The world of the 2020s appears to be a turbulent place, so how can family enterprises adapt and seize opportunities? A White Paper from the US bank and business school examines the terrain.

A report by Citi Private Bank and Cambridge Institute for Family Enterprise finds that the majority of families running businesses are moderately to extremely concerned about turbulence ahead.

The 57-page report delves into the issues, such as digital transformation and volatile economics that are shaping how family-owned businesses are run. 

The report examined the top five external factors affecting family firms. The largest force, covering those saying it had a “transformative” impact and “significant” impact, was “digital advances and disruptions, pace of tech change, and cybersecurity." In second place overall was “volatile economics,” followed by “political issues,” then “diseases, viruses, pandemics,” and finally “changes in your industry that impact your business model.”

As family-run firms are an important source of high net worth clients, and can also spawn family offices, organisations such as Citi Private Bank are keen to find out what makes them work. (The US bank has produced a number of white papers about areas which are relevant to family offices, such as private aviation and cybersecurity.)

The study, called The Future of Family Enterprise: Turbulence and Transformation in the 2020s, said that 34 per cent of respondents expect “high and extremely high turbulence” during the 2020s, and a further 46 per cent foresee “moderate turbulence.” (This news service has asked Citigroup to state the number of respondents, and may update in due course. A number of named families were interviewed for case studies within the report.)

Some 59 per cent of respondents are “very or extremely optimistic” about success through the 2020s, versus 45 per cent for next-generation success, the report said. In all, 84 per cent of respondents said moderate to radical changes are needed in their firms.

Digital impact
The report said 74 per cent of survey respondents expect that digitalisation, the pace of technological change and cybersecurity will have a “moderate” to “transformative” impact on their family enterprises.

E-commerce, cloud computing and software as a service, and fintech are expected to be significant to transformative factors by about half of respondents.

Bracing for turbulence
The report also found that 34 per cent of respondents expect “high and extremely high turbulence” during the 2020s, and a further 46 per cent foresee “moderate turbulence.”

Some 59 per cent of respondents are “very or extremely optimistic” about success through the 2020s, versus 45 per cent for next-generation success. In all, 84 per cent of respondents said moderate to radical changes are needed in their firms.

“It’s clear that most businesses and industries will be disrupted or at least seriously impacted by the turbulence of the 2020s,” the report said. “In today’s complex and hyper-connected world, the pace of change has accelerated, disruptions occur more frequently, and a crisis anywhere can have a butterfly effect with global ramifications.”

“Family-owned businesses and family offices will be affected, and those that aren’t prepared to address new threats and opportunities will be left behind,” it said.  

“This study identifies a unique blueprint especially for enterprising families to prosper through today’s highs and lows,” Ida Liu, global head of Citi Private Bank, said. “From having difficult conversations around transfer in leadership to investing in new technology, this report can be used to spark important multigenerational conversations within families about how to proactively adapt to upcoming challenges as well as opportunities.”

The study is the culmination of a year-long research and writing project led by Professor John Davis, founder and chairman of the Cambridge Family Enterprise Group (CFEG) and professor of family enterprise at the MIT Sloan School of Management.