49th St. Gallen Symposium "Capital for Purpose": 8–10 May 2019

EDIT HEADER

There’s no business like family business

You might think that a country can only have one royal family. In most cases that’s true, but it that’s not the case in Sweden. The Nordic nation’s unofficial ruler arrives in St. Gallen wearing a black suit and green tie, carrying a small black back bag.  

Marcus Wallenberg represents the fifth generation of one of the most powerful families in Sweden: The Wallenberg family. Their businesses have dominated the Swedish economy for over 160 years. According to the Financial Times, in 2015 the Wallenberg family controlled businesses worth around 250 billion Euro. However, Marcus Wallenberg doesn’t like the word empire. “Call it the Wallenberg Group or whatever,” Wallenberg says. Instead of being royally reserved, Marcus Wallenberg is a man who quickly comes to the point when talking about family businesses: “As a company you have to make sure that you do not stop changing, evolving and thinking new,” he says.

Their family business started in 1856, when André Wallenberg founded Stockholm’s Enskilda Banken. Through a network of corporations and foundations the family owns interests in companies like ABB Group, SAAB Group and Ericsson. When asked about the business values that the family’s companies share, he often points out their long-term perspective and their ability to build businesses over a long time – attributes experts often cite as key traits of family-owned businesses.

The Wallenberg’s network of companies are an extreme example of a family business, but they’re far from alone. According to KPMG Enterprise, there are over 14 million family businesses in Europe, which provide more than 60 million private sector jobs in total.

The importance of values

Even through most family businesses are not as big as the Wallenbergs’, most of them also rely on strong corporate values that are deeply embedded into their business strategies. Those values help shape the culture in both the families and among their employees. Wallenberg says change also includes finding out which values that are important to keep.

But things are changing for family companies, and so are business values: The Internet has created companies that did not exist before and automation and AI is rewriting business models. Research shows there are certain characteristics in family businesses that can work against innovation. A study by consultants from PwC Global asked more than 2,800 senior executives from family firms across 50 countries about the advantages and disadvantages of their companies. When asked about innovation and risk-taking, a third of the respondents said that family firms are less open to new thinking and ideas than other companies. Over 60 percent think that family firms are not willing to take more risks than other companies.

 
Change also includes finding out which values that are important to keep.
Marcus Wallenberg and Jan Martel at the 48th St. Gallen Symposium

Smaller giants

Wallenberg does not believe that family businesses are less innovative than startups. Still, he believes that the traditional companies have to change. “If you want to bring the best product and most innovative product at the best possible terms of condition to your customer, you have to change,” he says. He believes that Chinese and US companies are better at innovation, particularly when it comes to technology and digitisation. “In the future, we have to compete with them.” Therefore, traditional companies must keep their entrepreneurial spirit and understand how new technologies work.

But can the Wallenbergs be compared to a much smaller family business? At first sight, Jan Martel’s family firm has only two things in common with the Swedish family empire: they were both established in the 19th century.  And both men represent the fifth generation of their companies.

Compared to the Wallenbergs, Martel AG St. Gallen can be considered a small family company - even though Martel is one of the leading wine dealers in Switzerland. The family owns two shops in Saint Gallen and one in Zurich. For Martel there are two different camps when it comes to business models: the traditional companies and the startups. “A functional family firm has to include both sides of the story,” he says.

Just like the Wallenbergs, Martel does not believe that family firms will lack innovative spirit in the future. He says that the often-criticized decision-making procedures in family firms can be faster than those of startups. “We do not have to discuss things with investors, we can be fast and still express our values.” That also includes adjusting their family values day by day.

Neither Wallenberg nor Martel see a lack of willingness to change on the part of family firms. “There are examples of family businesses that have been around for a long time,” says the Swedish banker. “Probably they were pretty good at innovating and changing, otherwise they would not be in business anymore.”

The often-criticized decision-making procedures in family firms can be faster than those of startups.