What is the one risk family businesses can’t afford?
An ISB report argues that postponing innovation, not disruption, is what truly endangers legacy enterprises
- Feb 26, 2026,
- Updated Feb 26, 2026 8:30 AM IST
There was a time when an HMT watch marked life’s milestones, gifted at graduations, worn at weddings, trusted for decades. But when quartz technology transformed global timekeeping, HMT stayed focused on refining mechanical precision rather than redefining relevance. The warning signs were clear: between the early 2000s and 2013, watch division revenues fell from over ₹100 crore to single digits, while cumulative losses crossed ₹1,600 crore. HMT remained operationally active, EBITDA-focused long after its strategic ambition had stalled.
The story is not unique.
Once a market leader in consumer electronics, Videocon expanded aggressively into oil & gas, telecom and financial services. But these capital-heavy bets lacked ecosystem coherence and integration. As leverage mounted, cash flows lagged. By the time insolvency proceedings began, creditor claims had crossed ₹60,000 crore.
These were not companies short on capital, brand equity or ambition. They faltered because innovation was delayed and in fast-moving markets, delay compounds irrelevance.
That is the central warning of “BUSINESS INNOVATION: An Imperative for Indian Family-Led Business,” a report by the Centre for Business Innovation and the Thomas Schmidheiny Centre for Family Enterprise at the Indian School of Business.
Growth Without Reinvention?
Family-owned businesses contribute over 75% of India’s GDP — a figure projected to rise to 80–85% by 2047 — and dominate sectors from manufacturing and healthcare to FMCG and infrastructure. Yet growth beyond a handful of large conglomerates remains uneven.
While giants such as Tata Consultancy Services, Reliance Industries, Adani Enterprises, Wipro and Bharti Airtel have clocked strong growth, many mid-sized family businesses have lagged — despite India’s 8% GDP expansion and double-digit growth across healthcare, FMCG, automotives, BFSI and consumer electronics. Rising urban consumption and accelerating technology adoption have created tailwinds, but much of this opportunity remains under-leveraged.
Interactions with founders in the study suggest the constraint is not capital or demand, but risk appetite. As global capability centres expand rapidly and competition for talent and market share intensifies, the advantage will lie with those who build ecosystems, enter adjacent categories and experiment with new models. Operational discipline built past success but in today’s environment, resilience without reinvention risks becoming rigidity.
The report’s central argument is clear: the greatest threat to family businesses is not bold experimentation, but strategic inaction.
Innovation Is No Longer Optional
Innovation today is not about adopting fashionable technologies. It is about rethinking business models, customer engagement and ecosystems.
Companies that have embraced reinvention show what this looks like in practice. Nykaa blended influencer marketing, offline retail and augmented reality to build an integrated beauty ecosystem. Apollo Hospitals scaled AI-driven consultations and diagnostics nationwide, while TVS Motor Company accelerated its EV push through rapid launches and technology integration. In each case, innovation was contextual responding to shifting consumer expectations rather than defending legacy formats.
Drawing on detailed analysis of 10-year annual reports, media interactions and face-to-face discussions with promoters across 19 family businesses, the report distils these learnings into a practical playbook: the ARISE framework.
A – Ambition: Look Beyond EBITDA Sustained growth begins with bold, long-term vision rather than short-term margin protection. IndiGo signalled category leadership with a 500-aircraft order in 2019, staking claim to future demand. Dr. Reddy’s Laboratories moved beyond generics into biosimilars, reshaping its global portfolio.
R – Real Risk: The Risk of Inaction Growth requires calculated bets. Biocon invested in a biologics facility in Malaysia to strengthen its global supply chain. Eicher Motors deepened digital engagement during COVID, strengthening customer relationships at a moment of disruption.
I – Innovation: Tailor for Context Innovation is about relevance, not hype. Thermax deployed remote tools and digitisation to improve industrial efficiency, while Nykaa built an omnichannel beauty platform grounded in consumer behaviour.
S – Speed & Scale: Build Fast, Learn Faster In volatile markets, speed itself becomes a competitive advantage. Apollo Hospitals swiftly scaled AI-led consultations, diagnostics and digital platforms across India, while TVS Motor Company introduced two EVs within a year, combining smart technology with rapid iteration to stay ahead of the curve.
E – Ecosystem Thinking: Go Beyond Products Enduring advantage comes from platforms and partnerships. Bajaj Auto co-created motorcycles with KTM and integrated EVs with servicing through ProBiking outlets. Dabur expanded into wellness tech via WhatsApp Ayurveda and strategic e-commerce tie-ups.
The GCC Wave: Threat or Opportunity?
One of the most significant structural shifts confronting Indian family businesses is the rise of Global Capability Centres (GCCs).
Once back-office units, GCCs have evolved into innovation hubs driving AI, automation, advanced analytics and R&D for global multinationals. As Finance Minister Nirmala Sitharaman recently noted, India’s GCC ecosystem in 2025 generates an estimated $68 billion in gross value addition about 1.6% of GDP. By 2030, that figure is projected to reach $100–200 billion, contributing 3–5% of GDP and materially altering India’s economic composition. India now hosts over 1,900 GCCs employing nearly 1.9 million professionals, with projections to reach 2.8 million by FY2029.
This surge creates a talent war particularly in six major metros where over 70% of GCCs are concentrated.
For family businesses, the implications are double-edged.
On one hand, competition for digital and AI talent is driving up salaries and attrition. Many legacy enterprises struggle with slower decision-making cycles, lower R&D intensity and less agile innovation cultures, making it harder to attract top-tier technology professionals.
On the other hand, the spillover effects are significant. As GCCs deepen India’s capabilities in AI, automation, cybersecurity and next-generation supply chains, family-run enterprises gain access to a far richer digital talent ecosystem. Some conglomerates including Bank of Baroda, Adani Group and Tech Mahindra — have already established captive digital centres to accelerate internal transformation and embed Industry 4.0, AI-driven marketing and digital commerce into legacy operations.
The strategic choice, therefore, is not confrontation but convergence. Family businesses possess enduring strengths: deep customer loyalty, last-mile distribution, diaspora linkages and strong product development ecosystems. By combining these advantages with GCC-enabled digital capabilities data-driven personalisation, AI-powered supply chains and global e-commerce platforms they can scale across the Global South and developed markets alike.
In that sense, the GCC boom is not merely competitive pressure. It offer family businesses a rare opportunity to fuse legacy with innovation. If leveraged well, they can help Indian enterprises move from defending domestic dominance to building global scale.
The critical question: Will family businesses see GCCs as rivals or as gateways to reinvention?
The R&D Deficit: Underinvestment in the Future
Perhaps the most sobering insight in the report is around R&D.
Indian family businesses typically spend below 0.3% of revenues on R&D, compared to 2–4% among global MNCs and GCC-driven corporates.
Historically, many business families played a nation-building role through institutions such as the Tata Institute of Fundamental Research, BITS Pilani, and the Indian Institute of Science.
While several Indian conglomerates have used startup acquisitions to accelerate innovation — such as TVS Motor Company acquiring Norton Motorcycles and Swiss E-Mobility Group, and Reliance Industries investing in AI ventures like Haptik and Addverb — long-term leadership in deep-tech demands patient capital and strong lab-to-market ecosystems. That is the strategic opportunity before India’s family businesses in an AI-first world.
The report recommends the following way forward:
- Build regional innovation clusters anchored around leading institutes such as IITs, IISc and BITS, with structured industry–academia collaboration
- Create sector-focused Education and Research Zones within or alongside industrial parks — especially in healthcare, infotech and digital supply chains.
- Adopt joint R&D funding models, enabling corporates to co-invest in shared labs, infrastructure and research talent aimed at solving real-world manufacturing, shopfloor and logistics challenges.
- Institutionalise faculty exchange and corporate immersion programmes, allowing professors and industry leaders to move across academia and business.
- Establish a National Institute for Faculty Development and strengthen India-focused data portals to enhance research quality, accessibility and evidence-based decision-making.
The Fork in the Road
Indian family businesses stand at a decisive fork in the road. The cautionary tales of HMT and among others show that delay, not disruption, is often the real danger while examples like Thermax and Nykaa among others demonstrate how legacy can be strengthened through disciplined innovation and operational agility. In the decade ahead, relevance will belong not to the biggest, but to the boldest: those willing to align ambition with reinvention. The greatest risk now is not change it is standing still.
There was a time when an HMT watch marked life’s milestones, gifted at graduations, worn at weddings, trusted for decades. But when quartz technology transformed global timekeeping, HMT stayed focused on refining mechanical precision rather than redefining relevance. The warning signs were clear: between the early 2000s and 2013, watch division revenues fell from over ₹100 crore to single digits, while cumulative losses crossed ₹1,600 crore. HMT remained operationally active, EBITDA-focused long after its strategic ambition had stalled.
The story is not unique.
Once a market leader in consumer electronics, Videocon expanded aggressively into oil & gas, telecom and financial services. But these capital-heavy bets lacked ecosystem coherence and integration. As leverage mounted, cash flows lagged. By the time insolvency proceedings began, creditor claims had crossed ₹60,000 crore.
These were not companies short on capital, brand equity or ambition. They faltered because innovation was delayed and in fast-moving markets, delay compounds irrelevance.
That is the central warning of “BUSINESS INNOVATION: An Imperative for Indian Family-Led Business,” a report by the Centre for Business Innovation and the Thomas Schmidheiny Centre for Family Enterprise at the Indian School of Business.
Growth Without Reinvention?
Family-owned businesses contribute over 75% of India’s GDP — a figure projected to rise to 80–85% by 2047 — and dominate sectors from manufacturing and healthcare to FMCG and infrastructure. Yet growth beyond a handful of large conglomerates remains uneven.
While giants such as Tata Consultancy Services, Reliance Industries, Adani Enterprises, Wipro and Bharti Airtel have clocked strong growth, many mid-sized family businesses have lagged — despite India’s 8% GDP expansion and double-digit growth across healthcare, FMCG, automotives, BFSI and consumer electronics. Rising urban consumption and accelerating technology adoption have created tailwinds, but much of this opportunity remains under-leveraged.
Interactions with founders in the study suggest the constraint is not capital or demand, but risk appetite. As global capability centres expand rapidly and competition for talent and market share intensifies, the advantage will lie with those who build ecosystems, enter adjacent categories and experiment with new models. Operational discipline built past success but in today’s environment, resilience without reinvention risks becoming rigidity.
The report’s central argument is clear: the greatest threat to family businesses is not bold experimentation, but strategic inaction.
Innovation Is No Longer Optional
Innovation today is not about adopting fashionable technologies. It is about rethinking business models, customer engagement and ecosystems.
Companies that have embraced reinvention show what this looks like in practice. Nykaa blended influencer marketing, offline retail and augmented reality to build an integrated beauty ecosystem. Apollo Hospitals scaled AI-driven consultations and diagnostics nationwide, while TVS Motor Company accelerated its EV push through rapid launches and technology integration. In each case, innovation was contextual responding to shifting consumer expectations rather than defending legacy formats.
Drawing on detailed analysis of 10-year annual reports, media interactions and face-to-face discussions with promoters across 19 family businesses, the report distils these learnings into a practical playbook: the ARISE framework.
A – Ambition: Look Beyond EBITDA Sustained growth begins with bold, long-term vision rather than short-term margin protection. IndiGo signalled category leadership with a 500-aircraft order in 2019, staking claim to future demand. Dr. Reddy’s Laboratories moved beyond generics into biosimilars, reshaping its global portfolio.
R – Real Risk: The Risk of Inaction Growth requires calculated bets. Biocon invested in a biologics facility in Malaysia to strengthen its global supply chain. Eicher Motors deepened digital engagement during COVID, strengthening customer relationships at a moment of disruption.
I – Innovation: Tailor for Context Innovation is about relevance, not hype. Thermax deployed remote tools and digitisation to improve industrial efficiency, while Nykaa built an omnichannel beauty platform grounded in consumer behaviour.
S – Speed & Scale: Build Fast, Learn Faster In volatile markets, speed itself becomes a competitive advantage. Apollo Hospitals swiftly scaled AI-led consultations, diagnostics and digital platforms across India, while TVS Motor Company introduced two EVs within a year, combining smart technology with rapid iteration to stay ahead of the curve.
E – Ecosystem Thinking: Go Beyond Products Enduring advantage comes from platforms and partnerships. Bajaj Auto co-created motorcycles with KTM and integrated EVs with servicing through ProBiking outlets. Dabur expanded into wellness tech via WhatsApp Ayurveda and strategic e-commerce tie-ups.
The GCC Wave: Threat or Opportunity?
One of the most significant structural shifts confronting Indian family businesses is the rise of Global Capability Centres (GCCs).
Once back-office units, GCCs have evolved into innovation hubs driving AI, automation, advanced analytics and R&D for global multinationals. As Finance Minister Nirmala Sitharaman recently noted, India’s GCC ecosystem in 2025 generates an estimated $68 billion in gross value addition about 1.6% of GDP. By 2030, that figure is projected to reach $100–200 billion, contributing 3–5% of GDP and materially altering India’s economic composition. India now hosts over 1,900 GCCs employing nearly 1.9 million professionals, with projections to reach 2.8 million by FY2029.
This surge creates a talent war particularly in six major metros where over 70% of GCCs are concentrated.
For family businesses, the implications are double-edged.
On one hand, competition for digital and AI talent is driving up salaries and attrition. Many legacy enterprises struggle with slower decision-making cycles, lower R&D intensity and less agile innovation cultures, making it harder to attract top-tier technology professionals.
On the other hand, the spillover effects are significant. As GCCs deepen India’s capabilities in AI, automation, cybersecurity and next-generation supply chains, family-run enterprises gain access to a far richer digital talent ecosystem. Some conglomerates including Bank of Baroda, Adani Group and Tech Mahindra — have already established captive digital centres to accelerate internal transformation and embed Industry 4.0, AI-driven marketing and digital commerce into legacy operations.
The strategic choice, therefore, is not confrontation but convergence. Family businesses possess enduring strengths: deep customer loyalty, last-mile distribution, diaspora linkages and strong product development ecosystems. By combining these advantages with GCC-enabled digital capabilities data-driven personalisation, AI-powered supply chains and global e-commerce platforms they can scale across the Global South and developed markets alike.
In that sense, the GCC boom is not merely competitive pressure. It offer family businesses a rare opportunity to fuse legacy with innovation. If leveraged well, they can help Indian enterprises move from defending domestic dominance to building global scale.
The critical question: Will family businesses see GCCs as rivals or as gateways to reinvention?
The R&D Deficit: Underinvestment in the Future
Perhaps the most sobering insight in the report is around R&D.
Indian family businesses typically spend below 0.3% of revenues on R&D, compared to 2–4% among global MNCs and GCC-driven corporates.
Historically, many business families played a nation-building role through institutions such as the Tata Institute of Fundamental Research, BITS Pilani, and the Indian Institute of Science.
While several Indian conglomerates have used startup acquisitions to accelerate innovation — such as TVS Motor Company acquiring Norton Motorcycles and Swiss E-Mobility Group, and Reliance Industries investing in AI ventures like Haptik and Addverb — long-term leadership in deep-tech demands patient capital and strong lab-to-market ecosystems. That is the strategic opportunity before India’s family businesses in an AI-first world.
The report recommends the following way forward:
- Build regional innovation clusters anchored around leading institutes such as IITs, IISc and BITS, with structured industry–academia collaboration
- Create sector-focused Education and Research Zones within or alongside industrial parks — especially in healthcare, infotech and digital supply chains.
- Adopt joint R&D funding models, enabling corporates to co-invest in shared labs, infrastructure and research talent aimed at solving real-world manufacturing, shopfloor and logistics challenges.
- Institutionalise faculty exchange and corporate immersion programmes, allowing professors and industry leaders to move across academia and business.
- Establish a National Institute for Faculty Development and strengthen India-focused data portals to enhance research quality, accessibility and evidence-based decision-making.
The Fork in the Road
Indian family businesses stand at a decisive fork in the road. The cautionary tales of HMT and among others show that delay, not disruption, is often the real danger while examples like Thermax and Nykaa among others demonstrate how legacy can be strengthened through disciplined innovation and operational agility. In the decade ahead, relevance will belong not to the biggest, but to the boldest: those willing to align ambition with reinvention. The greatest risk now is not change it is standing still.