By Rodrigo Basco, Ph.D.
‘The need to internationalize our company was not an alternative, it was a necessary step in a market we perceived saturated‘. These are the words of a family business CEO at an interview, referring to the future of the family saga in his company. The corporate vision is a characteristic of a good entrepreneur as it involves anticipating the path the company should take in order to avoid stagnation in the future.
The internationalization of a firm can be understood as a process that has different stages and constitutes a learning process in itself.
The interview with the CEO continued with amusing anecdotes about the internationalization process. I refer to them as ‘funny’ because past stories mixed with selective memory and time result in legends that will surely make us smile.
The company had been internationalized in his father’s time. ‘Of course,’ he said, ‘at our first attempt at internationalization everything went wrong’. He told us about a series of mishaps that made this first international experience of the business a total failure: they were scammed by their partners from the foreign country, foreign banks charged them a ridiculously high interest rate, all the shipments arrived late … there seemed to be an endless list of mistakes. And the story, quixotic, to say the least.
‘How can you go wrong in a process of internationalization?’, I thought. If you read a book on business administration, you know that the first thing to do is to plan, to minimize the problems that may cause the venture to fail. But reality is far from what the books portray as ‘technical’ when in fact they are prescriptive. Firstly, when an opportunity arises, more often than not, there is not much time for planning. Secondly, a small to medium size firm may not have enough resources, specifically human resources, to know all necessary knowledge for a new business venture (such as internationalization).
But just like an orchestra conductor, the businessman/entrepreneur has a specific ability to organize firm resources. This includes the ability to visualize where the firm should go, the ability to recognize a good opportunity, and the ability to create learning opportunities out of past mistakes and errors in the strategic implementation. Perhaps this last feature is what makes family businesses have greater resilience than the company which is non-family based.
Many entrepreneurs are able to visualize the future and recognize different opportunities, but at their first experience with failure, they leave the organization. The difference they have with a family businesses and family entrepreneurs lies in generational learning. In the family business, learning experiences between generations implicitly occurs because of interrelationships and interactions. The relationship between young and old in formal settings (such as a company meeting) and/or in informal meetings (such as a family meal) enables communication of experiences and transference knowledge through stories and anecdotes. That kind of learning, which is not regulated and is not learned in any classroom, is the one that allows the family business transcend through time.
In the interviewee’s opinion, the failure of the first international experience led by his father has become their main business asset: knowledge. That knowledge is an intangible resource that is embedded in the genetic code of the family members. The experience has been transmitted through formal and informal channels in family reunions, at business meetings, in different anecdotes… Their business is now successful at internationalization and growth, since past mistakes have not been committed again, and they know now how to proceed.
Knowledge and knowledge transfer are key aspects to the continuity of the family business.