Growth strategies: how alliances can boost the performance of family-owned firms

In today’s fast-paced global environment, growth isn’t an option for family businesses: it’s an imperative to ensure their long-term success and continuity.

This reflection and the role of strategic alliances were in the spotlight at the first Family Business Forum for Reflection, organized recently by IESE and the Instituto de Empresa Familiar.

This article, written in collaboration with post-doctoral researcher Jessenia Davila, is the first in a series on the ideas explored at the forum.

The advantages of strategic alliances

When speed is the name of the game, organic growth is often perceived as an evolutionary path and potentially too slow for today’s fast-paced global marketplace.

In this context, strategic alliances can give family firms faster access to new markets, advanced technologies and expertise by forging strategic alliances, although concerted efforts are necessary to ensure they stay true to their authenticity, culture and defining values.

In addition to promoting processes such as internationalization, expansion, innovation and diversification, strategic alliances offer other interesting advantages.

First, they denote a unique path that can be tailored to the needs of the family business thanks to the possibility of a broad pool of strategic partners. A clear example is the unconventional alliance between the luxury brands BMW and LVMH, which leveraged their shared high-end values by creating an exclusive line of Louis Vuitton luggage linked to an BMW model.

While uncommon, this partnership was actually a coherent and natural union given the authenticity of their approach and clear focus on an elite audience.

Second, alliances offer an invaluable source of support during succession or transformation processes like the professionalization of the leadership team, in addition to promoting the company’s financial expansion.

Case in point: the family-owned fashion and fragrance company, Puig. Over the last decades, this third-generation family business has made ongoing efforts to reduce family involvement in executive positions, deciding that the current CEO would be the last family member to serve in the firm’s management.

In 2023, the company also announced its intention to open its capital to external members by launching an IPO in 2024. In this way, Puig demonstrated its commitment to attracting investors and ensuring the firm’s continuity and growth.

Success stories

Family businesses with breakthrough levels of success thanks to strategic alliances highlight the benefits of harnessing synergies while maintaining tradition and family legacy, even if the partners are competitors.

Such is the case of the unique alliance between Zara and the sports brand Everlast, the luxury firm Susan Fang, and the German brand Kasel Edition, as well as the recent accord between Puntonet Empresas and Movistar in Ecuador, aimed at optimizing the country’s connectivity and telecommunications services.

Key considerations

Alliances can help drive the growth of family-controlled firms, especially SMEs, whose success relies on a keen understanding of partnership dynamics.

This process starts with a strategic selection of potential partners with similar values and complementary objectives to ensure alignment of priorities between the business family and future partners.

In this regard, it is important to clearly establish roles, expectations and common objectives to prevent conflicts and foster effective cooperation.

Also key is maintaining open and transparent communication to manage cultural and operational differences, and planning an exit mechanism from the outset in case the partnership doesn’t meet expectations.

In this delicate balance, the management’s unwavering commitment to the company’s future is paramount, although not always easy given the logical fear of losing control.