Our work with mid sized family businesses gives a clear picture: working on processes and digitalising thoroughly pays off. The 2022 study by the Witten Institute for Family Business (WIFU) shows that family businesses with a high degree of digitalisation record significantly higher profitability and faster revenue growth than their competitors. Despite this potential, many family businesses still have ground to make up. The efficiency potential offered by developing processes further and using digital tools is by no means fully exploited. That applies to every part of the business, but especially to digitalisation in production.
Digitalisation and artificial intelligence (AI) offer great efficiency potential at many points along the value chain. Processes can be radically accelerated, steered as a whole and improved in quality. Digitalisation projects consistently show gains in earnings and in resource efficiency. The result is a more resilient company.
Weighing investment strategically in uncertain times
The current economic environment tends instead to push digitalisation projects back or stop them altogether. It is understandable that investment is scaled back in times of high uncertainty. Yet digitalisation demonstrably strengthens resilience. Uninterrupted information flows and institutionalised knowledge increase
- the ability to act and to stay flexible,
- the chance of spotting risks earlier, and
- the speed at which companies adapt to events.
It therefore takes careful judgement to decide whether the effects of economic developments may be allowed to delay projects that secure the future and are usually anchored in the strategy. That is no easy decision when profitability and liquidity are under pressure. Digitalisation is a matter for the owners and part of the strategic direction. Digital process improvement with suitable technology and AI offers family businesses considerable scope to improve earnings through lower costs, higher productivity and new business opportunities.
Examples from the mid market
Practice in the mid market shows many approaches to developing processes further with digitalisation and AI:
- In the tea industry, digital systems handle unloading, inspection and recording of raw materials at goods intake. Availability of goods has improved markedly and now supports sustainable growth.
- A paint manufacturer has fully digitalised and automated production. Output has multiplied and the workforce has grown considerably.
Solutions like these do not depend on the size of a company.
- A company that is fairly small in terms of headcount has fully digitalised its accounting. Invoicing and payment control now run as needed rather than to office hours. Automated dunning reduced outstanding receivables by around 80%. Instead of a cupboard full of folders, the company has less liquidity tied up.
- A joinery invested in a robotic milling centre and integrated it into production in order to make wooden and plastic parts more efficiently and with less waste. Time and material use fell markedly.
Efficiency gains through digital and automated processes
Whether it is reducing downtime, avoiding paper in the office and on the shop floor, cutting reject rates or conserving various resources, digital and automated processes have a significantly positive effect on efficiency and make a valuable contribution to business success.
Family businesses achieve these effects with a clear digitalisation strategy and a planned approach to delivery. Defining a clear benefit or use case is the foundation. Processes are digitalised and connected end to end. End to end logic dissolves existing isolated solutions or prevents them from arising in the first place. Involving the people in each area early brings in the knowledge and experience of those who can often name existing bottlenecks very precisely.
In family businesses, digitalisation success depends decisively on the commitment of the owning family. The more actively and knowledgeably members of the ownership circle support the digital transformation and lead by example, the greater the success of each digitalisation step.
You can read more about digitalisation and process and system analysis and improvement here.
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