Gifts from the Past: Your Family Business Success DNA

We recently published a new book called Family Business Mastery: Bridging Legacy and Innovation to Build a Family Business that Lasts for Generations. Writing it was truly a labor of love for us, as we got a chance to reflect upon not just our journey within the company, but also the journey of the founder and the business from conception. Here, we wanted to share one of the most important chapters in the book- the chapter about the family business DNA and why is it essential to discover it. If what we wrote resonates with you, sound off in the comments below or emails us your thoughts, we’d love to hear your story. And if you want to read more, the book is available on Amazon in both electronic and print version; it’s a bestseller in its category!

What is family business success DNA and why do you need it? Family business success DNA is the essence of your family business success. It is as essential to your company as your heartbeat is to your body, ensuring you sustain life. But how can you begin to discover just what it is that pumps the blood through the veins of your business?

To use a culinary analogy, what are the conditions and the key ingredients in this special dish that is your family business? What kind of spice do you have in there? What is the main type of protein that is in there? What kind of first course is there? What kind of a main course is there? What about dessert?

Has it ever crossed your mind to ask how your company became successful? How did your business get to where it is now? And if you were to do it all again, which of the steps you took along the way would you need to retrace?

Knowing how your business became successful sets the foundations for it to become even more successful in the future. In this chapter, we will retroactively reverse-engineer to understand how you became successful.

Unconsciously Competent Genius

Almost all professional athletes are amazing at what they do. They can play their sport without ever really thinking about it. It is natural to them. But if you look closely at any sport, it can get quite complex once you are inside of the game. For an athlete to think through all of the things that they have to do when they are at the top of their game - at their peak performance level - is quite complex.

If you ask a player, “How did you accomplish such an amazing feat of that amazing play at the end of the game?” Words typically elude them; they cannot explain how. Any description they could offer would not really do it any justice.

And that is what usually happens with the founders of businesses and family businesses. Often they are unconsciously genius at what they do. It is natural to them.

They don't ever have to consciously think and retrace the steps on how they created their amazing success. And if you ask them, “How do you do this?” they will most likely give you a vague answer like this: "Hey, this is what you should do and this is what will get you the result. Okay, go."

But how is that going to get you the result? Where did that come from? What are the underlying principles behind that decision? How was that first discovered? What is the remedy that can not only be used in this case, but can be used in other cases in the future? What we are looking for here is the principle and the law behind the success that you have already created - the prescription. Or the recipe, to stick with the culinary analogy.

Our Discovery

So, where did we get this concept of family business success DNA? Well, it came from our own experience. We were having a very, very difficult time getting our founder to start trusting other people to work alongside him. Our founder, as with most founders we have encountered, built his company from scratch; on his blood, sweat and tears, working eighteen-hour shifts in the early days, with very humble beginnings, with limited resources, and with all the odds stacked against him.

Sound familiar? Perhaps you are a founder and it sounds like your own experience. Or perhaps you are a next generation leader, but you know what your parents - and you along the way - had to sacrifice and how much you all had to invest in order for the business to survive and, eventually, thrive.

With all of those years of working hard, being solely in charge, and making all the decisions, it is very difficult to change gears. The key success ingredient in the early days is to control everything and make all the best decisions possible, all the while taking personal responsibility for every move. “The founder knows best” is what we often hear within family businesses. But as the organization, and the company, and the business grows, it becomes a constraint; because the enterprise cannot grow inside one brain anymore. Conditions such as the number of employees, size of the customer base, technological advancements and so on change so much. It is physically and mentally impossible for only one person to handle all of this information.

Therefore, there is a need for change.

Multiple Benefits Across Space And Time

Discovering the family business success DNA accomplishes multiple objectives. It prepares the founder to include more people in his vision and to have a way to communicate and ensure the clarity of that vision. It prepares the next generation through the honoring and understanding of the company history and the founder’s history, enabling them to be the carriers of that vision into the future. It builds trust and respect between generations.

And finally, it provides clarity to the rest of the organization on what must be preserved at all costs while the business grows and innovates, keeping the original heart and soul of the enterprise healthy and thriving. It is a way of changing your perspective about history. Rather than seeing it as limiting and only part of the past, history can be part of a living story that’s still evolving.

When you discover your success DNA, you only need to make the effort to go through the process once, and then you reap the benefits of that process over and over again. Your success DNA anticipates and solves a lot of problems and conflict before they even become a reality. It is a very high leverage activity.

We came up with our success DNA out of necessity. We had already asked about the key ingredients which lead to the success of the business, but our founder didn't know exactly how to decode what these ingredients were. He couldn’t come up with the key practices and behaviors that must be practiced, controlled, and preserved in order for the business to continue in a healthy manner, and we did not have a process as to how to extract all of it from him.

So, we started getting curious and we started asking more questions: How did this whole thing start back in the day? What were the overall conditions like back then? What were the market conditions? And what was the economic climate that this business was founded in? Which first, early steps did you take to start the company? Where did the opportunity come from and how was the opportunity tapped into? How did you innovate? Who were the customers?

We quizzed and inquired about all of those things, and eventually the key ingredients of what was responsible for that success started to crystalize. What we discovered first were some key essence values that really allowed our business to succeed.

To be honest and truthful, the real motivation behind discovering the family business success DNA was not just professional, but also personal - we wanted to relate better to the founder. We wanted to have a much better relationship than we already had, and the best way to do that was to understand him in a deeper way.

And we wanted to fully understand what prompted him to start the business, to go on this incredible journey as he emigrated from a communist country, arriving in the United States to better his life, and then eventually to better the life of his whole family. So, in all essence, that desire to relate better to him translated into understanding the family business better.

Living History Of Loutech

What we discovered during this process is that our founder really wanted to challenge himself, and he wanted to challenge the world, and to discover how much was he worth and basically - what he was made of. He wanted to test his skills and ingenuity and he wanted to really see how far he could take things. With this kind of motivation, courage and drive, his commitment and energy was unending.

What we discovered were a set of key essence values which guided our founder on his way early on. This was a really useful part of the process for us and an essential stepping stone to unearthing our family business success DNA.

Here are those values.

• Build-in quality
• Respond quickly
• Innovate daily
• Communicate directly
• Persevere to victory
• Serve your customer above all else
• Do more with less

We’ll cover how we capitalized on these insights later in the chapter.

Our business is a precision machine manufacturing facility. We started with very humble beginnings, with one machine, and our founder worked day and night to find solutions for the marketplace at that time. He started the company during the recession in 1987, and had a very difficult time finding any kind of work. There were many times where he thought he was not going to make it. But he kept at it, kept persisting, got a few loans, kept working at it, and slowly the business started to take off. He added more machines and more operators.

Lean-Mean-Production-Machine

Because of the recession, all the parts that he was getting orders for had to be made in a very efficient manner, in a very lean way. Therefore, our founder was forced to create innovations in machining that produced better, higher quality parts in a much faster and leaner way. And so there were a lot of savings for the customer - and a narrower profit margin for the company - but the innovations that he created were so revolutionary that all of a sudden he was flooded with work. The market excitedly responded to the lower pricing and higher quality parts, and the orders started pouring in.

The key relationship he developed at that time was with one particular electrical connector company. Through that relationship, the company started getting overloaded with work, and consequently could never expand its customer base because it was working at full capacity, all of the time. Unfortunately, that created an over-reliance; a high concentration of revenue from one location, and one customer.

Those conditions amounted to a lot of stress, and put the business in a very dangerous place, because if that one customer was to pull all their orders - that would be the end of Loutech. With the ups and downs of the economy, and the ups and downs of this customer we were so reliant on, we went through famine times, and we went through feast times.

This main customer actually had their own manufacturing facility and so what we were getting was their overflow work. When their workflow was slow, we became slow; when they were booming, and growing, so were we. From time to time, they would expand their facilities to manufacture more products in-house, and we would consequently experience a dip in orders. Or perhaps one of their new executives would attempt to limit outsourcing, and this would throw us into famine for a few months.

Solving The Problem That Is

We knew our situation was unsustainable, but when we tried to make changes we found ourselves embroiled in conflicts with the founder. The problem was even more widespread: most of our team members were also resistant to any kind of change.

It was incredibly frustrating for us but part of the issue was that we were coming to the problem from a wrong place. We were attempting to solve a problem that wasn’t there. We had assumed that there must be something wrong with the founder and the employees. How could they not see the necessity for change? We knew that if we didn’t widen our customer base we would surely go out of business. The company would not survive. And yet, they were still resistant to our efforts. So, we started communicating the message louder as if they couldn’t hear us. We attempted to use threats and rewards. That didn’t work either.

As the old adage goes, we were stuck in the trees, unable to see the forest. We needed to discover what the real, deep issues were for the people we were working with.

A key discovery came when we began to understand that a lot of our team members didn’t feel included in the business. As a result, they didn’t feel engaged. Through their eyes, they weren’t trusted to think so therefore they didn’t. They weren’t even expected to think - so, why would they?

So, the real problem was one of inclusion. Once we focused on including more people by sharing information on growth and development, as well as including them in the decision-making process, the momentum really started to build and our change initiatives started to get traction.

One of the first and most important projects we put in place was to establish a new quality system by hiring a Quality Systems Manager. We acquired the standard industry certification and trained inspectors in the product specifications required by our customers. Just by getting certified we were able to start pursuing more high-leverage customers.

Clear And Guided Decision Making

The essence values we had codified from our process of enquiring and connecting with our founder soon began to come into play and guide us in our decision making. From deciding who we would need to keep on the team, to who we would need to let go;, from observing who fitted well with the culture of our business, to who didn’t. In the past, all of those decisions would be made in a very nebulous way. Nobody knew our motivations.

But all of a sudden - things became more transparent and clear. And, armed with the essence values, we proceeded to include the entire organization in on our discoveries by teaching the entire team what these values are.

We were even able to take these essence values and use them to uncover just what our family success DNA is. Ultimately, it boiled down to this: We make good parts fast. It's all about making good parts fast. That is our advantage in the market and that is the secret sauce of what we built the entire organization on, right from the beginning when it was a one-man operation, to where it is now with a 60-strong team.

Equipped with this clarity, all of a sudden the resistance to change and new initiatives started to reduce and disappear. People started to feel more included and valued and the founder cautiously started to support decentralizing the decision making and building a bigger and wider leadership team.

Sigh Of Relief

Once we found out what our founder’s values were, we were able to gain a tremendous amount of trust from him, and he was able to recognize that there were people alongside him who were looking after what he had built. And, even though we were saying that from the beginning, the message wasn't getting through - because there was a high level of stress on his part. He had been keeping all these balls in the air all by himself without even knowing how to name those different balls, or how to allow someone in to help him.

Once we had enabled him to articulate his essence values and from there figure out our success DNA, it was almost like he could breathe a sigh of relief. We had helped him to express all the little factors, thoughts and nuances that he had in his mind that nobody else knew about, and we were able to write them down, and we were able to focus on them, and we were able to preserve them.

Our founder finally felt that he could trust us with this business and he gave us the driving wheel. That was in 2008. We were so happy and we felt a great sense of achievement. We were at the helm of our organization and our long-term dream of being the leaders of this business had come true.

Deep Trouble

And what do you know - sometimes your biggest successes can be followed by your biggest failures. What came next was a very jolting and very disorienting experience for us, but one that we certainly wouldn’t have survived if it weren’t  for the progress we had made in the months before.

At the end of 2008, the entire world went into a tailspin, as most of you know or even experienced. A lot of businesses entered what could be called a death spiral. And for us it was definitely a triggering event that really took us into a very dark place because from March of 2009 to April of 2009, we lost 95% of our revenue. And from that April 2009, we were losing $200,000 a month consistently. And it was a very scary time. In our minds and hearts, it was gut-wrenching.

By this point the business had been around for twenty years and just when we had taken over the leadership position it was going to go down the drain. We felt a huge sense of responsibility for that, and we felt like this world we had just stepped into was about to be taken away and we didn’t even have a chance to respond. There was a finality to it. There was a sense of, If the industry doesn't pick up, no matter what we do, nothing will help. We were just going to go out of business. There was no solution for multiple months. There were sleepless nights and difficult, heart-breaking conversations.

 To our surprise, our founder was a lot more relaxed about it than we were. We thought that he would be out-of-control worried, but he wasn’t because he had acquired something of a ‘Been-there-done-that’ attitude throughout the years which helped him greatly in times of panic. And he had also secured his financial standing in life, as opposed to us, who had just taken over this leadership position as our livelihood. Even though it wasn't our fault per se, as we didn't have anything to do with the external events, it still happened on our watch.

And we felt responsible. And ultimately, that's a good thing. You should be responsible, and you should be thinking and planning for unexpected events that could happen, whether internal or external. You need to have a risk model and make preparations as to how you can create your sustainable future in the face of such triggering events.

Ask yourself: How long do you have until things turn around? How long can your organization survive? What kind of moats can you build around your castle that would protect you from the peril of these unexpected events? For sure, you cannot prepare for everything but it is your responsibility to prepare where you can.

As a result of the work we had done leading up to the crash, we knew we were taking us in the direction of more customers and more sustainable situations, but it wasn't fast enough.

We were in trouble. And we almost didn’t last long enough to find the opportunity in this danger. Hardly anyone was outsourcing anything out there. We had no work and we were pretty much looking at how we're going to go bankrupt; because there was no way to turn this thing around.

But by drawing on those essence values we were able to turn our circumstances around and initiate multiple projects. In particular, we drew on one of our key values.

Innovate Daily: Life Preserver

We had to come up with something new. In the process of discovering our success DNA, it has become clear that innovation is one of our most important values. For our founder, ‘innovate daily’ was restricted to machining. He was a machining innovator. But that innovation didn’t cross over to customer acquisition and team building. So, we took the same value and applied it in those two crucial contexts. That enabled us to not only survive, but also to fuel our growth.

So, we got to work. With persistence, we continued to knock on many doors. We addressed a lot of issues we needed to address long ago. Thankfully, we had already created higher quality system requirements when we became certified with AS9100 quality standard. As a result, we were able to gradually regain traction in the marketplace and open ourselves to more customers.

We also did an innovative presentation at our industry conference, a move which succeeded in letting the market know about us. Up to this point, we were a highly kept secret by that one main customer who didn't want anyone to know about us. And so, once people started to get to know about us, we were able to turn things around and flourish again, and regain all our previous success - but in a much more sustainable and much more stable way.

We feel very fortunate to have lived to tell this tale. Over the course of the crash, countless thousands of businesses went under. And especially in the manufacturing industry and the precision machinery industry. There were companies going out of business in droves. We are very grateful to have survived it and know that is down to the fact that we were flexible, mobile and resourceful and those key initiatives that we took got us out of trouble and also informed our future planning and our future preparation.

It was a big learning opportunity and a big learning experience.

All of those years of sticking with one customer, and not opening ourselves up to the larger market, created a condition of danger, and an underlying dynamic that could have sunk the entire business - and it almost did.

There is definite danger in success. And just as in success there is always danger, in every danger there is opportunity.

As you see, in this process of discovering the family business success DNA, we discovered the dos and well as the don’ts. Consider what you're not supposed to do just as much as you consider what you should do. What can you correct?

Your family business success DNA is just as much a secret sauce of don’ts as it is a secret sauce of dos.

Ongoing Success Blueprint

Our success DNA allows us to preserve the purpose of why we are around and it allows us to keep looking for solutions in the now and in the future. It allows us to continue to serve our marketplace, and flourish from the current leadership team to the leadership teams of the future.

It is wonderful to see how far we have come. From the days when we struggled, from the fights, the risk, the conflict, all because we couldn't communicate, we couldn't relate, and we couldn't integrate our different ideas and continue to evolve. To now, where we have a great business, with a strong leadership team that isn't stressed, where people are happy and enjoying their work and life, and where people are continuing to succeed, with a sustainable business model, and a sustainable future. The seeds of this success were all planted by our discovering our family business success DNA.

Your Opportunity

What are some of the persistent issues in your organization that have been resistant to change? How are you seeing that problem? What actually is the problem? Solving the problem that isn’t, in other words focusing on the wrong thing, will not give you the results that you are looking for.

This is ultimately the difference in being book smart or street smart. Book smart people follow instructions blindly and tend to force square pegs into round holes. The street-smart business owner, consultant or advisor, tends to deal with reality and really assesses the situation in a more holistic way to deal with the reality of the problem they are faced with. No amount of forcing will produce the results you want unless you become intimately familiar with the reality of the situation. What if the actual problem, when solved, would give you the ultimate result and outcome?

Having flexibility of both thought and behavior comes as a must in this endeavor. You must be flexible in your approach to discovering the reality of the situation. You must come to the problem with new eyes. You need to back away enough to see the bigger picture. Sometimes, we are all just too close to our own situations. And we need to open ourselves up to discovering a new way of looking at things.

And that is what we want for you and that's why we are going to give you some guiding questions so that you can discover your success DNA for your family business. The process of addressing and answering these questions will lead you on the path to success, just as it did for us.

Your Success DNA Process

The discovery process is organized into six different sections in a very specific order. The first section that we're going to cover is the story section. The story section is going to give you an idea that you're entering a new dimension, you're entering a new realm of space and time, where the past is accessible to you. Where the energetic differences from that time are available to you, where lessons from the past are available to you, and where new insights are available to you. All of this is available to you as you enter into the space and time of your story.

 We want you to enter a new realm as you discover your success DNA. In the current three-dimensional space, the answers that you're looking for may not be there. And if they were there, you would already have found them. So, you need to enter a new dimension. You need to enter a deeper place. You need to enter the invisible dynamics. You need to open yourself to enter this new place.

So here are some questions to guide you in that direction. And from that place, you will be able to ask better questions that will give you better answers. With these new questions, you will discover new answers that will aid you in this process.

The questions are based on our spiral growth method, which we will properly introduce to you in Chapter 6. For now, it’s enough for you to notice that each letter of the word SPIRAL stands for an area of questioning which we’d like you to explore.

Story Questions
• When was the business founded?
• What were the early conditions?
• What was the marketplace like at that time?
• Who were the key players?
• Who was involved?
• Who was the founder?
• What is the founder's background?
• How many siblings did the founder have?
• What is the origin of the founder? Is he from here? Is he from another country or culture? (We need a deep diagnostic of the entire family history of the founder, because lot of dynamics that the founder brings come from his family and the previous generation of his family. The founder carries a certain DNA inside of him, and carries certain dynamics from the family he grew up in that affect the business, and we need to unearth all of that. We want to draw the genogram of the founder.)
• What was the purpose of the business? Additionally, what is the ultimate purpose of the business? Sometimes the answer to this question may not be visible to a founder.
 

Perception Questions

We need to look at these dynamics, this genogram, this business, this organization. The progression, the key milestones of the business, how did it go, where did it go? Trace the entire timeline of the business from the founding to the now.

And once we have the entire thing in front of us, we need to see the whole thing with new eyes. We want to search for patterns that are not easily apparent. We want to look for connecting pieces that don't seem to be connected. We want to test new hypotheses: could this be related to this and how is this related to that? From the quantum physics world, we know that everything is connected. And in this timeline, in this connection, in order for this business to get to here, what were some key things and key dynamics that are not easily seen?

There are as many different perceptions and perspectives as there are people involved in the business. You will have the perception of the founder, the perception of the second generation - maybe even the third generation if  they work in the business. There is the perception of the founder's spouse. There is the perception of the oldest working employee. There is also a perception of the business itself, if you look at it as a living body.

So, taking all those perceptions and perspectives into account, and valuing them, is very important in the process of discovering your family business success DNA. Because if we omit any of those perceptions we will find it much more difficult to go through to the essence, through to the true secret sauce that family business success DNA is.

Further to this, you may have a similar experience to the one we had. Perhaps you will discover the essence values of your business first, and this discovery will guide you on your path to finding your DNA.

Initiative Questions
• Who took the initiative early days?
• Who was the main driver of the business?
• Who was an early ally in the business?
• In which direction was the initiative taken?
• What can be learned from this early initiative?
• Is there a definite pattern in the initiative taken in your business?
• What kind of action was the main driver of your family business?
• What initiatives were taken throughout the timeline of the business?
• Was there any kind of shift happening, and if so, what kind of initiative was needed, and what kind of initiative was taken?
• Is it possible that there is a difficulty in continuing to evolve because of a reluctance to take certain initiatives?

Relating Questions
• What were the relationship dynamics that may be key to the success DNA?
• What were the key relationships?
• Who were the key customers?
• Who were the key employees?
• What was the relationship between them?
• How did they relate?
• How did they get along?
• What conflicts were prevalent?
• What synergies were developed?
• As the business developed, what new relationships enabled that development?
 

Awareness Of Opportunity Questions
• What opportunities were ultimately created out of the new perceptions and new ways of relating with people?
• When was the awareness of opportunity born?
• What kind of opportunities were there?
• How were those opportunities uniquely leveraged?
• How many different kinds of opportunities were tapped into throughout the history of the business?

Leading Edge Of Innovation Questions
• What key innovations were created based on those opportunities?
• What key innovations were the essence of success of this business?
• What was the early innovation that allowed traction and momentum to build in this business?
• What were the subsequent innovations that allowed the business to continue to grow?

With the answers to these questions, a new picture starts to emerge, a new understanding is born about your Success DNA.