Inspiring Innovation: The Challenge for Next Generations

In 1931, Harry Beck was a 29-year-old temp, working at London Transport drawing electrical circuit diagrams. He showed one to the publicity department, suggesting that it might make underground maps easier to read if they straightened the lines and spaced the stations more evenly apart, like in a circuit diagram. He was laughed out of the office.

Two years later, a persistent Beck persuaded them to trial a print run of 1,000 copies. They sold out within an hour. Within six months there were a million in circulation and almost every tube system in the world now uses Beck’s circuit diagram style of map. Beck didn’t invent circuit diagrams, they’d been around for decades, but he was the first to think of using them for maps.

Likewise, Steve Jobs didn’t invent the laptop, nor did he invent the mp3, the touch screen, the mobile phone, or the digital camera. All those things were already out there, in different industries, in different disciplines. He was the first to start packaging them together, into the iPod, iPhone, iPad; the innovations that collectively make up over 70% of Apple’s turnover today.

Everyone knows the story of James Dyson and the bagless vacuum. How he made around 5,000 prototypes, how Hoover turned him down, how he went on to transform the industry and make Dyson the 6^th largest family business in the UK. Few people know that cyclonic extraction, Dyson’s central innovation, had already been around for a century. Dyson first came across it while visiting sawmills, where cyclones have been used to extract and separate sawdust since at least the 1920s. His innovation was to bring it into the living room.

How do you keep innovation going?

The history of innovation is built on just such examples, of ideas from outside an industry triggering a transformational change. Similarly, the history of many family businesses begins with an innovative founder, an industry outsider, bringing a new approach, a new technology, a new idea to the party.

The challenge is, how do you keep that going? How do you ensure new ideas continue to flow in, from other industries, other disciplines, other cultures, as that first generation hands over to the second and the third?

One of the first family businesses I ever worked with was in its third generation, owned and run by two brothers. Their grandfather had been a well-connected opportunist, an innovator, an entrepreneur and a philanderer, who’d apparently set up at least one of their companies as a way to keep his mistress away from his wife. Their father had joined the business in his twenties, and both brothers had worked in it, man and boy.

They were great at what they did and regularly won industry best-service awards. They knew the industry inside out, but hadn’t introduced any fundamental innovations for probably forty years, and they were being increasingly out-manoeuvred by the competition. They were both young, but the reason they’d asked me in was to help them sharpen up the business ready to be sold. I got the very clear feeling they’d run out of enthusiasm, out of ideas, and out of love with the whole thing.

Market changes and disruption: what’s the challenge for the next generations?

Grooming successors, a next generation who can take over the reins, is a big consideration for any family business. But bringing in fresh perspectives, fresh blood, fresh energy and fresh ideas, the fundamental ingredients of innovation, are increasingly critical for every business, family or not.

The pace of change, across most industries, is accelerating by the year. In the 1950s, the average time a US company spent in the S&P 500 was 50 years. By 2012 it was less than 20 years. Businesses are no longer steadily trading share with competitors, they’re being fundamentally disrupted by outsiders. Neither Reid Hastings nor Marc Randolph had ever worked in the film industry or run a retail store in their lives. It didn’t stop them founding Netflix and putting Blockbuster, and a thousand smaller video chains out of business.

The challenge for family businesses might once have been: how to keep the next generation in the business to take it over. But the challenge in the future is far more likely to be: how to get them out of the business, into different industries, different disciplines, different cultures, so they can bring a new wave of ideas, innovation and entrepreneurialism back into the fold.

Martyn Drake is the founder of Binley Drake Consulting. His clients range from global brands like Weight Watchers and Walgreen Boots, through family businesses like Advance Group, Alstons and Joules, to non-profits like the National Autistic Society and Parkinson’s UK. He helps them to grow, innovate and change, to improve performance and lead their markets, to set more ambitious goals and to surpass them. Prior to consulting, Martyn spent 20 years in senior roles within private equity hospitality and global retail businesses. He lives in Nottingham with his wife, two children and an ever-growing menagerie of pets.