How family businesses can innovate without losing their legacy
By Pronto Software
Legacy is a family business’s greatest strength – but if not carefully managed, it can also be its biggest obstacle to innovation.
While tradition provides a source of pride, stability and a competitive edge, a refusal to evolve can put the entire business at risk. Indeed, in the 2025 Family Business Barometer survey, which Pronto Software conducted in partnership with the Family Business Association, 32% of family businesses said balancing tradition with innovation was a major challenge.
Yet as Chad Gates, Managing Director of Pronto Software, points out: innovation doesn’t have to mean abandoning your legacy. Rather, it can be reframed as an exercise in practical problem-solving that enhances business efficiency without disrupting core values.
“People think innovation is this big, scary concept,” says Mr Gates. “But it’s really just about solving a problem in a way that allows you to grow without needing to add unnecessary costs or headcount.”
So how can family businesses embrace change without losing what makes them special?
Why change is difficult: the key barriers to innovation in family businesses
Family businesses often operate with longstanding traditions and deeply ingrained processes. While these are valuable, they can also create the following barriers to adaptability.
1. Resistance to change from within
Many family businesses are hesitant to disrupt established ways of working, fearing that change could:
- Undermine the business’s unique identity and values.
- Cause conflict between generations, particularly if younger leaders are pushing for modern approaches and older generations are pushing back.
- Create short-term disruptions that employees and customers might resist.
But clinging to tradition too tightly can lead to stagnation, especially in today’s fast-changing business world.
“Resistance to change is natural, especially in family businesses where tradition is such a strength,” says Mr Gates. “The key is to innovate in a way that complements legacy, rather than replaces it.”
2. Fear of losing control
Many family businesses resist change as they fear losing control. But with 64% of Business Barometer respondents now in second-generation (or later) businesses, adapting to modern realities is key to long-term success.
Data from KPMG supports this. The research found that family businesses with strong legacy scores outperform their peers, with 45% reporting stronger business performance and 53% achieving higher sustainability results.
3. Lack of a clear roadmap
Many businesses recognise the need for change but struggle with where to begin. In fact, a 2023 PwC survey found that only 19% of family enterprises make innovation a core part of their strategic planning – highlighting why so many struggle to move forward.
Key concerns include:
- Choosing the right technologies or processes.
- Lack of internal expertise for implementation.
- Balancing innovation with tradition.
“Innovation doesn’t have to be overwhelming,” says Mr Gates. He encourages business to “start small” by “focusing on the quick wins first”, such as simple process improvements that make people’s jobs easier.
How family businesses can innovate without losing their legacy
Understanding these barriers is the first step. Now let’s explore how family businesses can innovate while staying true to their roots.
1. Focus on efficiency-driven innovation
Operational inefficiencies hinder growth, but innovation can be the missing piece of the puzzle. Businesses that embrace strategic innovation don’t just improve efficiency – they build resilience.
Instead of overhauling your business model, look for ways to increase efficiency and reduce unnecessary workload.
“Innovation doesn’t have to mean tech,” Mr Gates points out. “It can be as simple as removing an outdated approval process or automating a manual task. The key is to solve a problem without adding unnecessary complexity.”
2. Foster a culture of continuous improvement
One way to balance legacy with innovation is to involve employees at all levels in idea generation.
Business leaders looking to create an innovative culture could:
- Encourage staff to flag inefficiencies and propose process improvements.
- Create a “safe space” for new ideas through brainstorming sessions or internal competitions.
- Reward successful innovations that align with the company’s values.
For example, Mr Gates explains how Pronto Software runs biannual “hackathons” where employees can propose and prototype solutions to improve operations. Many of these innovations have gone on to become core features of the business’s enterprise resource planning (ERP) software.
“It’s important to create an environment where employees feel safe to suggest new ideas,” Mr Gates says, underscoring a key point. “Innovation can only thrive if people aren’t afraid to fail.”
3. Leverage technology to strengthen legacy
With the right approach, new technology doesn’t erase tradition – it strengthens it.
For example, when Pronto Software customer, Haymes Paint, wanted to modernise its operations, it adopted Pronto Xi ERP to optimise its supply chain – all the while preserving its heritage craftsmanship.
“The best innovations scale a business without compromising what makes it special,” says Mr Gates. “AI and automation are tools, not replacements for human expertise.”
4. Bridging the generational divide
Innovation challenges often intensify during succession planning, as new generations bring fresh ideas that can clash with established norms.
Despite 45% of Business Barometer respondents prioritising a successful exit strategy, only 23% have a formal succession plan in place, leaving many businesses vulnerable to disruption.
To ease this transition:
- Encourage cross-generational mentorship. Younger leaders tend to bring digital expertise and creative thinking, while older leaders often provide invaluable lived experience and strategic wisdom.
- Define a clear innovation roadmap. Set goals for gradual technology adoption rather than radical change.
- Document legacy knowledge. Use ERP and business intelligence tools to capture insights from seasoned leaders.
“The key to successful succession is balancing continuity with adaptability,” says Mr Gates. “Businesses that don’t evolve risk stagnation, but those that innovate too aggressively risk losing what makes them special.”
Making innovation a core strength of family businesses
Innovation and tradition aren’t opposites – they can and should work together.
Family businesses that embrace practical, efficiency-driven innovation will strengthen their competitive edge in a rapidly changing market, preserve their legacy while improving processes, and ensure a smooth transition between generations by fostering adaptability.
As Mr Gates puts it: “Innovation isn’t about throwing out tradition. It’s about making your business smarter, stronger and ready for the future.”
About Pronto Software
Pronto Software is an Australian developer of award-winning business management and analytics solutions. Pronto Xi, our flagship ERP software, integrates accounting, operational and mobile features in a single system optimising business processes and unlocking actionable insights. Over 1,500 organisations have leveraged our industry experience and innovation to increase growth and revenue.
Pronto Software is an Australian developer of award-winning Enterprise Resource Planning (ERP) management software.
