An interview with Prof. Nadine Kammerlander

An interview with Prof. Nadine Kammerlander from the Institute of Family Business and Mittelstand at WHU.

• Dear Nadine, please tell us a little bit about yourself and how you became a professor and expert for family businesses.

After graduating from high school, I studied physics at the Technical University of Munich for five years, but then had to realize somewhat soberingly that I did not want to become a physics professor, because that would not have been compatible with my private life plans and the compatibility of family and career. In order to buy some time and to give my curiosity room, I joined the consulting firm McKinsey as a Fellow and spent two and a half years advising companies in the automotive and semiconductor industries with a focus on technology. Inspired by my consulting work on digital innovation, I then decided to leave McKinsey and pursue a PhD in radical innovation in family businesses. My doctorate was then followed by my post-doctorate in St. Gallen. Of course, I had never imagined my life like this before. But now I can say: it is the best thing that could have happened to me. Every day I deal with inspiring people instead of nanoparticles.

• Please tell us a bit about your institute. What are you researching? What are the big topics of our time?

The first family business activities at WHU go back to the early 2000es and have had several chairs since then. Shortly before receiving my habilitation from the University of St. Gallen, I was called to WHU in November 2015 and then formally founded the institute together with a colleague. The institute has three major pillars: Research, Teaching and Practice Transfer. These pillars are enormously important, which is why I always tell my students that a very good thesis must be able to be published both in scientific academic journals and in practice reports. For me, research is about the close interlinking of theory and practice, because I am convinced that the findings we draw from scientific studies are only of significance if we can also prepare and transport them in such a way that SMEs and family businesses can benefit from them. If this does not happen, we will not live up to our own claim. In current research projects we are looking at topics such as "internal corporate venturing" and the question of how great the influence of the "dominant coalition", i.e. the people who have the greatest influence in the company, is on such a topic. In addition, we currently have a total of three major research focuses. First, the topic of innovation. How can companies become more innovative? What role does collaboration with startups actually play in this? And what processes are there that facilitate digital transformation in companies? What role does artificial intelligence play? The second major research focus is the human being. What does good leadership look like? What difference does it make if a family entrepreneur (and thus an heir) is at the helm of the company? The third part deals with entrepreneurs who have sold their family business and are now sitting on the money and want to invest it entrepreneurially rather than entrusting it to the bank. These investments of family offices in startups would be important to raise the innovation potential in Germany because the investment philosophy is very different from exit-driven classic VCs. Family offices have the capital, the experience and the long-term view, from which startups in Germany could benefit greatly.

• Why should young, well-trained people go to medium-sized companies?

The German Mittelstand, which is led by Nextgen, i.e. the younger family entrepreneurs, has great advantages over large corporations for well-trained people because it opens up many more opportunities. Unlike DAX corporations, family businesses don't have to go through any major coordination loops to convince the board of directors. There are usually direct ways to implement an idea. The speed of innovation is therefore theoretically often greater in family businesses – regardless of the business case! This rapid implementation gives young people in particular the opportunity to have an immediate impact. Young, well-educated people can thus come into direct contact with innovation projects. There is also usually greater flexibility for those people in SMEs – there are individual working time models and there is not such a rigid corset as, for example, in large, listed companies. In addition, there is less politics in the company. In large corporations, often lots of politics take place, especially in the middle management; family businesses with a person at the top generally have no need for political tactics, which means that the levels below also do not have to engage in political tactics.

• What are the biggest challenges facing medium-sized businesses?

The first thing to do is to distinguish between radical and incremental innovation. Family businesses are super and very far ahead in incremental innovation. They are masters at optimizing processes. The problem is that digitization, as we perceive it these days, is not incremental innovation, but radical innovation. Unfortunately, that's where mid-sized family businesses face major challenges. Family businesses may be able to make quick decisions in theory, but in practice, that's where the real problems come in: On the one hand, there are emotional obstacles. Not only do you destroy old business models, but in some cases, you also destroy a legacy that your father or mother spent decades building up. Secondly, family entrepreneurs maintain extremely close relationships with their suppliers and customers. A change in the business model, as required by digitization, may destroy these relationships – especially with 2B2 customers. This is where the loyalty of many family businesses kicks in, which then makes decisions more difficult, slows them down, or sometimes even prevents them from being made. Finally, there's the young, digital-savvy talent that Mittelstand needs to attract. Of course, that's significantly harder if you're based in the countryside. And at the same time, you have an old workforce that, in part, has nothing to do with the topic of digitization and is also not willing to adapt. Accordingly, sometimes that means you have to say goodbye to some of them. But that's not something that makes a family business so easy. Because here, too, loyalty kicks in. So, there are a lot of little things that are primarily emotional in nature, but in total can slow down the speed massively.

• What do you think is not talked about enough in the discourse on German Mittelstand?

The discussion in the media is very binary. Either family businesses are the best and everything is easy, or SMEs are completely sleeping through the digital transformation and failing across the board. What we need is a discussion that lies in between. A discussion that doesn't always points its finger on what is wrong, but also presents best practices and shows what takes place in between, what may not have worked out sometimes. Because it's precisely from these supposed failures that you learn a lot. They are so interesting! And then, of course, there's the big issue of diversity. This has not yet been addressed in the media at all. Diversity in SMEs is still significantly lower than in DAX companies, where it is already poor. That's why we are currently analyzing data for German SMEs in a study and seeing it confirmed: There are far too few women, but also far too few international managers. Because – and that too is an issue which is often neglected – diversity is not just about age and gender, but also about internationality. The big question that is interesting for us is: How can diversity be used productively? Because we find that family businesses that are diverse are not yet able to use that to their advantage. Interestingly that contradicts usual studies devoted to other segments. What's the reason for that? We believe it's because companies haven't found a mode for bringing different perspectives, equally and inclusively, into the discussion.

• Why did you decide to become part of Maschinenraum?

I believe that there are incredible synergies between these two institutes. Practical transfer has always been important to us; there is a lot of thematic overlap between Maschinenraum and our institute. At WHU, we have always thought of science and practice as complementary, because both sides benefit from it. And the first joint activities have shown that this partnership is bearing fruit for both sides. Sometimes the sum is greater than its parts. For me, that applies to our institute and Maschinenraum.

• The best thing about Maschinenraum in one sentence?

The mix of people, with their drive, experiences and goals that make Maschinenraum so special.