In this episode of Family Business Focus, Kirsten Vosen and Laura Pearson examine why family enterprises are uniquely positioned to be innovation leaders—and why innovation is no longer optional. They explore how agility, close-knit decision-making, and long-term thinking allow family businesses to implement new ideas quickly, while also addressing common barriers such as concerns around relationships, privacy, and technology adoption. The conversation highlights how thoughtful investment strategies, emerging tools like generative AI, and a balanced approach to risk can help family businesses fuel growth, strengthen trust, and prepare for the future.
TRANSCRIPT
Speaker 1 [00:00:12] Hi, I’m Kirsten Vosen, U.S. Deloitte Private Audit and Assurance Leader. Welcome to Family Business Focus, where we’ll cover topics of interest to family businesses. Throughout this series, we’ve been speaking with Laura Pearson, Deloite Private’s U. S. Family Enterprise Leader. Today, Laura and I will explore the concept of innovation within family-run businesses. I recently read an article that described family businesses as innovation powerhouses, especially small and medium-sized firms. This finding runs counter to previous research that found bigger companies tend to be more innovative. How do you compare this experience with what you see in family businesses, Laura?
Speaker 2 [00:00:51] I’m so reassured to hear this. Family-owned businesses can often implement new ideas quickly. Imagine the family brain trust having dinner and coming up with an idea they can quickly put into practice. In my experience, family businesses of any size have the requisite tools to be pioneers in their industries. And in reality, innovation isn’t an option anymore. It’s a necessity. We know that customer expectations are shifting. Industries are converging. Technology is rapidly advancing, and the threat landscape is becoming more sophisticated every day. Innovation can help solve for that. It can be a powerful catalyst for growth, talent retention, improved customer trust, and so much more.
Speaker 1 [00:01:38] What are some of the barriers family businesses may face when incorporating technology into their operations?
Speaker 2 [00:01:44] I see two main barriers in my work with family businesses, the relationship aspect and the privacy aspect. Relationships often shape the dynamics of family enterprises. So understandably, some may be reluctant to embrace automation or other technologies out of concern that it could compromise those client relationships or replace the human talents of a trusted colleague or family member. But we can reframe that conversation to emphasize that technology enhancements aren’t about replacing people. Instead, it’s allowing precious human talent to spend more time on value-added tasks and building the relationships their organizations value so greatly. For example, with GEN.AI, you can acquire vast amounts of information on your industry, your customers, the market landscape, current trends, et cetera. Business leaders can then use that data to generate well-informed strategies to meet real business needs. With regard to privacy, family enterprises often have heightened concerns about privacy, as breaches can lead to unwanted risk, reputational damage, or exposure for the family, both professionally and personally. The sensitive nature of their data can be a barrier for some to adopt technology, but it doesn’t have to be. Family businesses just need to make sure that any technological integration is approached with a relentless prioritization on security.
Speaker 1 [00:03:15] So reaching those ambitions take resources. Is there a standard formula family businesses should follow when it comes to spending on innovation?
Speaker 2 [00:03:23] A lot of the old guard family enterprises might argue for reinvesting, let’s say, five percent of top line revenue back into R&D. But a new approach might involve operating with 80 percent of the legacy budget and dedicating 20 percent to exploring and implementing new technologies. And then within that 20 percent, allocating a fifth of that amount, or about four percent, specifically for more groundbreaking innovation. Gartner actually has a great framework to explain this concept. One area for predictability and another for exploration. I think that’s a great way for family enterprises to maintain current systems while also investing in tomorrow.
Speaker 1 [00:04:07] Well, thank you for the time today, Laura, and sharing the great insights on the challenges and the opportunities that family businesses encounter through innovation.
Speaker 2 [00:04:15] Well, thank you, Kirsten, for the excellent questions. And I hope the viewers can take some of what we’ve discussed back to their organizations.
Speaker 1 [00:04:22] Thank you all for joining us on the Innovation episode of Family Business Focus.
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