While public companies are planning for the next quarter, successful family businesses are planning for the next decade. While private equity firms anticipate exit, successful family businesses anticipate transitioning to the leadership of the next generation. A recent profile in the New York Times of Rumiano Cheese provides a great example of how family businesses persist and endure over generations. Rumiano Cheese is celebrating its centenary this year, and the company’s story provides some great reminders for all family businesses that are in it for the long haul.
Successful Family Businesses Adapt to Market Demand
At its founding in 1919, Rumiano was producing a dry parmesan cheese that was reminiscent – to the largely immigrant customer palate – of more scarce parmesan cheese. When World War II created demand for a shelf-stable cheese product, Rumiano ramped up the production of so-called “American” cheese. As consumer preferences have shifted to organic food, Rumiano has adapted in both its own branded cheeses and its ability to supply cheese ingredients to organic food manufacturers.
What about your family business? Are you meeting market demand, or hoping the market will accept what you want to produce? How is market demand different today than it was five years ago? What will customer preferences look like five years from now?
Successful Family Businesses Match Investment with Opportunity
Rumiano expanded production to keep pace with the war-driven demand for “American” cheese. When demand waned in the post-war years, Rumiano scaled back production capacity to meet demand. Consistent with an ROIC mindset, the leaders at Rumiano were careful to match investment to available opportunities. When consumer infatuation with whey protein presented a new opportunity, Rumiano committed $20 million in capital to meet the opportunity.
What about your family business? Does your balance sheet match your income statement, or are you holding on to assets that no longer serve a purpose? Conversely, are you willing to commit the resources necessary to meet new opportunities in your markets?
Successful Family Businesses Navigate External Challenges
Family business observers sometimes talk as though all of the challenges associated with running a family business are internal (family dynamics, etc.). They are not. Before a family business can earn the “privilege” of addressing internal family-related challenges, it must successfully navigate a steady stream of external challenges that disrupt the status quo. For Rumiano, those external challenges have included changing government regulations, unpredictable weather patterns, and the actions of competitors.
What about your family business? What external threats need immediate attention? What emerging threats do you need to plan for? What external challenges can be turned into opportunities by identifying and implementing creative solutions that actually strengthen your business?
Successful Family Businesses Take Advantage of Local Resources
While it is true that successful family businesses are those that adapt to changing market demand, it is also essential not to forget where you come from. Amid all the change and evolution at Rumiano, one constant has been to take advantage of local resources – an abundant supply of high-quality milk from the many organic dairy farms located near the company. You don’t have to own the resource to take advantage of it, but proximity is important. The local dairy resources readily available to the company help forge Rumiano’s strategy of providing fresh, organic cheese. This strategy frees the company from competing directly with the much larger industrial cheese producers based in the Midwest.
What about your family business? What local resources are available that can contribute to sustainable competitive advantage? What partnership or joint venture opportunities are available to help you make the most of the local resources that have the potential to make your company unique?
Successful Family Businesses Take Advantage of Global Markets
Successful family businesses may find their competitive advantage in their own backyards, but they may need to go across the globe to fully exploit that advantage. The demand for whey protein is a global, not local, phenomenon, and Rumiano has followed that demand into protein-hungry Asian markets where growth opportunities for organic suppliers are abundant.
What about your family business? Is there global demand that you possess a competitive advantage in addressing? What emerging markets can you establish leadership in today? What resources are required to execute in global markets? Are there potential partners having valuable experience in global markets with whom you can work and learn from?
Whether your family business’s planning horizon is five years or five decades, it is always instructive to hear the success stories of those who have been in it for the long haul. Odds are that most of our readers are not in the cheese business; regardless, reading the 100-year story of Rumiano Cheese offers a great opportunity to reflect on where your family business has been, is, and is heading.