Generative AI sparks family business renaissance: PwC report

The next generation of leaders in family businesses is poised to embrace the transformative power of generative AI (GenAI) despite marked resistance from the incumbent leaders, according to a PwC report.

The global report, based on a survey of over 900 NextGen individuals aged between 18 and early 40s, was aimed at understanding family businesses’ “Success and Succession in an AI World.” These “NextGen” participants, PwC said, have emerged as trailblazers in harnessing the power of AI and advocates for its integration in family businesses.

According to the report, a whopping 73% of NextGen leaders acknowledged that GenAI is a powerful force for transformation and has the potential to reshape business operations and drive innovation. In the same breath, the findings suggested the NextGen leader’s apprehension about the incumbent leaders’ ability to capitalize on it.

“They (NextGen) are more optimistic about generative AI than the incumbent generation, but that they understand the urgent need to shift responsibility for AI out of discrete silos and to deploy it to support enterprise-wide adoption in their companies,” PwC said in the report.

The report also highlighted that NextGen leaders echoed the sentiment of global chief executives as far as the transformative potential of GenAI is concerned. An earlier PwC Global CEO Survey 2024 showed that 70% of business leaders believe GenAI will significantly transform future businesses and the future of businesses.

However, the NextGen business leaders of family businesses showed uncertainty about the present owners’ and decision makers’ ability to fathom the power of digital transformation.

“The hardest part of digital transformation is changing the culture of the business to align with new challenges — and that’s even more difficult in a family-owned and operated enterprise,” Enrique Hinojosa, a fourth-generation leader of a family-owned business, Welldex Logistics in Mexico, was quoted in the report as saying.

The survey findings too echoed Hinojosa’s sentiment. “They are significantly less optimistic than the current generation of leaders about the business’s readiness and doubt that the current generation grasps the full potential of AI,” Scott Likens, global AI and innovation technology leader at PwC US said in the report. “The upsides encompass ‘unlocking a range of opportunities, including improved products and services, faster time to market, improved decision-making and higher profits.”

Why Family Businesses Matter

According to the International Federation of Accountants (IFAC), family businesses account for nearly 70% of global GDP and are significant employment generators. A UN Conference on Trade and Development (UNCTAD) study stated that two-thirds of businesses worldwide are either owned or managed by family businesses contributing 60% of the world’s workforce.

Thus, “harnessing the potential of generative AI isn’t only about any one firm staying competitive; it’s about shaping the global economic landscape,” advocated the PwC report. According to PwC, NextGen leaders as future business owners are the inheritors of the largest wealth transfer in history and, hence, owe the responsibility towards the society, the environment, the employees, and their families, besides their businesses.

“This includes an outsized interest in the business’s ability to responsibly navigate the hype, hopes, and fears surrounding generative AI,” the report added.

NextGen vs Current Gen: How are they stacked

The report highlighted the cautious nature of the current generation leaders compared to the NextGen leaders as far as adopting innovation is concerned. A significant 49% of family businesses have either not started exploring AI or have prohibited its deployment, and a mere 7% have implemented it in some of their businesses.

Pit that against global CEOs — about 32% of all CEOs have already implemented AI in some form or the other, and 31% of all CEOs say they have redefined their technology strategy because of AI, as per a PwC C-Suite insights study.

“There are solid reasons for this conservative approach,” justified the report, as “implementing GenAI is a marathon and not Sprint” as any company who wishes to implement AI “needs to strike the right balance between urgency and prudence.”

Another aspect of the family businesses, the report mentioned, is that such businesses favor proven technologies more compared to emerging technologies like AI, which restrict them from infusing any new money into businesses. However, the investment landscape is changing fast. Now, 90% of family businesses are open to private equity investment compared to 18% in 2011.

Urgent Call to Action

As family businesses stand at the crossroads of tradition and innovation, the PwC report suggested proactive measures to accelerate digital transformation and AI adoption.

With NextGen leaders getting themselves ready to take the baton from the incumbent leaders and lead the charge towards innovation, the time cannot be any better to embrace digital transformation seizing the opportunities presented by GenAI, suggested the PwC report.