Family businesses in the Middle East have ambitious plans for growth but are called to operate in a new norm with increased challenges, according to the 2019 Middle East Family Business Survey, released today by PwC.
Family businesses in the region have always demonstrated a successful track record of growth thanks to an entrepreneurial founding generation and a vision for the future in mind. In the past, they reported the highest growth numbers compared to their global peers. Though still optimistic, this year’s survey finds that growth has been more modest: 53% of respondents reported growth last year compared to 74% two years ago. This is largely attributed to changing market dynamics and disruption which these leaders now recognize need to be addressed.
Hani Ashkar, PwC Middle East Territory Senior Partner, says: “Family businesses in the Middle East have long spearheaded economic growth with significant GDP and employment contributions. Today, they are expected to operate in an environment that is changing more rapidly than ever. Changing times, however, require adaptability and action; transforming challenges into opportunities. Family businesses are called to enlist their values, loyalty and their commitment to find new ways of operating in a constantly evolving environment.”
Survey highlights:
- The economic environment is reported as the key challenge by 78% of the respondents. At the same time, traditional challenges that are pertinent to family businesses around accessing skills, succession planning and the professionalisation of the business continue to be high on leaders’ agendas. In the list of top five challenges facing family businesses over the next two years, the economic environment is followed by the need to access the right skills (66%), the need to innovate (63%), the impact of regulations (63%) and succession planning (53%).
- The PwC survey also shows that family businesses are recognising the need for action in order to remain competitive and secure their legacy in a digital age. 47% of respondents reported vulnerability in the face of digital disruption and the same number reported concern over cyber-attacks. In terms of future planning, 66% of respondents are taking significant steps to improve their digital capabilities and 34% expect to change their business model accordingly, over the next two years.
- Another theme that emerges this year is a recognition of the importance of a fostering ecosystem. Beyond the economic, other external factors such as changing regulations show how government policy development can be an influential catalyst or inhibitor for growth for family businesses across the region.
PwC Partner and Middle East Entrepreneurial & Private Business Leader, Adnan Zaidi, says: “Our publication aims to be a comprehensive analysis of all current factors impacting the growth of family businesses in the Middle East and to shed light on the areas we believe family business leaders need to address in order to ensure a sustainable future for their businesses.”
“Interpreting our survey’s results, we realise that family business leaders need to address four key areas: First, and from an internal perspective, they need to professionalise their business, establish better corporate governance and organise a succession plan to ensure a smooth generational transition. Secondly, from a business perspective, they need to examine with objectivity and efficiency the profitability of their business segments. Mastering both bottom-line profitability and top-line growth is what will distinguish the family business of the future. The third factor is the impact of innovation and digitalisation which are undeniable competitive tools – a digital mindset and embracing innovation is more important than ever for business leaders. And finally, a collaborative mindset is essential: Embracing peer-to-peer and public-private collaboration as well as policies that support growth and ensure accountability and transparency on governance can enable sustainability for family businesses.”
Amin Nasser, PwC’s Family Business Senior Advisor, also shared his insights on working with Family-owned Businesses, remarking that “Business challenges come on top of traditional family-centric challenges, so family businesses need to tackle all fronts simultaneously. Leaders need to also ensure the development of a strong and motivated next generation which is key to successful transition. One distinguishing competitive advantage are the values of family businesses. Common ideals that cultivate a sense of duty, belonging, responsibility and a purpose can build a family business DNA that transcends time.”
Indeed, the PwC survey reports that the vast majority (88%) of Middle East Family Businesses have a clear sense of agreed values and purpose.
Adnan Zaidi concludes: “We are in times of rapid transformation and family business leaders cannot afford to remain static and wait for an economic upturn. At the same time, if family businesses prepare adequately to rise to the new challenges and face the future, there are enormous opportunities. The time to act is now.”
