How Family Businesses Can Successfully Digitize Their Products

Medium-sized family businesses are often in a bind when it comes to digitization: They usually do not have the reserves of large corporations to drive their digital transformation; At the same time, they sometimes lack the agility and willingness to take risks of young companies and startups in these projects. But to remain competitive in the long term, there is no avoiding the digitization of business processes, products and services. And after all, medium-sized companies already have many advantages on their side that big players and startups cannot offer in most cases.

This includes, for example, long-term and intensive customer relationships, strong personal networks and highly specialized niche products. On the other hand, the willingness to take risks is less pronounced in family businesses. A clear return on investment (ROI) is always the focus of all projects – even if the financial cushion for experiments is available. In practice, the starting point of digitization initiatives is often linked to the point in time when a younger generation takes over management.

Risks In Digitization Projects

Most medium-sized companies have now understood that digitization is not just a buzzword but can and must create clear added value for their own company. For example, many companies network their production lines with the help of the Industrial Internet of Things (IIoT) to detect wear and tear and better plan maintenance routines. However, they often lack the necessary know-how and human resources to drive the initiatives forward. At the same time, every investment is a financial burden that a clear ROI must offset. In addition, those responsible often fear that when cooperating with partner companies, valuable intellectual property will be disclosed to external parties or that they will become unintentionally dependent.

The Complexity Of Digitization Projects

Even if there is consensus in their own family business to tackle the digitization of their product range: Before a product is digital and can deliver added value as part of the IoT, companies must tackle a variety of topics – from networking to the platform to Cloud and the development of related apps. There are also questions about data protection, hosting, maintenance, operation and support. Many companies are not aware of these processes and the complexity behind them.

Therefore, numerous medium-sized companies are reluctant to take the first steps in the development of digital offers. So maybe not a project? But! But right from the start, with the right partner who supports the company in digitization, has the necessary experience and can advise on a wide variety of challenges. It is important to select the right (external) team of specialists.

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Between Solution Providers And Software Developers

In principle, solution providers and software developers can divide digitization partners into two categories.

The former offers “ready-made” (software) solutions, such as an IoT platform for condition monitoring. Such solutions are often unbeatable and inexpensive compared to developing your own. The disadvantages, however, are usually obvious: Purchased solutions usually do not fully meet the requirements of the respective company and can only meet individual needs to a limited extent. In addition, proprietary systems are difficult to expand and so often prevent the development of new features. For example, when it comes to integrating your customers into the platform, there is often a lack of suitable applications. The necessary workflows cannot be mapped, or suitable usage and role concepts cannot be implemented. There is also the risk of vendor lock-in; this makes it difficult to switch to other software solution providers afterwards. In addition, it is no longer easy to differentiate your offer from the portfolio of the competition with “off the shelf” products.

The other extreme is service providers who develop software individually for their customers. The advantage is obvious: the partners design individual solutions and implement software projects that are precisely tailored to the respective company’s requirements. The disadvantages compared to the ready-to-use out-of-the-box solution primarily start with the price. The individually created software is significantly more expensive since software developers are rare and expensive like many skilled workers. In addition, the development of good and robust software takes a lot of attention and time. In addition, not all details of the finished digital offer are usually known in advance. It usually only becomes apparent during the project which functionalities are ultimately required.

The Best Of Both Worlds: System Integrators

System integrators use existing solutions and adapt them to the individual needs of their customers. Generic components from established providers such as Microsoft or Amazon often form the core. A team of solution architects combines various components and can assess where in-house work can be useful for differentiation or a competitive advantage. For example, for a first-class user experience in the app for end customers or in the company’s workflows. Similar to construction management, system integrators coordinate solution providers and software developers, coordinate components, and ensure that the solution is up and running at the end.

The advantage for family-run medium-sized companies: The cost-benefit ratio is optimal in almost all cases, as system integrators buy and readjust the solutions cheaply on the market. A customer-oriented further development is possible at any time, and there is no risk of vendor lock-in. In addition, the provision of the products is quicker than with “classic” software development, which means rapid market introduction and testing for medium-sized partner companies.

Another advantage over purely individual development: The solution providers used by the system integrators can implement far higher security levels for their products than a medium-sized company could ever do on its own. Microsoft, for example, invests around one billion dollars a year in the security measures of its cloud services. System integrators thus enable medium-sized companies to find solutions that combine the best of two worlds: Inexpensive, secure and individual. Family businesses can only create real added value with IoT products designed in this way.

How Do You Tackle The Project With A Partner Company?

A partner company has been found; the project should start. As in the day-to-day business of a medium-sized company, the following applies here: With pragmatism, a hands-on mentality and personal contact, you always get ahead. Therefore, at the beginning of the project, there should be an assessment that brings all those involved on the company and partner side on board. To ensure the best possible start, the marketing and sales teams should also be involved early on to advertise and sell the finished products as effectively as possible. Only then does a detailed concept follow, which includes the design of the IoT product, establishes added value for end customers and market potential, and identifies suitable methods for achieving the goals set.

Conclusion

Digitization also offers many opportunities, especially for medium-sized family businesses, to further increase the added value of their products. It is important to take advantage of these opportunities. The right partner is essential for small and medium-sized companies to successfully make the journey towards digitization.

System integrators are good contacts because they use software solutions for IoT products with a sensible price-performance ratio and can customize components that are critical to success as required. Both are important properties for medium-sized companies, for which profitability and proximity to their end customers are top priorities. Once the product range has been successfully digitized, the family business has taken a big step towards a successful future.

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