How Corporate Venture Building Can Address Pressing Challenges of UAE Family Businesses
Chantal Keller (Senior Innovation Expert & THABAT Program Lead, Bridgemaker) & Fabi Fiona Marks (Venture Architect, Bridgemaker), with contributions by H.E. Abdulaziz Alnuaimi (Assistant Undersecretary, UAE Ministry of Economy) and Oliver Kreusen (Managing Director, Bridgemaker Gulf)
Family businesses are critical to the UAE's economy, accounting for 90% of the country's private companies and 40% of the nation's GDP. However, the environment in which these firms operate is changing rapidly and dramatically. External market pressures from unprecedented and disruptive competition, accelerating technological disruption, and increased globalisation threaten the survival of these family-run economic pillars. Therefore, the UAE's family firms must answer this urgent call to adapt or risk being left behind.
Corporate Venture Building (CVB) is a dynamic, strategic response to today's growing global business challenges and has the potential to redefine the future of the UAE's economic pillars.
How Global Family Businesses Use CVB for Growth
Unsurprisingly, the UAE boasts some of the most successful multigenerational family enterprises in the GCC region. These enterprises are engaged in a wide range of industries and are now focusing on diversifying away from oil and gas dominance. The connection between the multigenerational success of the UAE's most prominent family firms and CVB may not be immediately apparent.
CVB is a systematic approach to developing and scaling new revenue streams, business models, products, or services, building on the company’s core. The core is the family business legacy that CVB can optimally utilise to build their future. CVB offers the advantages of speed, flexibility, and creativity of a start-up and combines these with the experience, assets, and security of family businesses.
Many of the world's most successful family businesses have engaged in some form of CVB:
Mercedes-Benz and Car2Go
Mercedes-Benz, one of the oldest family businesses, leveraged CVB's proven path to innovation when confronted with the disruptive car-sharing trend of the early 2000s. The company partnered with its independent innovation lab, Lab1886, to find new opportunities within its core business to complement the existing products and services.
The result was Car2Go, an innovative mobility service that enabled users to rent a car using a smartphone app across urban areas in Europe, North America, and China. By 2017, Mercedes-Benz saw its vehicle use increase as much as 40% over previous years, and Car2Go members spent 33% more time with the service than in 2016.
The success of Car2Go not only transformed Mercedes-Benz but also revolutionised the automotive industry and redefined the way people thought about transportation – changing the industry’s structure, moving away from ownership to short-term rentals and leasing. This is proof of CVB's disruptive potential to drive a holistic transformation.1
1. Car2Go would eventually merge with BMW's popular shared mobility product DriveNow and persists in the market as the ShareNow offering.
Waldmann and LIZ
When established office lighting company Waldmann, a German family business, began to struggle in the face of new technology and a growing wave of market entrants from China, the company turned to CVB for a solution.
In collaboration with the German Corporate Venture Builder Bridgemaker, they used CVB's creative framework and unique funding channels. They established their venture, LIZ – a forward-looking, IoT-driven smart office company. CVB played a crucial role in facilitating Waldmann's impressive evolution, identifying and stimulating new avenues of revenue and growth for the company in response to market pressures. The impact of CVB was profound, driving holistic change and accelerating Waldmann into the digital age, transforming the traditional lighting provider into a technology-driven office solutions business. Today, well-known international brands such as BOSCH, Kyocera, SolarisBank, and Handelsblatt rely on LIZ's innovative digital office platform.
How UAE Family Businesses Can Meet Challenges with CVB
How can the UAE's family firms not only survive but thrive in a challenging economic landscape? Boasting a 66% success rate of launched ventures, 30% higher than traditional start-ups, CVB has a proven track record. Let us take a look at three core challenges that family businesses face and how CVB can address them:
Challenge 1: Persisting Against New Competitors & Market Dynamics
The majority of UAE family businesses operate in traditionally established industries such as energy production or manufacturing. These industries increasingly face new and disruptive competition due to the challenges posed by shifting market dynamics such as digitalisation and sustainability trends.
A recent survey of global CEOs revealed startling figures: 65% expect the emergence of new and powerful competitors in the coming years, while 40% also believe that their revenues must stem from new markets and innovative business models within the same timeframe.
It's essential to take action immediately to ensure family businesses are prepared for the future, drive growth, maintain steady income for future generations, and establish a strong position in emerging markets. CVB provides access to an extensive network of experts, ventures, and family enterprises. It also facilitates the exploration of new markets and business models in a risk-managed setting, thanks to its structured and strategic approach. It employs a systematic and organised approach to pinpoint market challenges and opportunities, thereby enhancing its ability to navigate the evolving landscape and thrive in a rapidly changing global economy.
Challenge 2: Preserving Legacy & Engaging the Next Generation
Family businesses in the UAE today are at a critical juncture, where rapid technological advancements and increasingly powerful global competitors make the need to preserve their heritage while innovating more pressing than ever. In addition, many of them have reached a pivotal stage in their succession, with second-generation family members being already majority shareholders in over 50% of the country's family-owned businesses. Yet a recent DHL report suggests that only 22% of UAE's next gens intend to join their family business, raising serious concerns about the ability of these firms to maintain long-term growth strategies or even generational continuity.
CVB offers a path for UAE family businesses to harness the enthusiasm and innovation of their emerging leaders, positioning them for enduring success in an evolving market.
CVB is a way to prepare for generational change by building the necessary skills to innovate and succeed in the future. This involves gradually introducing the next generation to leadership roles within ventures, offering a supportive environment with guidance from experienced venture-building and innovation experts. This helps them develop the skills needed to lead the family business effectively.
Additionally, these ventures offer opportunities to make a positive impact through innovation, both economically and socially. For the next generation, taking responsibility for a growing venture and leaving their own mark in the family business is a valuable experience that contributes to the development and growth of the family business.
Challenge 3: Hedging Against Global Competition
Globalisation offers new opportunities but also brings challenges for the UAE's family businesses. Many lack a clear strategy and financial plan for the future, limiting their ability to capitalise on international markets and address globalisation's hurdles. Even family businesses that are well aware of the impact of globalisation on their operations can struggle to find ways to capitalise on its potential. According to a recent PWC survey, nearly 60% of family firms in the region consider expanding into new markets a top priority, making their need to adapt and innovate imperative. A focused approach can help them navigate this challenge more effectively.
CVB specifically focuses on creating new revenue streams outside a firm's core business while building on existing capabilities and assets – ranging from vertical moves along the value chain to diversified income generation. Embracing CVB means family firms can immediately access globalisation's broad and diverse pool of resources, including new talent, emerging technologies, and cross-border investment.
CVB: Future-Proofing the Family Business
By combining corporate resources with an entrepreneurial mindset, CVB can help family businesses address and resolve some of their biggest challenges while also enabling new business development and operational resiliency. By pulling together seasoned entrepreneurs, investors, and market experts, CVB supports a culture of innovation, impacting family businesses’ ways of working beyond the new market opportunities. Family businesses in the UAE specifically are in a prime position to take advantage of CVB's benefits, potentially maximising their access to economies in Asia and Europe and expanding their reach globally through digital markets and new products, services, and business models.
THABAT, initiated by the Ministry of Economy and in collaboration with Bridgemaker, offers innovative programs for UAE family businesses focusing on legacy preservation and next-generation empowerment.
The THABAT Venturing Program, spanning 3-5 months, equips future leaders with the skills to innovate and sustain their family's legacy through structured venture development.
The THABAT Innovation Bootcamp, an 8-week intensive program, turns participants into innovation leaders, covering key aspects from strategic thinking to investment, with hands-on sessions and expert guidance.
These initiatives are designed to ensure family businesses adapt and grow in a rapidly changing market. For more details, visit the THABAT website.
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