Amid the whirlwind of economic turbulence, the generational transition in businesses is not just a challenge—it is a battle of wits between the past and the future. As the founding generation gradually steps back, the question is no longer simply "Who will take over?" but rather "Where will the business go?" Balancing the invaluable experiences that laid the foundation for success with the need to establish a professional management system, businesses face a critical crossroads. This is not merely a transfer of power but an opportunity to reshape the entire organization, a chance to either leap forward or fall behind. Only businesses that are both rational and courageous can turn this period into a solid launching pad for the future.
Current State of Generational Transitions in Vietnamese Businesses
Generational transition is becoming a matter of survival for many Vietnamese businesses, especially family-owned ones. According to VCCI, about 70% of private businesses are family-owned, and most face difficulties transitioning from the founding generation to the next. The story of Minh Phu Corporation, a leading shrimp exporter, clearly illustrates this: they are striving to prepare the younger generation to inherit the business with ambitions for international expansion. But will this transition truly be smooth?
Conflicts in Management Perspectives: emphasizes stability and tradition, while the younger generation aspires to change and modernization. For instance, at Kinh Do Corporation, differences in strategic perspectives between the founders and their successors led to conflicts over development direction, from traditional confectionery to retail and real estate.
Lack of Clear Succession Planning: Many businesses rely on traditional experience without specific succession plans. Small-scale food processing companies in the Mekong Delta are prime examples, struggling to maintain operations due to inadequate preparation as founders step down.
Dependence on Key Individuals: Family-owned businesses often revolve around the founders, making transitions fragile. Agricultural enterprises in Da Lat face evident risks without standardized management systems, leading to potential quality declines and loss of direction when successors lack sufficient experience.
>>> Learn more: Non-star-centric organization: A Standardized Management System with Digital Transformation
Conflict Between Traditional Values and Modern Approaches: The tug-of-war between preserving traditions and adopting modern practices often traps businesses. At Saigon Newport Corporation, generational differences in development strategy caused tensions, as one side sought to maintain core logistics traditions, while the other pushed for digital transformation and international expansion.
Challenges in Generational Transitions
The Trap of "Ad-Hoc" Management
As founders hand over power, many family businesses face the harsh truth that they cannot rely forever on the "ad hoc" and flexible management style of their predecessors. A lack of professional management systems turns the transition into a struggle between maintaining the old ways and establishing new ones. Without standardized processes and transparent governance, businesses risk collapsing during this sensitive phase. If not reformed, ad hoc systems will become traps causing the next generation to stumble.
Technology Gap—A Divide Between Two Generations
Founders often pride themselves on achievements gained through traditional methods, but generational transition highlights a stark reality: technology is a gap many businesses have yet to bridge. A report by the Ministry of Science and Technology reveals that 60% of small and medium enterprises have not "digitized" their management processes, leaving the younger generation—tech-savvy and eager to innovate—facing outdated systems. Without timely updates, the technology gap will form a trench separating businesses from opportunities to thrive.
Struggles Between Traditional Values and Innovation Spirit
Corporate culture, once a solid foundation, can become a battlefield during generational transitions. The conflict arises not only in business strategies but also within internal culture. Founders cling to the values that brought them success, while successors seek bold new paths and stronger globalization. This conflict is a tough problem for any business wanting to maintain unity without stifling innovation.
Solutions for Generational Transition Challenges
Establishing a Structured Management System from the Ground Up
Experience has shown that successful generational transitions heavily rely on professional and standardized management systems. For businesses still operating on a flexible, ad-hoc management style, transitioning to clear and structured processes not only minimizes risks but also creates a solid foundation for the next generation. Businesses need to invest in establishing standardized operational procedures across financial management, human resources, and supply chains. These processes not only promote transparency but also help younger generations quickly understand the flow of business operations. A systematic mindset is the key to ensuring long-term sustainability.
Large corporations like Vinamilk have standardized their entire management system from production to distribution, enabling smooth generational transitions. Standardized processes, in particular, make training and passing on responsibilities clearer. Similarly, Masan Group successfully transitioned from a family-owned business to a public company.
Embracing Digital Transformation to Bridge Generational Gaps
In today’s context, digital transformation is no longer optional but an essential requirement for businesses aiming to unlock the full potential of their successors. Digitizing data, automating processes, and leveraging management software like ERP are critical first steps. These tools not only help younger generations adapt more easily but also make businesses more agile and better prepared for market changes. Investing in technology not only keeps pace with trends but also creates long-term competitive advantages, where the old and new coexist and thrive together.
- ERP Solutions for Process Standardization and Optimization ERP systems eliminate individual dependence by introducing standardized operational procedures. For example, Tân Hiệp Phát Group uses ERP to synchronize processes from production to warehousing and sales. This integration not only enhances operational efficiency but also minimizes risks when the next generation takes over, avoiding information gaps if a key employee leaves. For small businesses, implementation costs and timelines can be daunting. Fortunately, modern ERP solutions on cloud platforms offer affordable options, allowing businesses to begin when their operations are simple.
>>> Learn more: What is modern ERP? And how it benefit businesses?
- Digital Transformation for Adaptability and Growth Rapid market shifts make digital transformation vital for survival. TPBank serves as a prime example: under new generational leadership, the bank focused on digital banking services, from modern financial apps to swift online transactions. This strategy expanded its customer base and strengthened its competitive edge. However, digital transformation is not merely about adopting technology; it requires a change in management mindset—an ongoing challenge for businesses still clinging to outdated methods.
- Building a Digital Knowledge Management System: Knowledge is an invaluable asset, but poor management can hinder growth. FPT Group has developed a digital knowledge management system to store all data and managerial experience, enabling future generations to access information quickly. This approach preserves the company’s core values while fostering innovation. However, effective knowledge management requires a culture of sharing—something difficult to achieve if founders view “hoarding experience” as a personal advantage.
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Benefits of Standardized Management and Digital Transformation in Generational Transition
Risk Mitigation
A standardized and technology-integrated management system ensures stability even during leadership changes. At Thế Giới Di Động, technology serves as the “backbone” of operations, ensuring transparency and traceability in all processes and data. This minimizes risks related to information gaps and strategic disruptions, facilitating smooth and stable generational transitions.
Enhanced Performance
According to a study by McKinsey, companies adopting professional management practices and digital technologies experience 15-20% higher performance compared to traditional businesses. During generational transitions, standardized systems allow the younger generation to focus on optimization rather than struggling with disorganized and inefficient processes, maintaining growth momentum despite market fluctuations.
Simplified Training and Transition
A structured management system supports operations while providing a strong foundation for training the next generation. Hoa Sen Group, for example, has leveraged standardized systems to help successors quickly grasp the entire scope of operations. This not only boosts their confidence in running the business but also encourages exploration into new business areas, adding value to the company.
Laying a Solid Foundation for Long-Term Growth
Generational transitions are challenging yet provide a rare opportunity to reshape businesses. A structured management system and comprehensive digital transformation not only help businesses navigate through disruptions but also serve as a launchpad for future growth. Standardizing processes, mastering technology, and fostering a culture of continuous learning not only make transitions easier for successors but also create significant momentum for the future.
For businesses facing the critical moment of transition, this is a golden opportunity to rethink their operational and management approaches. Don’t let the transition be merely a symbolic change; turn it into a chance for comprehensive reform.
At Viindoo, we understand that every business has its unique story, with distinct challenges and opportunities. If you wish to seize this opportunity to build a strong, sustainable, and transformative business, our team of strategic consultants is here to guide you. With deep market insights and expertise, we don’t just provide solutions but also walk with you through every step—from strategy to execution.
This isn’t just about “transitioning”—it’s about transforming.
