic.
Are successful transformation projects cooperation and collaboration projects?
For us, cooperation and communication are part of our business model and a strength. The topic of digital change is so complex that it can only be mastered in cooperation with experts and the use of innovative software. Usually several actors are involved in a project: Employees, managers, consulting firms, service providers, etc. This only works if everyone works on transparent measures, with the same information and view of things. If you orchestrate many customers or customer projects today, as we do, and do not know at the push of a button whether everything is going according to plan or not, then you risk setting goals and necessary control.
Without Solyp 4.0 it would not be possible to be so scalable, flexible and predictable in our business model. We do not use existing software modules, but develop them according to customer requirements. This is why Solyp and the cooperation with Evolutionizer is so unique for us: they understand what we need, develop and deliver for our customers.
Not only the orchestration is an added value for the customer. We often combine silos in customer projects and replace legacy systems. Everyone has some BI tool, a project management tool, a weak collaboration solution and we concentrate everything as best as possible on the platform. The customers are thus significantly faster, more agile and, thanks to the facts and figures, clearer in their decision-making.
What are the main challenges in the digital transformation of family businesses?
The combination of process, product & service, but also radical business model innovation, requires courage. One challenge is the risk aversion with regard to key business figures – i. e. investments. This can be countered in a structured way by proceeding in small iterative steps.
Our experience shows: The bolder the company is, the greater the success.
Technology is not the challenge. The challenge is people, organization and an innovation-friendly corporate culture - open, appreciative, trusting. This interaction only works with good communication and good leadership. To be an innovation leader means innovation in leadership: In an environment of yesterday, I cannot come up with thoughts of tomorrow. The mindset must be changed.
It also includes a methodology for promoting innovation: Today, you innovate differently, in smaller steps, in close coordination with customers. That's something medium-sized companies lack. Collaboration is more likely to be thought of in departments and silos.
What are the advantages?
Once they have made the decision. family-run businesses are faster compared to non-family run businesses. Once the path has been taken, it is very fast, very efficient and resource oriented. This is partly due to the hierarchical level and the trust bonus towards the employees – but also in reverse. If the employees are not intrinsically motivated, it is extremely difficult to change. If we succeed in leading companies with their strong values to be innovative because they have developed the organization and use technology to be innovation leaders – then we have achieved our goal.
Thank you very much for the interview.
About AYB | About Your Business GmbH:
The name is the game: AYB's Change Architects are all about family businesses and how they sustainably ensure the success of and for future generations with digital sovereignty.
Katrin Schwarz has 20 years of experience in management positions in medium-sized companies and excellent analytical expertise. Her experience in medium-sized companies and the effectiveness of the "new" world, convince her to combine the best. She is a communication lover, networker and constantly strives to improve things.
Oliver Stiefenhofer has specialized in consulting for medium-sized companies for more than 20 years. He knows the pain points of family businesses, their challenges and the requirements of their stakeholders. He has discovered the passion for himself to take away his clients' fears, to turn to new technologies and to see and help shape changes in the course of digitization in a holistic way.