Absorb for Family Firm Success

Absorptive capacity is essential for your family-run store to thrive. Studies at University of Castilla-La Mancha supported this conclusion by using an instrument to measure the four components of absorptive capacity as generally agreed on by business scientists. Here is my version of those four along with why they are especially important for the family-run enterprise:

• Acquisition. The business regularly exchanges information with others in the industry. This overcomes an inbreeding danger for the family-run store, in which management decisions are always made by the same select group. 
• Assimilation. Ideas for improving the business are continually communicated and critiqued. Otherwise, senior family members can mistakenly believe junior family members understand the reasons for decisions, and junior members can hesitate questioning flawed ideas for fear of disrupting family peace. 
• Transformation. The accumulated and critiqued information fuels innovation. One of the frequent upsides of a family-run business is stability, but without a strong transformation capability, the stability results in the business falling behind the marketplace. 
• Exploitation. The business tests out prototypes before undertaking full implementations. This component of absorptive capacity facilitates both the innovation and the opportunities for critiques. 

     In a sample of 1,045 family firms, those reliably practicing the four above showed greater sales growth, profit growth, and growth in market share. An entrepreneurial spirit also proved important to success, but it operated through absorptive capacity.
     Family-owned stores too often lack longevity. That reality transcends languages and cultures. Consider the English-language versions of these maxims:

• “Father merchant, son gentleman, grandson beggar” (Mexico) 
• “Rich father, noble son, poor grandson” (Brazil) 
• “From the stables to the stars and back to the stables” (Italy) 
• “Wealth never survives three generations” (China) 
• “Shirtsleeves to shirtsleeves in three generations” (U.S.) 

     Those were collected by investigators at Boston Consulting Group and Cambridge Advisors to Family Enterprise to flesh out the fact that only about one out of every ten privately-held businesses makes it through to the third generation.
     Family-run businesses have advantages. The loyalty among management members helps to persevere through the tough times. As long as the senior members cultivate a life outside the business, developing a succession plan is straightforward. The business projects an authentic sense of family to customers and prospective customers. According to research at University of Geneva, giving a sense of family is useful for retailer-to-business relationships, too.
     By incorporating absorptive capacity, your family-run business can realize these advantages for the long-term.

For your success: Retailer’s Edge: Boost Profits Using Shopper Psychology

Click below for more: 
Exchange Retailing Ideas with Lots of Others
Prolong Opportunities for Family-Owned Stores
Incorporate Family Values into Your Retailing