Why the second act matters more than the first in family-owned legacy businesses

Inheriting a family business is often seen as a privilege, but for second- and third-generation leaders, the tension between maintaining a legacy and forging a new path can be daunting.?

Traditional wisdom suggests that only 30 per cent of family businesses transition successfully to the second generation, with just 12 per cent surviving into the third. Still, recent studies challenge these assumptions, suggesting that family enterprises may possess greater resilience than previously believed, particularly when they embrace innovation and adapt to shifting market demands.

Aditya Mittal, the son of steel magnate Lakshmi Mittal, exemplifies this balancing act. Groomed from an early age to lead his father’s global empire, Aditya has faced scrutiny over his ability to steer the company into an era defined by sustainability and shifting workforce priorities. His leadership reflects a continuation of his father’s vision, ensuring stability while integrating incremental changes.?

For many, this approach represents the ideal — respecting the foundation laid by the previous generation while modernising for the future. Yet others see it as constrained, too tethered to the past to encourage transformative innovation.

On the other hand, some successors opt for reinvention rather than continuity. Take Alexandre Arnault, for example, the son of LVMH chairman Bernard Arnault. Rather than simply inheriting a role in his father’s empire, Alexandre brought a fresh perspective to Rimowa, the German luggage brand acquired by LVMH.

Under his leadership, Rimowa transformed into a highly coveted luxury brand through collaborations with Off-White and Supreme, appealing to a younger, trend-driven audience. His approach reflects a growing mindset among next-generation leaders: leveraging family legacy as a foundation for innovation rather than a limitation.?

Legacy vs adaptation

For many second-generation leaders, the family business transcends career aspirations; it is a testament to the grit and sacrifice of the founding generation. This reverence for legacy often creates a psychological burden of gratitude and obligation.

Scholars refer to this as emotional ownership or intergenerational expectations, where leaders frequently feel compelled to preserve the values and traditions that built the business — even when market realities demand change. Yet, those who succeed often find a way to honour the past while embracing transformation.?

This mindset is particularly relevant in Asia, where dynastic businesses dominate the economic landscape. In Singapore, studies indicate that many family businesses face significant challenges in succession planning, with only 58 per cent reportedly having clear plans for leadership transitions. Younger generations often hesitate to step into these roles, citing a lack of passion for the industry or doubts about the business’s relevance in today’s economy.?

Such reluctance has led to intergenerational tensions. Gen X leaders, rooted in traditional methods, often view their millennial and Gen Z successors as… (Read more here).