Family businesses play an important role in the global economy. They generate more than 70 percent of of the world's gross domestic product (GDP) and generates about 60 percent. world jobs. Even such business giants have to go with technology alone. However, this can sometimes pose certain challenges between the different generations representing the family business, and one of the most real challenges is the application of generative artificial intelligence (AI).
The world's most successful family businesses count not just one decade, but some, even a century. For example, Walmart, the world's largest family business, was founded in 1962, so it is natural that more than one generation contributed to the successful results. It is estimated that in Lithuania about 38 percent companies are family businesses. According to the data of the Confederation of Lithuanian Industrialists, about 95 percent of family businesses are still first generation businesses.
According to experts, the success of family businesses is often determined by resistance to external factors, long-term strategic direction, ability to renew and adapt over generations.
Family businesses generate the largest GDP
"The world's largest family businesses generate impressive revenues. For example, the 2023 Global Family Business Index reveals that the 500 largest family businesses collectively generate nearly €8 trillion in revenue and employ around 24.5 million people worldwide. These numbers show the economic power of family businesses and the fact that they are growing faster than the overall world economy," notes the digital bank European Merchant Bank | Sarp Demiray, Executive Director of EMBank.
The expert adds that in addition to Walmart, there are other well-known family businesses in the world, such as Volkswagen Group, Berkshire Hathaway and Exor, which controls Fiat Chrysler Automobiles, Ferrari and CNH Industrial. Almost half of the largest family businesses are located in Europe. It is noted that some of the strongest and largest family businesses are established in Germany.
Family businesses also have unique characteristics that contribute to their success. They tend to have longer tenures, stronger internal cultures, and a focus on passing on values and assets to succeeding generations. Such businesses are also known for their entrepreneurial activities, often implementing mergers and acquisitions of other companies in order to maintain a competitive edge.
Young managers are targeting AI
However, the technological progress of recent years shows that the younger generation would manage the family business not only with a new approach, but also with new technological solutions. A survey conducted by the auditing and business consulting company "PwC" shows that 73 percent of entrepreneurs surveyed believe that generative AI is a powerful transformational tool that family businesses are not taking advantage of.
According to Demiray, business leaders recognize the importance of building an early-day generative AI strategy to avoid potential business stagnation. About half of all CEOs of private companies, including family businesses, say their company will not be viable in the next ten years if it stays on its current path. For this, both conceptual and financial factors are important – preparing employees for AI integration and investing in training and technology.
The use of generative AI would contribute not only to competitiveness, but also to business progress. Future family business successors will have responsibilities towards their business, its employees, family, society and the environment. For this reason, future business successors need to prepare as early as possible for the possibilities of using AI, assess the risks and benefits and foresee the most appropriate path for the technological development of their company.
There are as many people who ban AI as there are people who use it
The head of the bank points out that the PwC survey shows that almost half of the businesses have not yet started to be interested in AI, and 9% have. have banned the use of AI within the company altogether. 37 percent only 8% of the respondents claim that they have tried AI at least once. – already using AI in business.
Such numbers are also associated with emerging doubts. Especially often in family businesses, not only attitudes, but also understanding of technology collide, so what seems like normal research to the new generation of entrepreneurs, may seem like a waste of time to the elders.
But it's not just the different technological know-how in the family business that inhibits the rapid integration of AI. In comparison, almost 70 percent. of family business managers note the challenges of cyber security, while less than 50 percent of the younger generation of future managers identify such risks. of those interviewed.
Also, almost 50 percent family business managers see reputational risk in using AI. At that time, only 29 percent the new generation of future family business successors see potential reputational risks.
This suggests that the new generation is more open-minded about the use of AI in business, suggesting that as leadership changes in the family business, we are increasingly likely to see AI being used. Probably few people will announce it publicly, because competitors may see it as help from the country. However, if an advantage is gained in this way, competitors will have to look for a quick response.
Lithuanians want technology
Lithuania does not have such family business giants as Germany or the United States. Most family businesses in Lithuania are small or medium-sized, which means that the divide in attitudes is not so great, not to mention that the integration of technological changes is somewhat easier due to the relatively small size of the team.
"From the side of our bank clients alone, we see that entrepreneurs increasingly want to optimize their company's operations. They want to consult about possible financial assistance, model how long the loan will bring the result. It would take time for the entrepreneur to calculate it himself, especially since additional factors need to be taken into account. As a result, they leave their financial decisions in the hands of professionals.
In this case, it should be noted that banks also operate differently. For example, digital banks are looking for the latest and most advanced technological solutions to serve the customer, and the use of AI is no exception. Therefore, for some time now, the bank is no longer just a money hoard that lends for certain interest. The bank helps businesses make the most of their money, helps them assess potential risks, so technological solutions are also needed for this, which are consistently implemented, says the EMBank representative.
S. Demiray adds that clients value the opportunity to focus on business development rather than on daily accounting challenges. But not only that, it says a lot about the direction of the business. The mere fact that Lithuanian businesses are increasingly interested in the green direction shows that we are open to innovation. More and more businesses are relying on the benefits of solar power plants or accumulators, for which they borrow considerable sums of money. This shows that businesses want to save and don't want to think about how to do it themselves. AI is also implemented in these smart devices, so one way or another, Lithuanian businesses are little by little touching the benefits of AI.
