The digital gap for family businesses has become a chasm as boards fail to adapt

Many of Europe’s family businesses have failed to make the digital transformation in their efforts to remain competitive not least because their boards are woefully unprepared to meet the challenge, according to a new report.

“Many family businesses and especially their board members are not equipped for the digital transformation happening now,” says Marc-Michael Bergfeld, one of the authors of the report and a professor specializing in family enterprises at Munich Business School as well as the founder of the Singapore-based consultancy group, Courage.   

To bridge the gap between the Mittelstand’s tradition of excellent engineering and ingenuity, and the digitalization potential of Europe’s tech talent, both worlds need to connect

He adds: “Less than 10% of family business boards in Germany have expertise in the field. They have no understanding of how it works, what has to be done, and how to design and implement a digital transformation agenda.”

The report, entitled Next Generation Family Business Boards for the Digital Future, and written by Bergfeld’s consultancy firm Courage with the executive search and consultancy group AvS, and digital consultancy OMMAX, says the Covid-19 pandemic had accelerated the digital paradigm for all businesses and how family businesses in Europe are particularly unprepared for the challenge. 

Bergfeld says: “Covid-19 has shown that digitalization is not an option, but basic requirements – ‘forced digitalization’, has arrived.” Businesses won’t have an option, they will have to digitalize their companies, or they will wither and die. This is “the New Reality”, says the report. 

“The ‘New Reality’ imposed by Covid-19 reinforces an additional and very particular challenge for professional boards: digital competence,” adds the report. Family businesses are being forced to quickly bring digital competence to boards, and the report suggested five considerations when they attempt to construct a future-oriented next generation board.

These include the hire of board members with digital competencies and entrepreneurial experience. Also, the importance of hiring the next generation who are more likely to be “digital natives” – fully competent with the digital age. 

“To bridge the gap between the Mittelstand’s tradition of excellent engineering and ingenuity, and the digitalization potential of Europe’s tech talent, both worlds need to connect,” says the report.

“As a first step, digital entrepreneurs can educate traditional family businesses and their boards on the basics of digital transformation. As a second step, digital natives should be a core ingredient of next generation boards across European family businesses.”