Most Asian family businesses are aware of technological forces disrupting their businesses, but only less than half have devised and executed a response strategy, according to study from Lombard Odier.

Family businesses should better harness generational diversity, overcome entrenchment and engage external sources of talent and capital to sustain growth between generations, writes Swiss private bank Lombard Odier in a new report.

The top five disruptors to Asian family businesses include big data (60.5 percent), artificial intelligence or AI (52.1 percent), Internet of Things or IoT (48.7 percent), renewable energy (42.0 percent), and robotics (40.3 percent).

Awareness But Limited Action

While over 60 percent of respondents have taken steps to identify and understand the nature of disruptive technologies, only one-third have developed a clear perspective on the future direction for their own industry, market, and business amid technological disruptions. 12 percent did not take any action at all when facing technological disruptions, while only less than 30 percent managed to embrace deep transformation by integrating disruptive technologies into their existing business models.

On average, it took approximately 28 months for Asian family businesses to identify and execute a response to a disruptive technology.

The report was authored by Professor Roger King and Jeremy Cheng of the Tanoto Center for Asian Family Business and Entrepreneurship Studies at The Hong Kong University of Science and Technology and based on the results of an extensive survey conducted by Lombard Odier and HKUST of 119 next generation members of family businesses in South East Asia and North Asia.

Barriers to Countering Disruption

Major barriers to Asian family businesses overcoming disruption include rigid mental models, emotional ties to loyal staff and existing assets, formalization, and political resistance. Asian family businesses also show low dependence on resources from external capital providers, indicating their concern about control dilution.

Families should rethink their control mentality. Those choosing to delicately balance control and resources may stand a better chance of exploiting opportunities presented by technological disruption.

Maintain Flexibility

Professor King said: «Many Asian family businesses are still in the awareness stage and remain far from formulating competitive strategies to exploit opportunities fueled by technological disruption.»

«Family businesses must strive to maintain flexibility and agility to be able to respond to disruptions in a timely manner. This can be a challenge when a family business grows in size and is passed down across generations,» Vincent Magnenat, CEO of Asia Pacific at Lombard Odier and limited partner, added.

Not a Life Sentence

The study found that Generation X took longer to recognize disruptive technologies than Generation Y. Families should actively consider strategies that capitalize of Generation Y’s digital diversities and absorb home-grown digital natives in their response to technological disruption.

«The study has highlighted Generation Y’s ability to add value by identifying disruptive technologies quicker than prior generations, but an increasing number want to create their own ventures,» Magnenat added. «Families should look to embrace the next generation’s digital savviness within the family business, or alternatively grab opportunities to turn next generation start-ups or spinoffs into a disruptor.»