Complex Made Simple

This is how disruption will affect Middle East businesses

Disruption is the buzzword now, said Chabi Nouri, CEO of Piaget, at arab luxury world, a leading conference on the business of luxury in the Middle East, held in Dubai earlier this month.

Industries and businesses across verticals are becoming affected by disruption of different forms, either positively or negatively. Family-owned businesses are no exception.

Leading professional services firm Deloitte has revealed in a new study that 46 per cent of the next generation of leaders of family-owned businesses expect that the market in which they operate will face disruption in the next two to three years.

More importantly, 27 per cent of 268 family-owned businesses that took part in the NextGen Survey 2017 expect to lose market share to new entrants.

“The global economy is changing rapidly and fundamentally, due to the exponential speed of transformation in digital infrastructure, among other things. Quicker than ever, the past is being left behind – a tendency that in the perception of many goes against the tradition of family-owned businesses. That is why, especially now, it is important to listen to the leaders of the future,” says Walid Chiniara, partner and head of Family Enterprise Consulting practice, Deloitte, Middle East.

The next generation

The next generation of leaders of family-owned companies says they are well prepared to anticipate disruption. The survey and the conversations show that they have a clear picture of the direction in which their industry is moving and that they understand the nature of the disruptive forces in the market and in their company.

They do indicate that they face two big challenges: the structure of leadership revolves too much around the family/management and there’s a lack of skills among staff to optimally perform in a disruptive environment (17 per cent does not have the skills, 35 per cent only partly has these skills).

Fast and agile

According to the next generation, the biggest disrupting factor for family-owned businesses is not market disruption (20 per cent), but the changes in family relationships (24 per cent). Succession is seen as the biggest disrupting factor by 14 per cent of the interviewees. 73 per cent states that succession is a natural moment of disruption.

The next generation is more aware of the meaning and effect of disruption than the previous generation. Interviewees indicate that the biggest advantage family-owned businesses have in times of disruption is that they are ‘fast’ and ‘agile’ when compared to other organisations.