Family-owned businesses in Asia Pacific are preparing to hand over the reins to a new generation of heirs amidst a technological renaissance. Driving a new era of innovation, generative AI (GenAI) can not only revitalise these traditional enterprises but also shape succession outcomes.
To stand a greater chance of preserving their legacy, family-run ventures in the region must be open and willing to embrace this disruptive, emerging technology. It falls to the next generation of family business leaders aged between 18 and the early 40s – also known as the NextGen – to lead this transformation.
More tech-savvy than the incumbent generation, these successors-in-waiting are best suited to act as advocates for GenAI, our Global NextGen Survey 2024 reveals. This Asia Pacific edition surveyed 310 NextGen leaders across 13 territories to understand their thoughts and actions on the key issues facing their family businesses.
The GenAI revolution: an opportunity that should not be missed
GenAI is already fundamentally changing the way we work, not long after bursting onto the scene. Whether it is text, code, images, video or audio, using machine learning to create new content has become much easier and faster. This offers family businesses a potential shortcut to new ideas, simpler processes, and better-informed decisions.
Almost three-quarters (73%) of NextGen are upbeat about the transformative power of GenAI, both in Asia Pacific and globally. The upsides are plenty - GenAI can help businesses to adapt quickly to market changes, unlock new revenue streams and gain an edge over competitors. Yet, nearly 70% of NextGen in the region (vs 66% globally) admit it can be hard to keep up with the rapid growth of AI in general.
Asia Pacific NextGen see employee productivity (48%), enhanced operational efficiencies (38%), and cost savings (36%) as the top three benefits of AI generally, aligning with their global counterparts. This demonstrates that today’s business progeny is aware of, and value, the tangible opportunities that digital transformation brings.
These future family business leaders believe that AI can make meaningful contributions in three key areas. Specifically, 44% believe that AI’s greatest potential lies in the digital upskilling of their workers, more so than their global peers. Meanwhile, 38% see AI as the driving force behind technology adoption while 37% believe AI can act an important enabler for business growth. Globally, AI’s number one impact is seen as compelling the use of tech-powered solutions.
NextGen are clearly convinced that embedding AI into their business can be a gamechanger. Empowering workers to future-proof their skills make it easier to deliver value. And harnessing the transformative power of AI can put the family business on a stronger footing when the handover from one generation to the next eventually takes place. However, there is a lot of ground to make up for.
GenAI ambition vs execution: a gap remains
Like their global counterparts, a significant majority of Asia Pacific NextGen (84%) have expressed a personal interest in GenAI. However, there is a wide gap between interest and expertise – only less than half (42%) consider themselves knowledgeable about GenAI.
More than 50% of family businesses in the region have yet to explore the use of GenAI. Notably, only less than a tenth (8%) have adopted GenAI. This suggests that those in the driver’s seat do not share the younger generation’s enthusiasm for emerging technologies.
The disconnect between the NextGen’s personal interest and existing corporate strategy with regards to GenAI suggest that there may be barriers to adoption. The conservative and risk-averse nature typical of family businesses may account for the hesitancy or lack of initiative in integrating GenAI.
NextGen’s hopes and fears in an AI-driven world
To thrive across generations, family businesses must rethink strategies and be more open to new perspectives. Here, Asia Pacific NextGen feel they can personally make the most difference in these areas: professionalising and modernising management practices, as noted by almost a quarter (24%) of respondents, and investing in new ideas, as cited by a tenth of participants.
This is no surprise. Being more receptive to newer technologies, the forthcoming generation probably feel that they can leverage GenAI to make the greatest impact in areas they feel strongly about.
Only 55% of Asia Pacific NextGen believe there are clearly defined roles and responsibilities in their family enterprise, lower than the global average of 63%. In addition, just 40% acknowledge the presence of a robust governance structure, whereas around half of family businesses globally already have such a framework in place.
Slightly over a fifth (22%) of respondents have faith in the digital capabilities of their family business (vs almost a third globally). With only 9% of Asia Pacific family businesses having established protocols on the responsible use of emerging technologies like AI, this lack of clear governance could hinder the adoption of GenAI.
Respondents in Asia Pacific are excited about their career opportunities and goals. But they worry that the longer the current generation delays retirement, the harder it would be for them to make an impact when they finally take over. After all, a longer runway to succession reduces the lead time for learning the ropes.
70%
have a clear idea about personal ambitions for a future role in the family business
and
74%
feel they have opportunity to learn and grow within the family business
60%
are aware of succession plan development
while
15%
do not know if there is a succession plan
Asia Pacific NextGen also feel less positive about stakeholder trust levels. Only about a quarter (24%) believe there is an acceptable level of trust between the NextGen and incumbent generation. The majority’s perceived lack of trust could affect communication, the integration of new technologies, and succession planning.
Larger, bolder organisations have already made big bets on GenAI, but family-run enterprises have been slow off the mark. The NextGen cohort has doubts about the existing leadership’s ability to fully grasp the potential of GenAI. Given the breakneck speed at which AI is evolving, NextGen worry that their organisations will be left far behind if they fail to seize opportunities presented by emerging technologies.
Besides, the most challenging part of digital transformation is the fear of disrupting family legacy. This could be due to deep-rooted cultural values in the region, such as respect for elders and traditions. Family businesses tend to favour proven technologies, rather than what they perceive to be risky innovations. Financing could also be an issue as the NextGen have restricted access to capital and less influence to push for digital transformation initiatives.
How GenAI will affect three key areas in family businesses
GenAI is a double-edged sword. It can create opportunities and foster growth, but also disrupt operations and increase cybersecurity risks. In addition, a lack of trust within the business could complicate the integration of GenAI.
Therefore, family businesses must focus on these three key areas - building trust, reinventing the business model, and mitigating risks – to prepare themselves for the day when GenAI becomes a must-have, rather than a nice-to-have.
Rebuilding trust to pave the way for GenAI acceptance
Trust is a key asset that can set family businesses apart from other companies. But our survey reveals a trust deficit across generations, as well as among family and non-family members within the business. In particular, the NextGen in Asia Pacific have more pronounced trust issues compared to their global counterparts.
More than three-quarters (76%) of them believe there is a low level of trust between NextGen family members and the current generation. Almost 80% of these future stewards also feel that there is a lack of trust between family and non-family members. As a result, any resistance to change and differing visions for the future direction of the business could potentially impede the implementation of GenAI.
Issues of trust also extend to the trust compact with consumers. The Asia Pacific results of our study show that 83% of NextGen believe consumers do not have trust and confidence in their family business to use emerging technologies responsibly.
Two years ago, our NextGen Survey 2022 revealed that Asia Pacific NextGen observed increased communication between family members, as well as between the succeeding and incumbent generations, as a result of COVID-19. The pandemic may have brought generations and stakeholders together, but trust levels have since declined.
Low levels of trust with those outside the family circle seem to be a recurring issue. This chimes with our Global Family Business Survey 2023, which revealed family businesses believe they are not trusted by consumers (44%) and employees (49%).
Unresolved trust issues can lead to internal resistance to AI adoption. As heirs apparent, NextGen must lean on shared values and familial bonds to foster greater trust within the organisation.
Reinventing the business model for longevity
Spurred on by technological disruption, family businesses are under immense pressure to adapt to new ways of working and doing business. For the family enterprise to endure across successive generations, reinventing the business model is a necessity.
Asia Pacific family enterprises need to reexamine existing stakeholder relationships and consider how they can utilise emerging technologies to create and deliver value to consumers, employees, and business partners. In particular, GenAI’s predictive capabilities can enhance customer experiences, inform decision making and drive operational efficiencies.
The adoption of GenAI also requires new roles and skills. Family-run businesses must invest in digital upskilling and reskilling to prepare their talent pool for this – employees must not only learn how to work with GenAI but also understand its risks. Transparent communication on GenAI adoption and its implications is crucial for talent retention.
In the process of reinventing, family businesses must also weave succession planning into the equation. The current low levels of trust within the business suggest that the current generation may not be willing to retire so soon. While 60% of Asia Pacific NextGen are aware of the existence of succession plans, a minority (15%) do not.
Both the incoming and outgoing generations must co-create a transition strategy that prioritises business continuity. Integrating transformative technologies into the new business model can position the next generation for success, enabling them to uphold the family legacy.
Mitigating the perceived risks of digital transformation
As a group, Asia Pacific NextGen are the most concerned about the potential increase in risks for their business as a result of digital transformation, compared to their global peers. More than half see cybersecurity risks stemming from GenAI implementation as the biggest threat to their business. Their concerns have grown substantially since our 2022 NextGen Survey - only 12% saw addressing cybersecurity as a priority at that time.
Asia Pacific has been particularly vulnerable to cyberattacks over the past few years. With the frequency of attacks unlikely to abate, it is not a surprise that the NextGen in this region display the highest level of perceived risk when it comes to digital transformation.
A fair proportion of NextGen - between 30% to 43% - also see risks in the spread of misinformation, legal liabilities and reputational risks, as well as bias towards certain groups of customers or employees.
To get the most out of GenAI, family businesses must navigate the risks it poses. Bringing in qualified risk professionals can help family businesses to use GenAI safely, with confidence, and in line with best practices.
Call to action: Embracing AI for NextGen success
Asia Pacific NextGen have a unique opportunity to write the next chapter of their family business. As digital natives, they can inherently grasp the compelling narrative surrounding GenAI. To capitalise on the transformative potential of GenAI, NextGen can lead the family business to make changes in these areas:
- Modernise practices. Leverage AI-driven solutions to streamline operations and embrace new ways of working.
- Enhance governance structure and succession planning. Establish policies for GenAI use and use AI-enriched insights for decision-making.
- Invest in digital skills through workforce transformation. Upskill employees so that they can thrive in a new era of disruption.
- Build and foster trust. Prioritise transparency and communication to earn stakeholder trust.
Ultimately, NextGen must claim agency over their efforts to achieve their aspirations for the family business in an era defined by digital disruption.
“As the architects of tomorrow, Asia Pacific’s NextGen clearly understand that GenAI isn’t just a tool for business transformation, but also a means to reimagine the family business legacy. Their optimism can drive their family business towards a future where tradition and innovation converge for success.”
About the NextGen Survey
PwC’s Global NextGen Survey 2024 is an international market survey among next-generation members of family businesses. The goal of the survey is to get an understanding of what NextGen are thinking on the key issues of the day, what roles they are playing and what roles they think they should play. The survey was conducted online with 917 interviews in 63 territories globally, and 310 interviews across 13 territories in Asia Pacific. The Global analysis was based on survey findings between 13 November 2023 and 23 January 2024.
