Family Businesses Must Innovate to Secure Future Growth: ISB Report

 

ARISE framework outlines roadmap for long-term value creation

India: Family-owned businesses contribute more than three-fourths of India’s GDP and are expected to play an even larger role in the country’s growth by 2047. However, new research from the Indian School of Business (ISB) highlights that many mid-sized family enterprises are yet to fully leverage India’s rising tide of economic growth, owing to their singular focus on short-term profits i.e., EBITDA, resulting in them holding back from investing in the future through technology and ecosystems, as seen in the case of global companies.

A new ISB report titled- ‘Business Innovation- An imperative for Indian family-led business’ highlights that while family-run firms continue to form the backbone of local and regional economies, many still rely on incremental growth models and are not fully capitalising on opportunities in high-growth sectors. This gap is most visible among mid-sized enterprises that are often built on strong operational foundations, but lack the vision and ambition to create markets, invest in intangible assets, and design future revenue models adjacent to their core business.

The report, authored by ISB’s Centre for Business Innovation and the Thomas Schmidheiny Centre for Family Enterprise, analyses innovation and growth patterns across leading Indian family businesses across sectors such as auto, retail, pharma, healthcare, IT, construction, and many more. It shows that firms investing in product innovation, supply chain integration, and customer engagement demonstrate stronger long-term value creation, growth and resilience than those following traditional operating approaches.

The findings indicate that strategic inertia – rather than market volatility – is emerging as the biggest risk for many family enterprises. In an environment shaped by digital transformation, global competition, and evolving consumer markets, the absence of integrated growth models and bold investments in technologies (including but not limited to AI) and partnerships, especially in high-growth markets of the Global South, are constraining scale and global expansion of Indian family-led enterprises.

To address these challenges, the report introduces the ARISE framework – Ambition, Risk-taking, Innovation, Speed & Scale, and Ecosystem thinking — as a roadmap for future-ready growth. It highlights the importance of bold _goals, timely decision-making, business model innovation, and strategic partnerships to help family businesses scale, compete globally, and create long-term value.

Professor Rajendra Srivastava, Novartis Professor of Marketing Strategy & Innovation, ISB and Executive Director, ISB Centre for Business Innovation, said, “India’s family-owned businesses are entering a new era – one that demands not only stewardship and legacy, but also agility and innovation. Therefore, the need of the hour is to unlearn past focus on EBITDA and invest aggressively in future growth through technology, design thinking, platform business models, markets and brand development. Through examples across sectors, the report highlights companies that have employed an innovation mindset to transform their business by scaling up growth opportunities in dynamic Indian markets.”

Recognising the unique challenges faced by family-owned businesses in a rapidly evolving and competitive landscape, ISB — consistently ranked #12 among global business schools by the Financial Times — has partnered with business families for over a decade through a structured initiative such as the Post Graduate Programme in Management for Family Business (PGP MFAB). Designed to professionalise family enterprises while preserving their legacy, the programme empowers next-generation leaders to realise their growth ambitions by equipping them with modern management tools and providing a rich learning experience through world-class faculty, international exposure, industry interactions, and hands-on experiential learning.