The 6%: Why Mexican Family Businesses Can't Innovate

(This is the first in a three-part series)

Family businesses are the engine of Mexico. They represent 90% of all business units, generate the majority of employment, and sustain entire communities throughout the country. When a family business grows, hires, invests, and expands, the effect multiplies across suppliers, employees, and families that depend on it. When a family business stagnates or disappears, that effect also multiplies, but in the opposite direction.

Mexico's economic future won't be defined by large corporations or Silicon Valley startups. It will be defined by the thousands of SMEs and family businesses that today face a decision: transform or fall behind.

And here's the problem. Most of them want to innovate, but very few actually can. Not because they lack ideas or desire, but because they lack structure, because family dynamics block change, and because there's widespread confusion between modernizing and actually creating something new.

This three-part series explores that problem from its roots. We start with an honest diagnosis of where we stand as a country, with data that's uncomfortable but necessary to face head-on. Then we move into more difficult terrain: the human factor, the people behind the decisions that don't get made, the ego and identity that stand in the way of change. And we close with a reflection on what it really means to innovate in a family business, which goes far beyond adopting technology or following trends.

The goal isn't to point fingers or offer magic formulas. The goal is to open a conversation that Mexico still isn't having with enough honesty. Because if we can help more family businesses develop the capacity to innovate, we won't just see more companies surviving to the third generation. We'll see a more dynamic economy, more diversified, and with more opportunities for everyone.

That's what's at stake. Let's begin.

The 6%: Why Mexican Family Businesses Can't Innovate

In Mexico, family businesses represent 90% of all business units. They are the engine of the economy, the largest employer, and the backbone of the country. Yet, only 6% of them make it to a third generation of leadership.

The global average is 11%. Mexico is almost half that.

But the problem isn't just survival. The problem is that Mexican family businesses have a structural deficit that makes them incapable of innovating, and without innovation, survival is just a matter of time.

The Mexican Reality: Worse Than the Global Average

According to the 2023 CIFEM-BBVA and IPADE study, 52% of family businesses in Mexico face some degree of risk of not surviving. Not because of the market, not because of competition, but because of accumulated internal bad practices that affect family and organizational dynamics.

Meanwhile, 79% of Mexican family businesses declare they "will focus on innovation." The intention exists, but the capacity to execute does not.

The Triple Deficit Blocking Innovation

Mexican family businesses don't die from lack of ideas, they die because they lack the minimum organizational architecture to execute change. Innovation requires clear, fast decision-making with real authority, and that's exactly what's missing.

1. Succession deficit

Only 3% of Mexican family businesses have an explicit succession plan for the CEO position, according to CIFEM-BBVA. A UDLAP study of nearly 1,500 companies found that 73% have no formal succession plan at all.

Without clarity on who leads tomorrow, no one bets on long-term projects. Why propose a three-year initiative if you don't know who will be making decisions when it matures?

2. Governance deficit

Only 21% of Mexican family businesses have a board of directors, and only 32% have a formal management team.

Without a decision-making structure, every new initiative dies in the limbo of "we'll look at it later." Ideas are presented, discussed informally, and diluted. There's no forum with authority to say yes or no, everything depends on the founder's mood and availability.

3. Institutionalization deficit

Only 5% of Mexican family businesses are in good shape regarding institutionalization, professionalization, and corporate governance. The remaining 66% need intensive work on these issues.

Without documented processes, innovation depends on individual heroism. Someone has to push every project through sheer personal force, navigating informal resistance without structural support. That doesn't scale, and eventually that someone gets tired or leaves.

The Paradox: Everyone Wants to Innovate, Almost No One Can

Globally, only 19% of family businesses dedicate significant focus and investment to innovation and R&D, according to PwC. Only 22% say they "actively innovate" during times of disruption, and just 3% seek to completely reinvent their business.

In Mexico, one in three family businesses doesn't consider its digital capabilities solid, and doesn't even see it as a priority.

The disconnect is clear: high declared intention, low installed capacity. It's not hypocrisy, they genuinely want to innovate but have nowhere to do it. There's no innovation committee, no protected budget, no process to evaluate ideas, no documented tolerance for failure.

Wanting to innovate without structure is like wanting to run a marathon without having trained.

What the Successful Ones Do Differently

McKinsey published a 2023 study on high-performing family businesses, those that consistently outperform their peers in growth and profitability. The findings are revealing.

Ninety percent of high-performing family businesses have an effective, independent board of directors, while only 72% of the rest do. That 18-point difference isn't cosmetic, it's the difference between having a real forum for strategic decision-making and depending on informal conversations at Sunday lunch.

High performers invest twice as much in R&D as other family businesses. Not a little more, double.

Eighty-five percent have a formal forum that meets regularly to address family and business matters, compared to only 66% of the others. And 80% have formal documentation with clear guidelines on family members' roles and responsibilities.

But the most important data point for understanding the connection to innovation is this: 40% of high-performing family businesses generate more than 50% of their revenue from businesses outside their original core. Among the rest, only 7%.

Those with structure don't just survive, they diversify, create new revenue streams, and truly innovate.

The Pattern Is Clear

Structure first, then innovation. Not the other way around.

You can't launch an innovation program in a company where it's unclear who can approve budgets. You can't ask people to propose disruptive ideas if the founder has informal veto power over everything. You can't expect creativity to flourish where there's no tolerance for failure.

Innovation isn't a project, it's an organizational capability. And that capability requires foundations that 66% of Mexican family businesses don't have.

Before Asking 'What Should We Innovate?'

The next time someone in your family business proposes an "innovation program" or a "new ideas committee," it's worth asking some questions first: Do we have a board of directors with independent members? Is there a documented succession plan that everyone knows? Is there a formal forum where the family discusses business matters with an agenda and follow-up? Are the roles and responsibilities of each family member in the business clear? Do we have a mechanism to resolve family conflicts before they escalate?

If the answer to most of these is no, the innovation program will fail. Not because of the ideas, but because of the lack of foundation.

The Real Problem

The problem with Mexican family businesses isn't that the market is harder than in other countries, it isn't lack of talent, it isn't lack of opportunities. The problem is that we're competing with a significant structural deficit compared to the global average, and that deficit is paid for in an inability to change.

The good news is that these are decision problems, not resource problems. Creating a board of directors doesn't require capital, documenting a succession plan doesn't cost millions, establishing a family forum is practically free.

The bad news is that it requires someone to make the decision to do it, and often that person is exactly the one who least wants to change anything.

We'll talk about that in the next article.