Introduction

Innovation is often defined as the multi-phase process of generating and adopting new or improved products, services, processes, or structures to adapt to dynamic environments. Innovation is essential for all firms in order to remain competitive.

But the successful navigation of the innovation process is not easily achieved among family firms. While most stages of the process present difficulties, the initial adoption phase is among the most important. One key means of enhancing the success of innovation within family firms is to assess readiness prior to beginning the innovation process.

Readiness for Innovation in Family Firms

By conducting an examination of the family firm's underlying readiness for innovation, family managers can better understand how the firm is positioned to move through the innovation adoption phase. If executed with care, the likelihood that the process will proceed efficiently can be greatly improved.

The Readiness for Innovation in Family Firms (RIFF) framework allows family managers to assess the extent to which the firm is prepared to adopt and incorporate any new innovation, and takes into account the specific characteristics of family firms

The framework consists of structural and psychological factors.

Structural factors represent the basic building blocks that are necessary for innovation readiness, and include aspects like ownership control, family commitment, and alignment of existing knowledge, skills and abilities with regard to the new innovation.

Psychological factors, on the other hand, reflect the extent to which members of the family and firm are cognitively and emotionally inclined to accept, embrace, and adopt an innovation.

Among these factors are innovation appropriateness (acceptance among the family that a specific innovation is correct for the situation) and innovation benefits (shared belief that the innovation aligns with the family’s overall goals and aspirations).

Implementation

With an understanding of key structural and psychological factors, assessing the appropriate factors within the framework at the appropriate time can be a critical aspect of innovation readiness, as successful adoption is influenced by accurately diagnosing and addressing the appropriate issues at the appropriate time. The firm's readiness can be evaluated through a sequence of assessments: initiation, decision making, and experimentation.

In the initiation phase, family leaders must first recognize the need and importance of innovation. During the decision-making phase, structural factors related to the family and firm should be considered in addition to the psychological factors related to the family. Foremost, family owners' control and established direction are key structural factors. Other details, like ownership, managerial involvement, and board representation should be decided at this stage. The final stage of innovation adoption, the experimentation phase, is contingent on psychological factors.

Some of the most radical shifts in management style and organizational structure have evolved out of the experimental phase of innovation adoption.

Innovation is not limited to products and services; some of the most radical shifts in management style and organizational structure have evolved out of the experimental phase of innovation adoption. One example is W.L. Gore & Associates (the creators of Gore-Tex) who conceived of a provocative company structure connecting every individual in the organization to every other, in an informal network that allowed free flow of information without layered management.

This was only possible after a shift and alignment of psychological factors among the family and all of the firm's stakeholders.

Implications

Innovation is widely accepted as the primary path to sustaining competitive advantage in both family and non-family firms. Family firm leaders may improve their ability to successfully adopt innovations by understanding innovation readiness. That understanding is derived from an understanding of both the structural and psychological factors that influence the family, individuals within the firm, and the firm itself.

The RIFF assessment framework, which describes a sequence of three phases within the innovation adoption stage, can benefit family owners as they attempt to lay the groundwork for innovation within their own products, services, and business models.

Source: http://cmr.berkeley.edu/browse/articles/58_1/5806/