Impact of technology in family-owned businesses

The impact of technology in private and family-owned businesses can be the difference in scaling up or sliding down. We have observed two key differences in how private and family-owned businesses approach technology change and investments.

People are the process

Most family businesses are built on people with whatever resources they had at the time. There was no money for an accounting package, so all inventory was tracked on a spreadsheet. Ten years later, that spreadsheet has become a bottleneck in the entire operation and is affecting the entire company. This is a familiar story in the family-owned business.

Often technology is used in a way that is NOT efficient and becomes, “how it is done”, versus how we can improve and change. There is a lot of resistance to any change because it typically means someone’s role is reduced or not needed anymore. If Sage is implemented to track inventory, what is Jim going to do? Our experience has been that Jim is better off with the improved technology and can move to a more challenging role than managing a spreadsheet.

A Technology Roadmap is key to getting from a people-based to a process-based operation. It will define areas where automation and increased efficiency are possible and remove some of the underlying emotion from the decisions needed to move forward.

The money matters in family-owned businesses

Organizations run by professional managers have a luxury that family-owned businesses don’t: it’s not their money. Sure, if they spend unwisely, they will find a new job, but typically, they are able to allocate funds to technology on a non-emotional basis. Not so much with a family-owned business.

A great example of this was a large trucking firm we worked with. Their computers were ALL outdated and in need of replacement. The owner did not understand why this was the case, as it was all “working” the way it always had. We asked how many new tractors they would purchase next year, and they said ten. We asked if they could get by with only nine, to which they replied, “Sure, we really just buy a couple extras in case we need them”.

Great, we said, give us the cost of the ONE tractor, and we can replace your entire fleet of computers! Guess what, they did, and in return their productivity and profits increased by 30% the next year, mainly due to efficiencies and time savings of moving their people to new systems and implementing a digital scanning application.

Private and family-owned businesses can benefit immensely from a Technology Roadmap (and a good partner!) to help owners frame technology decisions in a way that makes sense.