Our collaboration with mid-sized family businesses has given us a clear picture: working on processes and comprehensive digitalization pays off. A 2022 study by the Witten Institute for Family Business (WIFU) shows that family businesses with a high degree of digitalization record significantly higher profitability and faster revenue growth than their competitors. Yet, despite this potential, many family businesses still have catching up to do. The efficiency gains offered by process development and the use of digital tools are by no means being fully exploited. This applies to all areas of the company, but especially to digitalization in production.
Digitalization and Artificial Intelligence (AI) offer great efficiency potential at many points along the value chain. Processes can be radically accelerated, managed holistically, and improved in quality. Digitalization projects consistently demonstrate increased earnings and improved resource efficiency. As a result, this makes companies more resilient.
Strategically weighing investments in uncertain times
The current economic environment, however, tends to lead to digitalization projects being postponed or even halted. It is fundamentally understandable to cut back on investments during times of high uncertainty. But digitalization is proven to foster resilience. Seamless information flows and institutionalized knowledge increase…
- operational capability and flexibility,
- risks can be identified earlier, and
- companies adapt more quickly to endogenous events.
It therefore requires a smart assessment of whether the impact of economic developments should be allowed to delay future-proofing and mostly strategically anchored projects. This is not an easy decision when profitability and liquidity are under pressure. Digitalization is a matter for the owners and part of the strategic direction. Digital process optimization using suitable technologies and AI offers family businesses significant opportunities for earnings improvements through lower costs, higher productivity, and new business opportunities.
Practical examples from the mid-market
Mid-sized business practice shows many approaches to further developing processes that have been implemented with digitalization and AI:
- In the tea industry, digital systems take over the unloading, inspection, and recording of raw materials during goods receipt. Product availability has improved significantly, supporting sustainable growth.
- A paint manufacturer has fully digitized and automated its production. This has resulted in a multiplication of production output, and the workforce has grown significantly.
Such solutions are independent of a company's size.
- A company that is relatively small in terms of headcount has fully digitized its accounting. Invoicing and payment monitoring run on demand rather than according to office hours. Automated dunning led to a reduction in outstanding receivables of approximately 80%. Instead of a multitude of file folders in the cabinet, the company has less tied-up liquidity.
- A carpentry shop invested in a robotic milling center and integrated it into production to produce wood and plastic parts more efficiently and with fewer resources. Time and material usage were significantly reduced.
Efficiency gains through digital and automated processes
Whether it is the reduction of downtime, the elimination of paper in the office and production, the reduction of waste, or the conservation of various resources—digital and automated processes have significantly positive effects on efficiency and make valuable contributions to corporate success.
Family businesses achieve these effects with a clear digitalization strategy and a planned approach to implementation. Defining a clear benefit or use case provides the foundation. Processes are digitized and networked end-to-end. The end-to-end logic breaks down existing silos or prevents them from forming in the first place. Involving employees in the respective areas at an early stage ensures the inclusion of the knowledge and experience of these people, who can often identify existing bottlenecks very precisely.
In family businesses, the success of digitalization depends crucially on the commitment of the owner family. The more actively and knowledgeably members of the ownership circle support the company's digital transformation and lead by example, the higher the success in individual digitalization steps.
Find out more here about digitalization as well as process and system analysis and optimization.
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