44 Section 2 Chapter and Lecture Notes
Chapter 8 Change, Adaptation and Innovation
Learning Objectives
1. To understand the absolute necessity of keeping the business changing internally
(strategy, management competencies, systems, and organization) at least as fast as the
2. To discuss the very different leadership role that next-generation leaders need to
perform in order to assist in the adaptation and continued competitive fitness of the
Chapter 8 Essence
The primary responsibilities of next-generation leaders of a family business are very
different from the responsibilities of founding CEOs. Leadership of change and
leadership of a larger and more complex extended family figure prominently in next-
generation musts. Next-generation leaders have to be both leaders of change and growth
and stewards of culture, legacy, and values.
New leaders must not assume that the transfer of power often implicit in being named
the successor in a family business confers the authority to lead. Authority to lead can only
be earned and often only in the trenches.
There are three very distinct states in the change process: the present, the desired
future state, and the transition state. The transition state is where most of the change work
Section 2 Chapter and Lecture Notes 45
A variety of organization development and management of change interventions used
in family business are discussed in this chapter, including the use of appreciative inquiry
in the service of family business continuity.
The two governance bodies most qualified to institutionalize the adaptive processes in
a family business while at the same time providing for stability and governance of the
family-business relationship are family meetings or a family council and a board with
independent outsiders serving on it.
Through the use of new digital technologies, and without losing sight of the customer
and what has made the family business successful so far, family companies can
restructure supply chain dynamics, take on strategic partners in the value chain, and get
closer to the end customer.
Intangible assets, such as brand equity, caring and knowledgeable employees, and
committed ownership, are difficult to replicate by often-larger management-controlled
firms with their greater access to financial and physical assets. Intangible assets therefore
offer family companies a greater probability of creating competitive advantages that are
Discussion Questions
46 Section 2 Chapter and Lecture Notes
1. What are the factors in the momentum for positive change formula? Which of
the factors, given the existence of a family relationship, would you expect to be
hardest to promote as the next-generation leader of a family company?
DDissatisfaction with the status quo, challenging the status quo, traditional ways,
Dissatisfaction with the status quo is perhaps the hardest factor for leaders in family
businesses to promote on several counts:
to family values of harmony and accommodation.
VVision of the desired future state or detailed scenario of outcomes, results,
achievements at a particular point in time in the future. This could include return on
equity, market share, number of new products, net profits, sales growth, plus other
FS First steps or action plans to support the chosen direction. This factor is often a
stumbling block because of the often intuitive nature of entrepreneurs/business
owners. While the direction as well as the required action plans may be very clear to
2. What should Follett Corporation management do in the face of this new brand
of competitor?
Section 2 Chapter and Lecture Notes 47
3.
in acknowledging the threat and leading the efforts for adaptation?
They should approve the capital expenditures required and create a focused review
mechanism for the new venture, but protect it from immediate demands for
Discussion Questions for the Book Resource: A Succession Plan
Guided by the Three Leadership Imperatives and Five Best Practices
for Family-Business Continuity
1. What leadership imperatives and best practices discussed in the book are the
next-generation leaders of Vue Systems, Inc., counting on to assist the
generational transition and continuity challenges that the company and its
owning family face? Please list and discuss briefly.
CEO and CEO spouse:
Have assumed transition leadership roles that promote trust and the creation of
institutions (boards and family councils) that govern the family business.
48 Section 2 Chapter and Lecture Notes
2. If you were Michael Cook, Sr., would you feel any more confident
transferring power to the next generation now, after the succession and
continuity plan has been developed and discussed at length in a family council
meeting?
3. What is key to the ultimate effectiveness of this plan?
The key to the ultimate effectiveness of the plan is the strength and health of the
4. What do you predict will happen to Mike, Jr., Gabe, Vue Systems, Inc., and
the Cook family?
This is what the author knows happened: Three months after the family retreat, the
CEO issued a company-wide memo announcing the appointment of Mike, Jr., as
Section 2 Chapter and Lecture Notes 49