ILMA Compoundings – November 2018 - 42

BUSINESS HUB

Creating a Culture
of Innovation
By Joe Schmieder

I

nnovation is often seen as creative
change that produces meaningful
results. Family businesses that
demonstrate a proactive ability to
drive meaningful, value-adding change
are those with the strongest cultures of
innovation.
In some family firms, the notion
of innovation, creativity or change is
clearly stated in their values, which
might be posted on the walls of the
company. SC Johnson, the global
household cleaning company that
uses the tag line "A family company,"
makes its values as clear as glass freshly
cleaned by its products:
* Entrepreneurship
* Innovation
* Risk-taking
* Knowledge and technology
* Employee welfare
* Customer-relationship marketing
* Vision
* Proactivity
* Global thinking
According to this list, the Johnson
family explicitly values innovation.
Supporting innovation are the complementary values of entrepreneurship
and risk-taking. It takes an entrepreneurial drive and some investment risk
to make innovation real and meaningful. Four generations of Johnsons have
been inspired to exemplify these values
by the story of founder Samuel Curtis
Johnson: At age 53, he launched a
flooring company, then quickly diversified into floor maintenance when he

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NOVEMBER 2018

| COMPOUNDINGS | ILMA.ORG

observed that his customers needed a
product to preserve their new floors.
Most family businesses have not
been as intentional or broad-scope
about innovation as the Johnsons. In
other family firms, innovation might
be exhibited mostly in one area of the
business or only for specific periods of
time. In one example, a family firm in
the adhesive coating industrial sector
discovered that one of its key ingredients was going to be discontinued
by its sole supplier. Understanding
that this would devastate the business, a team of engineers, managers
and salespeople banded together to
generate a creative solution. It turned
out that one of the salespeople's customers knew a different vendor with
a similar ingredient. After some joint
development with that vendor, which
was also a family business, a formula
was developed to suit the firm's needs,
resulting in an even better adhesive.
This was just one time the family firm
exhibited such joint problem-solving
innovation.
Creating a culture of innovation
shouldn't be about product/service
developments alone. On the one hand,
there may be no greater practical way
to create a sense of innovation than
to produce a steady stream of new
market-focused products. New-product
introductions are exciting and highly
visible to the organization and its
stakeholders. On the other hand, to
maximize performance, companies
need to aim for innovation on multiple
levels. That means long-lasting family
firms also work on creative ways to:

* Take measured risks to develop
new wealth while preserving
foundational or legacy wealth.
* Blend diverse family members
working in the business with
capable nonfamily executives.
* Transition ownership from one
generation to the next while
balancing incentives to work hard
with financial security.
* Develop the next generation into
leaders who are able to reinvent
the business for greater growth,
building upon the founder's legacy without trying to replicate the
founder's hero image.
* Live family values that set the
tone for business continuity while
remaining focused on managing a
healthy business in the short term.
* Steward family resources in a
manner that benefits customers,
employees, communities and
family members.
* Develop effective governance practices that balance the sometimes
conflicting needs of the family,
management and ownership.
Together, these elements support
a highly innovative family business
culture.
Schmieder is a principal at
The Family Business
Consulting Group.
Adapted from an article of the same
title on The Family Business Consulting Group's blog on family business.
http://www.ILMA.ORG
ILMA Compoundings – November 2018

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