Viewpoint: How family businesses are innovating through tradition

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When innovation is all about the new and the future, how can a 300-year-old family business, with all its traditions and legacies, innovate and compete? Very well, in fact, because many family businesses innovate through tradition. And this is keeping them at the top of their game in a very fast moving world. 

The underlining assumption on innovation is that if you want to make the way for the future and the new you have to dismiss the past. Old knowledge is obsolete for current needs and expectations, and the past is a source of resistance, says the conventional wisdom on innovation. Innovation managers are often advised to create a corporate sense of urgency and obtain a mandate to dismiss the old and make way from for the new.

Tradition can elicit strong and positive feelings. Studies have shown that most of us crave the golden age of the past, and we all look at the past with some positive feelings.

This thinking sounds ominous for family businesses, which are often very much linked to their past and their traditions. But the research I have done, along with my colleagues at other universities*, shows how tradition can represent a powerful and unique source of competitive advantage for family businesses wanting to innovate. 

Tradition refers to the stock of knowledge, competencies, materials, processes, signs, values and beliefs pertaining to the past. It is a very powerful concept because tradition shapes the identity of individuals, businesses, organisations, and countries. Tradition can elicit strong and positive feelings. Studies have shown that most of us crave the golden age of the past, and we all look at the past with some positive feelings. 

Family businesses, which have been around for two generations and more, are often great depositors of tradition. The values and beliefs of the founding family are handed down across generations for decades, sometimes centuries. And family history pervades business practices, producing a close link between the present and the past.

Founded in 1526, Beretta is one of the oldest family businesses anywhere - so it knows about tradition more than most. Indeed, it prides itself on its craftsmanship...but innovation has also been at the heart of the Italian gunmaker.

Our research has found that innovative family firms have special capabilities to leverage tradition to develop successful new products - and hence innovate. A good example of this is the gunmaker Beretta. Founded in 1526, Beretta is one of the oldest family businesses anywhere - so it knows about tradition more than most. Indeed, it prides itself on its craftsmanship, handed down from one generation to the next. But innovation has also been at the heart of the Italian gunmaker. Beretta has used state of the art polymers and revolutionary technologies to develop products like the A400 Xcel, which have won various awards and accolades, including being voted the shotgun of the year by the American Hunter magazine. 

Another example of innovation through tradition is the coffee maker Lavazza. Founded in 1895, Lavazza’s tradition of great coffee making for more than 100 years is a big part of what the company stands for. But Lavazza has also built on its tradition through innovation such as developing its capsule-based espresso system to work in extreme conditions - even in outer space. 

Our research found that there were two major ways family businesses do product innovation - through product innovation and product meaning. Beretta and Lavazza are good examples of product innovation through the firm’s tradition. But product innovation can also be linked to the territorial traditional of a family business. An example of this is the natural health care and beauty products group, Aboca, which is strongly linked to the Italian region of Tuscany. Aboca uses its territory’s tradition through raw materials and manufacturing processes and reinterprets these to enable new product functionalities. 

Innovation through product meaning again can be interpreted through either the company’s tradition or its territorial tradition. Vibram, the maker of high-performance rubber soles for footwear, is a good example of innovation through product meaning using its company’s tradition. The company changed the meaning of a sports shoe by developing a line of minimalists shoes that mimic the look and mechanics of being barefoot. And a good example of using product meaning through territorial tradition is the boatmaker Apreamare, which has built luxury yachts based on the traditional design of fishing boats in the area of Sorrento in Italy.

There are many examples across the globe of family businesses innovating through their traditions - and using the approaches stated above. Family businesses are realising that their traditions and past can, in fact, be beneficial to their innovation efforts. This means rethinking competition as a balancing act between the past (continuity) and the future (change), using resources coming from the past to trigger and realise acts of innovation. That can only be a positive factor for the global family business sector. 

 

* De Massis, A., Frattini, F., Kotlar, J., Messeni-Petruzzelli, A., Wright M. (2016). Innovation through tradition: Lessons from innovative family businesses and directions for future research. Academy of Management Perspectives, 30(1), 93-116.

Alfredo De Massis is Professor of Entrepreneurship & Family Business at the Free University of Bozen-Bolzano (Italy), where he leads the knowledge platform on family business management, and co-director of family business at Lancaster University (UK).