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Sustainable enterprise performance : a comprehensive evaluation method
 9781786303714, 178630371X

Table of contents :
Content: Foreword xiAcknowledgements xiiiIntroduction xvPart 1: A Global Framework for the Governance Process and Indicators of Sustainable Performance 1Chapter 1. The Governance Process 31.1. Enterprise governance 31.2. Strategic business development 81.2.1. The global environment 81.2.2. Stakeholders 141.2.3. The structuring forces of companies 161.2.4. Strategic analysis 231.2.5. Actors 281.3. Taking into account corporate social responsibility: the governance process 281.3.1. CSR: a sustainable performance lever for enterprises 281.3.2. Companies are more and more concerned 301.3.3. The challenge of CSR for enterprises 311.3.4. The opportunities of CSR for enterprises 331.4. Translation of strategic objectives at the level of operational processes 361.4.1. Management by processes 361.4.2. Projects for improvement and resource mobilization 401.4.3. Human resource, skill and talent management 431.5. Monitoring objective achievement and risk control 441.5.1. The "balanced scorecard" 441.5.2. Risk mapping and the COSO framework 471.5.3. Compliance 511.6. The role of decision-makers in the governance process 521.6.1. Executives: what are they for? 531.6.2. The Executive 541.7. Case studies: assessing the maturity of the governance process 581.7.1. Gexpertise Group: assessing the maturity of the governance process without CSR 581.7.2. L'Oreal: assessing the maturity of the governance process with CSR 62Chapter 2. The Process of Creating Product Offerings 672.1. Introduction 672.2. The business' economic environment and its ecosystem or "humus" 732.2.1. Innovation and start-up 752.2.2. Economic intelligence 782.2.3. Strategic marketing (or "upstream" marketing) 802.3. Exploitation of the business' key assets or "roots" 832.3.1. Identification and evaluation of competencies and key assets: use a methodology 852.3.2. The value of informational assets 882.4. Best practice in operations involved in the process or the "trunk" 902.4.1. Product design: defining the product offering 932.4.2. The business model 942.4.3. Industrialization 962.4.4. Start of production 1002.4.5. Launch on the market 1012.4.6. Appraisal 1032.4.7. Best practice in executing the process of creating product offerings 1032.5. Case study: assessing the maturity of the offer creation process 1052.5.1. Safran Group 1052.6. Indicators of the performance of the offer creation process 109Chapter 3. The Process of Product and Service Production 1113.1. The strategic importance of the "supply chain" within digital development 1113.2. Description of the "supply chain" process 1133.3. Good practices and performance indicators for operations involved in the production process 1153.3.1. Result indicators 1173.3.2. Activity indicators 1183.4. The economic performance of the processes 1203.4.1. ABB-ABC-ABM: a management tool to help make decisions under certain conditions 1203.4.2. ABB-ABC-ABM: the logical sequence of implementation (ABB, then ABC, and then ABM) 1213.4.3. Using ABB-ABC-ABM as a tool for "operational management control" 1243.4.4. Approach to implementation and traps to avoid 1253.4.5. Links with processes 1273.5. The big picture of performance in the "supply chain" process 1293.6. Case study: assessing the maturity of the supply chain process 1313.6.1. Air France 131Part 2: Focus on Medium- to Long-term Performance Levers 135Chapter 4. Digital Transformation 1374.1. The importance of managing issues concerning the "digital transformation" 1374.1.1. How can we digitize while accounting for field realities? 1394.1.2. How does the enterprise integrate changes in its environment into its organization? 1394.1.3. What impacts do decisions have on the environment and stakeholders? 1404.1.4. What measures are taken to ensure that offers conform to customers' emotions and expectations? 1414.1.5. How can we measure the operational performance of different lines of products and services? 1424.2. The importance of monitoring digital developments. 1424.3. Artificial intelligence and robotization 1434.4. Case study: assessing the maturity of digital transformation 1454.4.1. Lise Charmel 145Chapter 5. Enterprise Culture 1475.1. The importance of enterprise culture for performance 1475.1.1. New criteria for enterprise performance 1485.1.2. A key factor in performance 1485.1.3. Can an enterprise's culture stifle progress and innovation? 1495.1.4. Enterprise culture: a sustainable resource and a competitive advantage 1495.2. Case study: assessing the maturity of enterprise culture 1505.2.1. H30 150Chapter 6. Ethics and Compliance 1536.1. The importance of ethics and compliance issues for performance 1536.2. Case study: assessing the maturity of ethics and compliance aspects 1556.2.1. iXBlue 155Chapter 7. Brand Image and Reputation 1577.1. The importance of brand image and reputation management for performance 1577.1.1. Brand image 1577.1.2. Brand image measurement criteria 1587.1.3. Anticipation analysis 1587.1.4. Reputation 1587.1.5. Means 1597.1.6. Communicating values 1597.1.7. The enterprise's attractiveness 1607.1.8. Brand image deterioration 1617.1.9. Rumors and e-reputation. 1627.1.10. Performance and sustainability 1637.1.11. Conclusion 1647.2. Case study: assessing the maturity of brand image management 1647.2.1. L'Oreal 164Chapter 8. Lean Management 1678.1. The importance of "Lean management" concepts for performance 1678.1.1. Toyota: the birthplace of Lean management 1678.1.2. Exceptional performance through original practices 1688.2. Measures of Lean performance 1698.3. Lean management in the IT industry or IT departments of enterprises 1728.3.1. The problems inherent in traditional computer systems 1728.3.2. The best practices of Lean IT 1748.4. Lean management in the service industries 1748.5. What is a "Lean start-up"? 1768.5.1. The motivation for performance in a Lean start-up 1778.6. Conclusion 1798.7. Case study: assessing the maturity of Lean management practices 180Appendix 183Glossary 187References 197Index 199

Citation preview

Sustainable Enterprise Performance

Sustainable Enterprise Performance A Comprehensive Evaluation Method

Jean-Louis Leignel Emmanuel Ménager Serge Yablonsky

First published 2019 in Great Britain and the United States by ISTE Ltd and John Wiley & Sons, Inc.

Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced, stored or transmitted, in any form or by any means, with the prior permission in writing of the publishers, or in the case of reprographic reproduction in accordance with the terms and licenses issued by the CLA. Enquiries concerning reproduction outside these terms should be sent to the publishers at the undermentioned address: ISTE Ltd 27–37 St George’s Road London SW19 4EU UK

John Wiley & Sons, Inc. 111 River Street Hoboken, NJ 07030 USA

www.iste.co.uk

www.wiley.com

© ISTE Ltd 2019 The rights of Jean-Louis Leignel, Emmanuel Ménager and Serge Yablonsky to be identified as the authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988. Library of Congress Control Number: 2019931762 British Library Cataloguing-in-Publication Data A CIP record for this book is available from the British Library ISBN 978-1-78630-371-4

Contents

Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

xi

Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Part 1: A Global Framework for the Governance Process and Indicators of Sustainable Performance . . . . . . . . . . . . . . . . .

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Chapter 1. The Governance Process . . . . . . . . . . . . . . . . . . . . . .

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1.1. Enterprise governance . . . . . . . . . . . . . . . . . . . . . 1.2. Strategic business development . . . . . . . . . . . . . . . . 1.2.1. The global environment . . . . . . . . . . . . . . . . . . 1.2.2. Stakeholders . . . . . . . . . . . . . . . . . . . . . . . . . 1.2.3. The structuring forces of companies . . . . . . . . . . . 1.2.4. Strategic analysis . . . . . . . . . . . . . . . . . . . . . . 1.2.5. Actors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3. Taking into account corporate social responsibility: the governance process . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3.1. CSR: a sustainable performance lever for enterprises 1.3.2. Companies are more and more concerned . . . . . . . 1.3.3. The challenge of CSR for enterprises . . . . . . . . . . 1.3.4. The opportunities of CSR for enterprises . . . . . . . . 1.4. Translation of strategic objectives at the level of operational processes . . . . . . . . . . . . . . . . . . . . . . . 1.4.1. Management by processes . . . . . . . . . . . . . . . . . 1.4.2. Projects for improvement and resource mobilization . 1.4.3. Human resource, skill and talent management . . . . .

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1.5. Monitoring objective achievement and risk control . . . 1.5.1. The “balanced scorecard” . . . . . . . . . . . . . . . 1.5.2. Risk mapping and the COSO framework . . . . . . . 1.5.3. Compliance . . . . . . . . . . . . . . . . . . . . . . . . 1.6. The role of decision-makers in the governance process . 1.6.1. Executives: what are they for? . . . . . . . . . . . . 1.6.2. The Executive . . . . . . . . . . . . . . . . . . . . . . . 1.7. Case studies: assessing the maturity of the governance process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7.1. Gexpertise Group: assessing the maturity of the governance process without CSR . . . . . . . . . . . . . . . 1.7.2. L’Oréal: assessing the maturity of the governance process with CSR . . . . . . . . . . . . . . . . . . . . . . . . .

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Chapter 2. The Process of Creating Product Offerings . . . . . . . . .

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2.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2. The business’ economic environment and its ecosystem or “humus” . . . . . . . . . . . . . . . . . . . . . . . . 2.2.1. Innovation and start-up . . . . . . . . . . . . . . . . . . . 2.2.2. Economic intelligence . . . . . . . . . . . . . . . . . . . . 2.2.3. Strategic marketing (or “upstream” marketing) . . . . 2.3. Exploitation of the business’ key assets or “roots” . . . . . 2.3.1. Identification and evaluation of competencies and key assets: use a methodology . . . . . . . . . . . . . . . . . . . 2.3.2. The value of informational assets . . . . . . . . . . . . . 2.4. Best practice in operations involved in the process or the “trunk” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4.1. Product design: defining the product offering . . . . . . 2.4.2. The business model. . . . . . . . . . . . . . . . . . . . . . 2.4.3. Industrialization . . . . . . . . . . . . . . . . . . . . . . . . 2.4.4. Start of production . . . . . . . . . . . . . . . . . . . . . . 2.4.5. Launch on the market . . . . . . . . . . . . . . . . . . . . 2.4.6. Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4.7. Best practice in executing the process of creating product offerings . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5. Case study: assessing the maturity of the offer creation process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5.1. Safran Group . . . . . . . . . . . . . . . . . . . . . . . . . 2.6. Indicators of the performance of the offer creation process

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Chapter 3. The Process of Product and Service Production . . . . . 3.1. The strategic importance of the “supply chain” within digital development . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2. Description of the “supply chain” process . . . . . . . . . . . 3.3. Good practices and performance indicators for operations involved in the production process . . . . . . . . . . . . . . . . . . 3.3.1. Result indicators . . . . . . . . . . . . . . . . . . . . . . . 3.3.2. Activity indicators . . . . . . . . . . . . . . . . . . . . . . 3.4. The economic performance of the processe . . . . . . . . . . 3.4.1. ABB–ABC–ABM: a management tool to help make decisions under certain conditions . . . . . . . . . . . . . . . . 3.4.2. ABB–ABC–ABM: the logical sequence of implementation (ABB, then ABC, and then ABM) . . . . . . 3.4.3. Using ABB–ABC–ABM as a tool for “operational management control” . . . . . . . . . . . . . . . . . . . . . . . 3.4.4. Approach to implementation and traps to avoid . . . . . 3.4.5. Links with processes . . . . . . . . . . . . . . . . . . . . . 3.5. The big picture of performance in the “supply chain” process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6. Case study: assessing the maturity of the supply chain process. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6.1. Air France . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Part 2: Focus on Medium- to Long-term Performance Levers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Chapter 4. Digital Transformation . . . . . . . . . . . . . . . . . . . . . . . .

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4.1. The importance of managing issues concerning the “digital transformation” . . . . . . . . . . . . . . . . . . . . . . . 4.1.1. How can we digitize while accounting for field realities? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1.2. How does the enterprise integrate changes in its environment into its organization? . . . . . . . . . . . . . . . . 4.1.3. What impacts do decisions have on the environment and stakeholders? . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1.4. What measures are taken to ensure that offers conform to customers’ emotions and expectations? . . . . . . . . . . . 4.1.5. How can we measure the operational performance of different lines of products and services? . . . . . . . . . . 4.2. The importance of monitoring digital developments. . . . . 4.3. Artificial intelligence and robotization . . . . . . . . . . . . .

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4.4. Case study: assessing the maturity of digital transformation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4.1. Lise Charmel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Chapter 5. Enterprise Culture . . . . . . . . . . . . . . . . . . . . . . . . . . .

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5.1. The importance of enterprise culture for performance. . 5.1.1. New criteria for enterprise performance . . . . . . . 5.1.2. A key factor in performance . . . . . . . . . . . . . . 5.1.3. Can an enterprise’s culture stifle progress and innovation? . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1.4. Enterprise culture: a sustainable resource and a competitive advantage . . . . . . . . . . . . . . . . . . . . . 5.2. Case study: assessing the maturity of enterprise culture 5.2.1. H30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Chapter 6. Ethics and Compliance . . . . . . . . . . . . . . . . . . . . . . .

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6.1. The importance of ethics and compliance issues for performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2. Case study: assessing the maturity of ethics and compliance aspects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2.1. iXBlue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Chapter 7. Brand Image and Reputation . . . . . . . . . . . . . . . . . . .

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7.1. The importance of brand image and reputation management for performance . . . . . . . . . . . . . . . . 7.1.1. Brand image . . . . . . . . . . . . . . . . . . . . . 7.1.2. Brand image measurement criteria . . . . . . . . 7.1.3. Anticipation analysis . . . . . . . . . . . . . . . . 7.1.4. Reputation . . . . . . . . . . . . . . . . . . . . . . 7.1.5. Means . . . . . . . . . . . . . . . . . . . . . . . . . 7.1.6. Communicating values . . . . . . . . . . . . . . . 7.1.7. The enterprise’s attractiveness . . . . . . . . . . 7.1.8. Brand image deterioration . . . . . . . . . . . . . 7.1.9. Rumors and e-reputation. . . . . . . . . . . . . . 7.1.10. Performance and sustainability . . . . . . . . . 7.1.11. Conclusion . . . . . . . . . . . . . . . . . . . . . 7.2. Case study: assessing the maturity of brand image management . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2.1. L’Oréal . . . . . . . . . . . . . . . . . . . . . . . .

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Chapter 8. Lean Management . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1. The importance of “Lean management” concepts for performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1.1. Toyota: the birthplace of Lean management . . . . . . . . . . . 8.1.2. Exceptional performance through original practices . . . . . . 8.2. Measures of Lean performance . . . . . . . . . . . . . . . . . . . . . 8.3. Lean management in the IT industry or IT departments of enterprises. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.3.1. The problems inherent in traditional computer systems . . . . 8.3.2. The best practices of Lean IT . . . . . . . . . . . . . . . . . . . . 8.4. Lean management in the service industries . . . . . . . . . . . . . . 8.5. What is a “Lean start-up”? . . . . . . . . . . . . . . . . . . . . . . . 8.5.1. The motivation for performance in a Lean start-up . . . . . . . 8.6. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.7. Case study: assessing the maturity of Lean management practices

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Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Foreword

No measures without excess The new paths of enterprise’s performance must fall within the scope of duration, systems and globality. They characterize the impact of environmental changes in terms of value well beyond traditional metric. To illustrate this, let us take, for example, the emergence of digitalization in order to transform the business and favor innovation services (Big Data, artificial intelligence (AI), Internet of Things (IoT), etc.). The search for value is becoming with more and more acuity the main objective of enterprises that are anxious to create different revenue models, “in rupture” or, in other words, differing. More importantly, this is at the time of economy based on sharing or a platform that impacts all sectors of activity by questioning fundamentals and usual models. However, we must not forget operational excellence in the production of goods and services, which will be strongly impacted by digital development and robotization. It is up to the enterprise to ensure that these technological opportunities are taken advantage of in order to positively contribute to this excellence. The approach to measure performance does not go without consequence. Naturally, activity must be measured as objectively as possible, reasonably and dynamically. However, the metamorphosis

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that we are experiencing raises several fundamental issues. Here are some of them. Are the methods of return on investment (ROI) calculation still pertinent? Are they suitable for the new economic context that we are facing today? Are the ratios of classical management, activity and profitability still the right ones? Will nonfinancial information that allows the measurement of financial engagements in terms of corporate social responsibility (CSR) become pre-eminent? Must the valorization of assets that are deemed intangible, in particular intellectual property, be carried out in a systematic manner with potential for future value? Can an enterprise strive for “sustainability” without ethical and responsible behavior? Can it develop sustainably without relying on solid foundations, those of skill, staff engagement and attractiveness to new talents? Let us take a look at the largest stock valuations, those of digital “pure-players”, in order to see the growing gap between capital value and profitability. To guarantee its continuity, a “sustainable” enterprise must redefine its position regarding ecosystems, alchemy between customers, shareholders, partners, service providers and suppliers, institutions and staff. A new strategy will arise, associating the vision and the reality of business, above all by not prohibiting anything at first glance. Of course, it will be necessary to make enterprise culture evolve in order to act quickly and not get left behind. Yes, beyond “good” measure that involves rethinking organizations and their modes of operation in-depth, a little bit of excess is needed. This ounce of foolishness can push one to innovate, step out of one’s comfort zone and anticipate changes. This will facilitate governance and leadership efficiency, guarantee that the enterprise is closely monitored, and accelerate its rise and maturity. No measures without excess. Geoffroy ROUX DE BÉZIEUX President, MEDEF (France’s largest employers’ association)

Acknowledgments

For 10 years, the authors have been at the nucleus of several working groups in enterprise governance at the French professional body Académie des sciences techniques comptables et financières (Academy of Accounting and Financial Sciences and Techniques). The Académie (http://www.lacademie.info) is the first Frenchspeaking and France-based professional network of competencies and influence in serving the economy. It is also a platform of services where we can progress in professional activity and join a network of competencies and influence. The Académie unites professionals working with numbers under common values and facilitates the exchange of information on transversal matters and identifying good practices. The authors hold full responsibility for the writing in this work yet they extend their thanks to William Nahum, president of the Académie, to the research groups and particularly to Sophie de Pomyers for her commercial and marketing reflexes, Faten Saadi for his passion for CRS, Nicolas Saloff-Coste for his rigorous respect for Lean management and Areski Guidir for his belief in the intangible. Our thanks also go to Edouard Salustro, Maurice Catalan, François-Xavier Simon, Angélique Courtade, Eric Freudenreich, Antonio Dias, Jean-Louis Brun d’Arre and Alexis Kignelmans.

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Similarly, the authors would like to thank in particular companies that have attested to the applicability of the method, notably Air France, L’Oréal, Safran, Gexpertise, Lise Charmel, iXBlue and H3O. We would like to also extend our thanks to ProcessWay, an association represented by its members, and to its president, Pierre Girault of Air France, for constructive exchanges around processes. We thank Nicolas Lamiot of the consulting firm H3O for the following endorsement of the method. I am an engineer specializing in the agro-alimentary domain who takes action among leaders to help foster growth and take on the challenges that confront it. We always start with diagnostics that allows us to precisely identify the gaps between the vision perceived by management and what we have found in the field. In order to do this, we have used the enterprise governance approach offered in this book many times. The described governance process allows us to seek balance among the pillars, as they are explained in the various chapters.

Introduction

Knowing that more than half of the first 500 enterprises appearing in Fortune in 2000 have disappeared by 2018, which enterprises will still be present in 2020 or 2030? What differences do you see between well-known businesses such as Google, Walmart, General Electric, Holiday Inn or Toyota? Of course, they evolve in vastly different business areas. Furthermore, are there indicators that would allow us to compare their cyclical and future performance in terms of value creation? Each one of them has management control and measurement procedures to measure their savings that, in their areas, provide information on their performance. But do these quantified and displayed results give a correct and comprehensive perception of their performance? This book offers responses to questions by broadening traditional methods – generally accounting based – to more systematic performance criteria on the way businesses today move in their environments, movements that the digital revolution is currently revealing. What do we see? Strategies more or less mindful of their environment. Agility more or less reactive to the expectations of the market and to the influence of their ecosystem. More or less attention to the adaptation of business models, to the quality and pertinence of the chosen operational processes.

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Does that suffice? Each of the four cited businesses undoubtedly possesses a huge “corporate culture”, but it has been said that certain ones are no longer suitable to attract talent, to mobilize their internal resources in the best manner, and more simply, to entice a vaster clientele. Their internal cultures, by osmosis and whether they like it or not, from now on permeate the image that their “e-reputation” conveys. We have analyzed work on “integral reporting”, which was developed to reinstate investors’ confidence. It emphasizes business’ financial performances, as well as social, environmental and governance (SEG) performances. It allows the promotion of sustainable development by proving to stakeholders that good practices in terms of corporate social responsibility (CSR) do not hinder financial growth, but on the contrary, they are a way to generate added value for the business. The concept is promoted by the International Integrated Reporting Council (IIRC), an international association created in 2010 that gathers pilot enterprises, investors, reporting norm promoters and big audit firms. Considering CSR in “integrated reporting” is undisputedly a step forward, but a business’ sustainable performance stems from a more global approach, integrating not only the process of governance and CSR criteria, but also the “supply creation” process and operational processes, without forgetting the importance of “enterprise culture”, “digital transformation”, ethics and compliance, the brand’s image and “Lean management”. At the time of mass consumerism and savings called “shortages”, performance was measured in numbers that improved economies of scale and could be shown. This time is behind us. Today’s economy is strictly supply sided and must respond to the most diverse expectations on the market. The Japanese industry was the first to take on this course, since the beginning of the 1980s. A radical evolution occurred with “World Class Manufacturing”, which aims to produce varied available products with high quality at competitive prices. Lean manufacturing encodes its practices. In the same spirit, these practices

Introduction

xvii

now imbue governances and their administrations, services of all kinds, the development of digital systems, piloting start-ups and even the hospital sector. Beyond the numbers, the control one has over these opportunities and their constraints – and good practices that increase a business’ profit – is determined by a global appreciation for the business’ performance. If we cannot claim to measure everything with numbers like we do in management control, it is nevertheless possible to measure the maturity of a business with respect to a standard or another business. This work will therefore offer quantitative questionnaires for each domain of reference below: the evaluation of the maturity of the business, without neglecting quantitative approaches to management control such as ABC–ABM (activity-based costing/ management) and the balanced scorecard, made popular by Kaplan and Norton. Even though it sometimes requires a global transformation, performance most often takes shape by means of an iteration of decisions, even microdecisions, in harmony with the business’ strategy, which must also be adapted with regard to the ecosystem in which the business finds itself. Microdecisions often take root around contacts with staff, suppliers, clients and even competitors. Over time the business will undergo a metamorphosis, maintaining contact with stakeholders, all while keeping performance in sight, which is the guarantee of its continuity. In order to exhaustively cover the totality of domains where good practices must be applied in search of a business’ sustainable development, in the following, the authors offer a global framework, which consists of two distinct but complementary parts.

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Sustainable Enterprise Performance

First, the main body of the text consists of: – The process of enterprise governance, comprising: - development of enterprise strategy; - CSR and sustainable development; - the translation of strategic objectives at the operational level; - monitoring the achievement of objectives and risk management; – The product offer creation process. – The operational processes of production of products and services. The second part focuses on transversal topics that deserve particular attention, which are: - digital transformation; - enterprise culture; - ethics and compliance; - brand image and reputation; - Lean management.

Figure I.1. Sustainable enterprise performance framework

Introduction

xix

With the goal of helping businesses evaluate their level of maturity in terms of sustainable performance, this framework for good practices was completed based on questionnaires related to each section in the chart. Summaries of these questionnaires, developed for the purposes of this book, have been tested by interviews in firms of various sizes from various sectors in order to validate their operationality. An excerpt illustrating the approach can be found at the end of each chapter with a summary in the Appendix evaluating the maturity of French enterprises based on these questionnaires.

Part 1

A Global Framework for the Governance Process and Indicators of Sustainable Performance

Sustainable Enterprise Performance: A Comprehensive Evaluation Method, First Edition. Jean-Louis Leignel, Emmanuel Ménager and Serge Yablonsky. © ISTE Ltd 2019. Published by ISTE Ltd and John Wiley & Sons, Inc.

1 The Governance Process

1.1. Enterprise governance Many principles of good governance and codes of good behavior have been suggested over nearly 15 years; the most recent ones place more emphasis on the function of Boards of Directors and the notion of internal audit. Today, we observe a certain maturity among enterprises with regard to carrying out these good practices: reporting the chapter relative to corporate governance in the annual report establishing responsible internal control or even a governance board in certain businesses, etc. This aspect of corporate governance is oversimplified however, as it does not address matters of value creation, which is central for assuring a business’ continuity as well as its performance. The model suggested by the Chartered Institute of Management Accountants (CIMA) and the International Federation of Accountants (IFAC) has the merit of introducing the “value creation” section, complementing the “risk management” section (see Figure 1.1). The analysis of existing models in the light of affairs revealed to the public highlights the fact that the human aspect has so far been neglected. It appears that leaders have lost interest in their human resources for a long time (“the only wealth is man”, said J. Bodin on the subject). Therefore, it seems necessary today to rebuild momentum in corporate governance by taking people

4

Sustainable Enterprise Performance

(decision-makers) into account more, beyond the implemented systems and organizations.

Figure 1.1. Enterprise governance

Finally, in order to think about the many diverse aspects that governance covers, nothing is better suited than the following image of navigation (Figure 1.2). It shows that we must simultaneously: – know where to go and plan the route to get there (value creation); – avoid obstacles (risk management); – make the best of winds and currents (optimization of resources); – not forget teamwork: “we’re all in the same boat” (people).

The Governance Process

5

Figure 1.2. Illustration of governance principles by navigation. For a color version of this figure, see www.iste.co.uk/leignel/enterprise.zip

It also shows that we cannot neglect any of the aspects and that we must approach all of them in a balanced manner. Governance must not appear as an obligation; if it is imposed from outside like international accounting standards or regulations on internal control, it will be nothing more than one virtuous component integrated into the corporate culture. However, the essential preoccupation of governance and its administrators must be to assure the business’ continuity through a periodically renewed project with a unique vision that is economically responsible and sustainable by taking human aspects into account, without which a project has no true meaning. Enterprise governance provides guidance for conditioning operational systems, their coordination and their control in order to meet the objectives that it put forth. It ensures coordination between various processes, which can conflict with each other.

6

Sustainable Enterprise Performance

Hence, the idea of highlighting a governance process that is in charge of orchestrating the decision-making process of all the managers of the company. Indeed, corporate governance is characterized by the decisions made by the management at all levels throughout the life of the company with the goal of sustainably creating value: 1) Ensuring short- and medium-term business development thanks to the pertinence of the established strategy and the optimization of available resources. 2) While simultaneously guaranteeing that risks capable of threatening the corporation are assessed and managed. The decision-makers’ responsibilities are exercised within the framework of a decision-making process that we chose to represent in the diagram in Figure 1.3 in order to give the management a global vision of enterprise governance that emphasizes the key areas where these responsibilities must be exercised.

Figure 1.3. The process of enterprise governance

The Governance Process

7

The strategy is defined here based on the expectations of all the stakeholders. From this strategy, the objectives are defined in order to improve the business processes to achieve the strategic goals. Projects mobilizing the resources of the processes are launched in order to realize these adaptations. Monitoring, a major component of the governance concept, covers the measurement of: – meeting strategic objectives; – performance; – risks; – maturity in terms of governance. However, the diagram of this model of governance is only effective when the human aspect is taken into account, defining the role of the actors in charge of making it work, evaluating the competencies and convictions that the employees have or should have. It needs also to take into account the economic, social, ecological, political, geopolitical, judicial, competitive, media and financial (analyst, rating agencies) environments. The increasing influence of financial markets leads to certain difficulties in terms of governance. Actors are above all concerned with profit in the short term rather than constructing a sustainable future. As a result, it is necessary to ask oneself what are the values that have to be capitalized on and how it could be possible to make them sustainable. This sustainability depends on invention, innovation and technological capabilities. In the same perspective, governance faces the issue of externalization and relocation. This phenomenon therefore requires opening up the previous model to the future of the extended enterprise. Thus, an important factor must be considered: networks – their quality, the enterprise’s place in these networks, the ability and prerequisites to access these networks and the partnerships.

8

Sustainable Enterprise Performance

The governance process therefore consists of two complementary and inseparable components that will be elaborated in the following: – the chain of decisions that must be made on various points, all contributing to the objectives of governance to a various degree. The chain is only as strong as its “weakest link” – no one point can be neglected, as it could destabilize the whole; – the role of managers in charge of making decisions throughout the chain, decisions that must respect good practices so that the decision chain sustainably creates value for the business. Since governance is above all a human business, the governance process involves actors, who will be different depending on the “link” of the decision-making chain considered. 1.2. Strategic business development How well the enterprise elaborates its future vision and its applied strategy to attain it, meeting the criteria of good governance, mainly rests on: – the extensiveness of consideration for the environment and, notably, stakeholders’ expectations regarding the enterprise; – the involvement of the right people at the right place, in the process of decision-making at the right time. 1.2.1. The global environment The environment consists of elements that influence the enterprise’s decisions. It consolidates external factors that help the enterprise make decisions. In other words, it is the entirety of elements that are external to business but still must be considered when making decisions according to a systemic approach. In this open system that incorporates the enterprise and its environment, the enterprise must therefore adapt its offer based on a constantly changing competitive environment, all while maintaining the level of quality of offered goods and services.

The Governance Process

9

Some structural factors that characterize the business environment today: – the growing evolution towards globalization; – the arrival of new technologies capable of altering the market balances; – the greatest conscience of ecological, ethical, etc. considerations; – the development of innovation and competition: reduction in product and service life cycles, lowering of costs and rapid obsolescence of means of production; – the growing consumer importance amplified by social networks; – the change at the societal level: progressive transformation of the industry, modifying habits, new legislation (General Data Protection Regulation (GDPR), etc.) and new norms. The environment, despite its complexity and its restraints, presents opportunities for enterprises. It is therefore absolutely necessary that an enterprise understands the heavy trends that structure it and analyzes its own strengths and weaknesses in order to be in a position to take advantage of opportunities as they present themselves. The environment is primarily characterized by several aspects: diversity, complexity, turbulence, uncertainty, volatility, economy, politics, technology, socio-cultural aspects, legal matters, ecology and demographics. Diversity Globalization does not mean uniformity. Quite the contrary, globalization diversifies access to resources whereas at the same time expectations become more singular. Our industrial culture that is constructed on mass production and has founded its model on economies of scale is deeply questioned by growing diversity. We must from now on inspire ourselves with other, more economical and agile models.

10

Sustainable Enterprise Performance

Complexity Diversity is a source of opportunities, but the resulting complexity can be a source of disappointment if it is not well managed. However, when properly managed, it paves the way for qualitative differentiations that allow the establishment of a reputation. Norms, for example, offer an enterprise a framework that can lead to excellence if the enterprise knows how to intelligently go about it. When badly managed, complexity becomes stifling. Turbulence Turbulence accounts for the agitation that stems from incessant interactions between the many actors that animate the enterprise environment and therefore its resources. The environment depends on economic, social, ecological and financial phenomena such as the Arab Spring, protectionist regulations, the fall of financial markets, etc., which can turn out to be advantageous or disadvantageous for the enterprise. These phenomena often change their appearance with the scales of time that we use to observe them. Uncertainty The environment is called uncertain insofar as several contradictory interests compete at all times (the arrival of a new operator like Free or the emergence of the electric car from Tesla). Many enterprises can complain of uncertainty regarding the environment they are investing in. Yet, the instability of resources is the counterpart of their fast renewal. Volatility Volatility is everything that is short-lived. With regard to resources, the company must be wary. Cyclical incentives deemed “artificial”, most often emanating from public powers such as the “scrapping premium” for old cars, momentarily boost sales but lower them even more when they are

The Governance Process

11

over. Concerning products and services, they require time to market and manufacturing delays that are shorter and shorter. Even when orders are placed a long time in advance, customers insist on being able to modify them up to the expected delivery date, with the consequences in terms of logistics that one can imagine. Beyond its ecosystem, the enterprise, wherever it is, is surrounded by a vast set of determining factors whose importance is becoming increasingly preponderant with globalization. Despite their big differences, understanding them is indispensable. Economy The economy is now global, but like an orchestra without a conductor, it does not function in unison: one slip-up and everything malfunctions. This turbulence consisting of recessions and prosperous periods of varying length influences the offer creation of products and services. New expectations and trends that accompany them are equally opportunities to renew the offer. However, the products and services offered by the company must account for the economic context. Indeed, the offer is aimed at consumers whose level of income and their propensity to spend is linked to the economic cycle and to the confidence placed in the policies that guide the country’s economic policy. If during a period of economic growth with steadily increasing salaries the consumer will buy the latest phone model (for example, the iPhone X) without asking any questions, it would not necessarily be the same in the context of high unemployment. The consumer will tend to differ their purchases, with basic needs becoming more significant. Even though this logic is not respected for certain types of projects, due to the power of fashion trends, it remains true that the enterprise must pay close attention to economic indicators and orientations given to the economy by politicians.

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Sustainable Enterprise Performance

Politics In every country, politics tend to protect companies’ employment from jolts in the economy. Thus, politics orients the economy of the country with the decisions it makes, even though its role is becoming less and less a determining factor with globalization, where multinational firms such as GAFAM can be more powerful than states. Once again, the approaches diverge. Here, one attempts to plan the economy while somewhere else one is convinced that it must be more liberal. Thus, based on the barriers that the State either does or does not put on the importation of foreign products, local companies will or will not have the incentive to invest primarily in a national offer. In certain sectors, due to their particularity, the State must take initiative and present the main strategic axes and objectives. That is the case we find in France in the sector of renewable energy, where we note that the political guidelines play an important role in the development of more ecological vehicles. In other sectors, State intervention can prove to be counterproductive, insofar as it most often tries to infringe on the rules of a market that is open to global competition. Technology Technology is a particularly sensitive element that the enterprise cannot influence but should at least efficiently look out for. Indeed, the enterprise must remain extremely vigilant to the risks of disappearing if it does not make decisions at the right time with respect to technological change and disruptions in the considered industry. At this level, the enterprise must also know how to take risks (notably large groups that have important financial means at their disposal) by investing in innovating projects. The risk is limited, because if the project fails, the enterprise has only lost a small sum of money, whereas in the case of success, it will have been a pioneer in the domain and will receive important competitive gains.

The Governance Process

13

Socio-cultural aspects Different cultures have developed very different relationships with work. Motivations, hierarchical organization, modes of social dialog at the heart of the enterprise, the way work procedures are carried out. These all vary from one place to another and enterprises are dependent on them. Our perception of efficiency stems from cultural criteria, where short term and long term are often opposed to one another from one country to another. Enterprises are dependent on this. Since the enterprise must be closely interested in the consumer and their patterns, it is the country’s culture that, among others, determines how consumers welcome the enterprise’s offer. The socio-cultural environment must also be assessed internally at the corporate level. Indeed, employee work conditions will determine their performance in certain job positions and consequently the performance of the business itself. Conscious of this situation, many big businesses like Google, Microsoft or Apple integrate salary satisfaction and continuous improvement of work conditions as factors of performance. Legal matters The many matters regarding individual liberty, the protection of personal data and sustainable development expand the norms of conformity and security of the companies’ products and services. With respect to employee work conditions, for example, China is constantly cited in several matters and the companies that subtract their production in this country have to be very careful so that their reputation is not tarnished (see the reputation issues that Apple has had to deal with because of poor working conditions at its subcontractor Foxconn in China). The existence of the economy itself rests on the exchange between counterparties; it excludes theft. But not everyone shares the same perception of wealth. The same applies to intellectual property, for example. Without going so far as to consider stealing, a patent ends up in the public domain but the delay can vary from country to country. A high or incipient degree of harmonizing trading practices reflects a

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Sustainable Enterprise Performance

more or less elaborated consensus on the value of things, once again influencing offer creation with its relative uncertainty. Ecology Ecology is one of the major issues of the 21st Century where problems linked to sustainable development are sharply addressed. The global reflection that is conducted is whether the development of the market could be reconcilable with environmental imbalances even if it could provide solutions. Thus, we would integrate the consequences caused by companies on the environment in their internal coordination mechanisms. Even if decisions are slow at the state level, it seems unimaginable that a company does not take into account the ecological impact of its activity. Understanding the impact of human activity on the natural balance of our planet will be the major issue of the 21st Century. The problem has already arisen. Its perils and their costs will continue to increase. Solutions and the corresponding offer must be found. Demographics The first element that constitutes the enterprise environment is population, the reservoir of its markets. A business must be keenly interested in different characteristics within the population: size, geographical distribution, density, mobility, age breakdown, nationality, marriage and death rates, socio-cultural composition and religious affiliation. Demographics are the source of diversity and turbulence and therefore, once again, a source of threat and opportunity. 1.2.2. Stakeholders All environmental players (external or internal) must be considered in order to elaborate the business’ strategy and vision. They mainly consist of customers, consumers, stockholders, competitors, suppliers, partners, the public sphere, financers and also the employees of the company.

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As shown in Table 1.1, stakeholders take action in various ways within the enterprise environment.

Financers

×

Public sphere

×

Partners

Competitive environment

Suppliers

×

Competitors

×

Stakeholders

Customers

Economic and financial environment

Employees

Clients

ACTORS

×

×

×

×

×

×

×

×

×

×

×

×

×

×

×

×

×

×

×

Economic

×

Media environment

×

×

×

Politico-legal Political/geopolitical environment

×

×

×

Legal environment

×

×

×

×

Socio-cultural Social environment (employees, social partners) Cultural/religious environment

×

Demographic environment

×

×

×

×

×

×

×

×

× ×

× ×

×

Technology Technological environment

×

×

×

×

×

×

×

Table 1.1. The environmental actors whose expectations must be considered while elaborating the enterprise’s strategy

The expectations of stakeholders can differ depending on the domain of the environment in which they intervene. In order to have an exhaustive vision of their expectations, it would be most convenient to capture them within the context of each domain.

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Sustainable Enterprise Performance

Obviously, we cannot be content with expectations expressed through questionnaires, exchange groups, observation, etc. These approaches are necessary but not sufficient. Indeed, even though latent expectations are more difficult to detect, they are often the ones that trigger innovative ideas or even disruption in the enterprise’s offer of products or services. In order to understand them, it is effective to ask oneself what is “bothering” the stakeholders in their environment and therefore what are the constraints that they would like to see lifted. This analysis can be carried out through brainstorming, including representative actors from the environment, or internally, under the condition that the company has a sufficient understanding of the problems faced by these actors. That is how the most “disruptive” innovations come about, such as Booking and Uber, for example. 1.2.3. The structuring forces of companies When we widen the scope of resources offered to the enterprise, we access what represents economic dynamism from a geographical zone as well as an industry. At this scale, the decisions made by a company are very much influenced by its micro-environment. The company is part of this micro-environment.

Figure 1.4. The micro-environment of an enterprise

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1.2.3.1. Suppliers and partners: In order to deal with the diversity of market expectations, it becomes increasingly important to make client/supplier relationships evolve in the direction of partnerships. In a trivialized market where mass-produced products are exchanged, clients and suppliers try to share a pre-existing margin through competitive sourcing procedures. The result is different when the offer is diversified and the cycles of renewal are sped up. Sustainable solidarity is established in client/supplier relationships that take on the form of a collaborative network, for the company with regard to suppliers just as much as for its distributers. The composition of these networks must be attentively cultivated. Thus, the density and proximity of a range of activities becomes a vital asset of its micro-environment. In any case, it is a major component for the entire company when leaving the status of SME for that of a large multinational firm. In a SME, the size criteria may be a disadvantage for the company when it comes to negotiating buying conditions (price, quantity, delivery, etc.) for raw materials and other services needed to create the company’s offer. This will have a direct impact on negotiated quantities as the financial element gets factored in. This impacts the company’s offer in that the company is exposed to the wishes of the supplier; the possibility of shortages in provisions or material is still feared and unpredictable. The major inconvenience of such a situation is constraining the company to a limited horizon of visibility, taking into account the risk of stock rupture. In a large international firm, negotiation conditions remain globally advantageous given the size and the quantities that are dealt with. It is a matter of taking interest in the various risks involving, among others, logistics, quality or the local political regime.

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In an international context, the route of raw materials from one point to another is a central issue for businesses that remain dependent on the geopolitical situation in accordance with suppliers’ locations. In addition, the quality/conformity of ordered materials in the case of an international firm is a central point in negotiation because, in the case of failure, the enterprise jeopardizes its reputation or even its continuity. In whole, the business must pay attention to the fact that the relationship it maintains with its suppliers deserves careful followup because a disagreement or a late delivery will first have an effect on the chain of production (a problem of quantity and quality), and then on the market through the client’s dissatisfaction. Strategical alliances constitute more and more of an important lever for innovation, for combining organizations’ performance with the conquest of new markets. They concern the following aspects: – technological; – geographical; – economic; – sociological. Projects with the aim of collaboration or strategic alliance can constitute an opportunity for enterprise development. Thus, partners remain independent entities, all while combining their talents and the knowledge of their respective teams. Through the exercise of forging alliances, collaboration facilitates and accelerates the execution of the following key points: – better value chain coverage in a faster and less costly manner for products and services that deserve co-contracting or sub-contracting; – new opportunities by adapting existing products to new markets and making use of new technology; – research on new market positions occupying the space left free by the competition;

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– a tighter relationship with strategic clients by anticipating their needs, their expectations and new uses that result from them; – administrative, legal and geographic barriers that can be simplified by choosing an expert partner in specialized domains at the international level. The decision-makers’ objective is to forge alliances as a basis for improving their competitiveness. This is achieved by developing the following actions: – selecting partners based on criteria differentiating short, medium and long term;

for

cooperation,

– mobilizing concerned teams around a mode of operation that is open and conducive to collaborative project; – constructing the architecture of alliance that will better guarantee bonds of trust between stakeholders; – defining the methodological deployment approach, allowing decision-makers and actors to work together. 1.2.3.2. Competitors Auguste Detœuf once wrote in a famous work: “Competition is an alkaloid; a moderate dose is stimulating; a massive dose is poison” (Detœuf 1937). Much has been written about competition. From one extreme to another, some consider it pure waste, and others consider it the leaven of an activity’s prosperity. A philosophical matter? Competition is a response to the turbulence of expectations whereas at the same time it creates it. Thus, creating competition when it does not exist is one of the levers of supply-side economy politics. When competition exists, it constitutes a reservoir of knowledge that the enterprise must take ownership of in order to create its own supply. The enterprise must therefore use all of its available tools transparently and legally, making use of its competitors, partners, subcontractors and co-contractors.

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Sustainable Enterprise Performance

This is an observed correlation between an enterprise’s export capacity and the liveliness of competition in which the enterprise indulges in the home country. But this is not always the case. In the end, competition opens up a field of alliances or fusions that remain important tools for adaption and evolution. 1.2.3.3. The public sphere The “public sphere” is a term that covers very varied groups of interest that have an actual or potential impact on a business’ ability to realize objectives. They can hinder or foster the business’ activity. They are generally analyzed in four large categories, each covering a largely diverse domain: – The world of finance is comprised of all those who can provide the business with funding. It is sensitive and must be controlled or managed efficiently. In this category, we find banks, shareholders, financial markets, etc. – Media convey the company’s image. They transmit information regarding the company that can build or break its reputation. This group is particularly sensitive and must be approached with great caution. – Administration generates the regulations that influence corporate management. It should ensure that these regulations do not harm the enterprise’s operations. – Pressure groups are today, associations of consumers for protecting the environment, user committees and many other organizations in this regard, which affect the business’ decisions. With globalization and the development of the Internet and social networks, these associations have more and more influence on the enterprise’s operations. It is worth noting the particular role of the State, which, beyond the resulting administration and legislation, extends to the control, orientation and stimulation of certain sectors of the economy. This can be seen in the role of surveillance assured by the State in the pharmaceutical industry. As another example, the control of energy

The Governance Process

21

prices (electricity, gas), fossil fuels or regulations concerning portable blood alcohol content measuring devices (breathalyzers) can be mentioned. Enterprises and the State often have a contradictory relationship: – it is in the nature of the enterprise to produce wealth, satisfy its ambitions and provide jobs. In return, society owes it security, infrastructure and an institutional context in which the economy can develop. The enterprise must also contribute to the necessary redistribution of generated profit. This means accounting for hazards, such as those concerning health and employment, and providing pensions when age takes away from work; – but public power is often expressed by its will to steer the economy in a direction that supports growth and counteracts the harmful effects of such events. This steering takes on various forms; it can be more or less intense. It involves a certain redistribution that enterprises are called to contribute to, whether or not it corresponds to their raison d’être; – State orientations often compete with the orientations that the enterprises must naturally follow for their own survival. This can result in a certain wastefulness insofar as reaction times and approaches are necessarily different; – the State will justify its interventionism if it finds that enterprises are adopting a wait-and-see approach. However, this is what enterprises will do if it turns out that the State will only promote options that are unfavorable to them. 1.2.3.4. Standardization Here standards are referred to in a broad sense. They consist of the laws, professional standards of sectorial branches, incentive standards, mandatory levies, taxes and social, economic, sanitary and ecological rules that have an effect on the behavior and strategy of economic, social and cultural actors (citizens, consumers, producers, businesses and organizations, networks and public and private institutions).

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Sustainable Enterprise Performance

These norms can be optional (e.g. ISO Quality Assurance Standards 9000), mandatory (of regulatory nature or from legislative sources), or binding at the local, national, European, international or global level. Binding or not, the standards are first and foremost the recognition of good practices and proven solutions that allow diversity and complexity to be disciplined. In this sense, standards are essential in providing the foundation for a company’s responsible operation. They are intended to be milestones of progress. A recent evolution should be noted. For a long time, standards addressed the conformity of a product in terms of safety, quality and function (standards). The evolution towards a larger diversity of supply contradicts this normative approach, an approach that is now evolving towards standards of certification. Here, we are less concerned with the qualification of products as we are with the processes that give birth to them. For a long time, this type of certification has applied to operations like in the nuclear or aeronautical industries. While integrating standards can become a considerable challenge for a company due to their proliferation and sometimes conflicts between standards, the company cannot be satisfied with just watching them. It must play a proactive role in order to be involved in their elaboration and to be able to influence their course. Only in this case can it take advantage of standards in order to contribute to its development in a demanding if not hostile environment. We can see that the micro-environment (the structuring forces of the business) reflects the history of a country, a civilization and a culture. In order to change micro-environments, a business must go elsewhere, England rather than France, the United States rather than Europe, Asia rather than Africa, etc. This can justify partial delocalization politics. Competitive practices in Japan are not the same as those in Germany. Judicial procedures in France are not the same as those in the United States. Social organization in Argentina is not the same as

The Governance Process

23

in Sweden. Russian standards are not the same as they are in Switzerland. Lobbying in China does not work the same as way it does in the European community. The micro-environment will thus shift the business towards audacious and aggressive approaches here, and maybe towards diffident and conservative approaches there. 1.2.4. Strategic analysis In order to guarantee coherence with the governance diagram in Figure 1.3 above, the decisional process concerning strategy will support a structured methodology following two areas corresponding to what Michael Porter suggests: – Attractiveness of the market: analysis of the environment and stakeholders’ expectations structured around matters such as: market growth, competition, barriers to entry, constraints or opportunities originating from legislation, client evolution and segmentation, etc. – Business competitiveness: analysis of the business’ competitive strengths and weaknesses structured around matters such as: market share, skills available or to be created, technological innovation, listening to customers, operational excellence, communication, etc. For all of the company’s product families, this approach should result in both ambitious and realistic goals in terms of: – growth; – means to implement in order to attain this growth; – need of human and financial capital. As crucial as this step is, it is far from enough, because even once it is made, the hardest part remains to implement “good governance” at the heart of the company, namely: making sure that the entire company gets on track to contribute to the achievement of the established strategic objectives.

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Sustainable Enterprise Performance

To achieve this, it is necessary to “align” the operational goals of all managers, regardless of their level, with strategic objectives. Strategic analysis must help structure thinking in order to identify ideas for enriching supply or improving its market positioning, whether it be new products or the improvement of existing products, with the goal of contributing (in parallel with other initiatives such as reducing development time, improving the quality perceived by clients, reducing product manufacturing costs, etc.) to the achievement of clearly defined strategic objectives, such as, for example, reaching a desired market share in a certain market sector within a precise time horizon. Strategic analysis will naturally exploit: – in “pull” mode, economic intelligence (i.e. the entirety of collected information) previously cited in order to identify voiced or latent expectations in the environment; – in “push” mode, the analysis of key competencies that the business has capitalized on over the years and can rely on for developing its offer or releasing an innovative offer. This new offer is most often obtained through an original combination of some key competencies, sometimes involving those of external partners. In order to do this, it needs tools such as those described by Michael Porter and summarized in publications that made reference to them at the beginning of the 1980s, notably: – Competitive Strategy published in 1983; – Competitive Advantage published in 1985. In the first book, he describes the four “forces” that structure competitive behavior and the strategic positioning of a company inside its activity sector: 1) Potential entrants into a market: the larger their number, the more intense the competition in the sector. The significance of this threat depends on the presence of barriers to entry (necessary critical

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size, very strong brands of present competitors, patents, particularities in distribution circuits). Potential entrants can be a threat for the business based on the maturity of offered products and services. These entrants will make choices and strategies that are different from those of the present enterprise: price, distribution, packaging, location, etc. A developed vigilance, a protection of tangible and intangible heritage (patents, brands, drawings, models, etc.) as up to date, are a necessity in this context. 2) The client’s power in negotiation: the larger the share a customer represents in a company’s revenue, the more power this customer has in negotiation, and all the more if the customer has a considerable number of alternative suppliers at their disposal. Therefore, customer concentration represents an important criterion to evaluate the competitive intensity of a sector, completed by the possibility of diversifying the customer portfolio or not. 3) The supplier’s power in negotiation: similarly, the smaller the share a company represents in a supplier’s revenue, the more powerful the supplier is in negotiation. Here again, the competitive intensity of the sector depends on the ability to easily change suppliers. 4) The existence of substitute products: these are products whose use can harm the use of other products on the market (e.g. tablets instead of PCs). The main risk is losing sales to products that benefit from lower product costs or more attractive functions. Substitute products offered by competitors can be an advantage for the company, insofar as these products bring value to the market. Thus, the business has interest in understanding and working within the new strategic space that has been opened up. It can also readjust its strategy and politics according to the new situation. Products and services originating from new technology (digital books, automobiles, agribusiness, logistics and transportation) are examples of opportunity to be pursued. 5) As shown in Figure 1.5, these four determining forces determine the fifth force: the competitive intensity that the company is subjected to. It will greatly condition attainable margins on the market.

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This dimension requires that the company focuses its attention on it in order to differentiate itself from the competition. Its management capabilities and global quality (organizational, social and economic) will be major assets in innovating or reinforcing its position. This intrinsic distinction will be its “trademark”. A frequently cited example is Coca-Cola with its recipe, which remains an absolute secret. The brand’s immense power, built on over generations, is just as much a source of competitive advantage. Some authors add a sixth force: the influence of public power.

Figure 1.5. Intensity of competition (Porter 1982)

In the second publication, Competitive Advantage, Michael Porter (Porter 1985) laid the foundation for modern strategic thought with: – The description of three generic strategies: - differentiation: this strategy aims to obtain a competitive advantage by offering a product or service of high value to a large target audience, with low volumes but high margins;

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- domination by costs: this strategy aims to obtain a competitive advantage by offering a product with a low cost to a strategically large target, with low margins but high volumes; - focus: this strategy assumes that a competitive advantage has already been obtained, by either differentiation or domination by costs. It aims to obtain a decisive competitive advantage by exploiting this advantage for the benefit of a restrained strategic target. – The stalemate that results from a middle path: - without showing interest in any of the three strategies, the company finds itself without any true competitive advantage in its industry segment: on one hand it is dominated by costs from other entities that have more clearly developed a low-cost strategy, and on the other hand the quality of its products or offerings is not as high as that of the entities that have explicitly chosen differentiation; - the return on investment lags behind. A choice must be made: leave the industry or obtain a competitive advantage. The longer the period of non-strategy, the more difficult and costly it will be for the company to obtain a competitive advantage. There are, of course, other tools for strategic analysis: BCG matrices, D. Little, SWOT, etc., to mention just a few of them. These tools aim to structure reflection for identifying key factors of success within various segments of offering in its markets and from them deduce the appropriate strategy and its implications on the offer evolution. Obviously, this evolution will be very different based on the adopted strategy. These approaches, and notably those developed by Michael Porter, illustrate the importance of logical and rational reasoning in the development of a strategy of differentiation and value creation.

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1.2.5. Actors How well the enterprise’s vision and the strategy, which is put in place to attain it, are developed in a timely fashion relative to criteria of good governance, mainly relies on: – how exhaustively the environment is taken into account and notably how the stakeholders’ expectations concerning the enterprises are considered; – the implication of the right people making decisions in the right place, at the right time. The actors mainly involved in strategy development are: – the Executive Committee that defines the strategy and organizes its process of continuous adjustment; – the Board of Directors that validates the strategy as well as envisaged evolutions to continuously adjust it. To account for the importance of technology (artificial intelligence, blockchain, robotics, IoT, etc.) in the development of new products or services, the enterprise must organize a technology and opportunity watch so that heavy tendencies can be detected and taken into account while developing the strategy. Whether this technology watch is operationally entrusted to the Chief Information Officer (CIO) or to the Chief Digital Officer (CDO), it must be placed under the responsibility of a member of the Executive Committee, who will ensure that strategic orientations benefit from it. 1.3. Taking into account corporate social responsibility: the governance process 1.3.1. CSR: a sustainable performance lever for enterprises Corporate social responsibility (CSR) is about taking into account the impact that the enterprise has on the environment so that it can be

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preserved in a long-term vision. It is a key component of corporate governance and also of the strategy in that it complements stakeholder satisfaction. According to ISO 26000, CSR covers the following domains: – governance: the organization’s degree of transparency regarding stakeholders’ interests; – respecting human rights: discrimination, social and economic rights, labor rights, human rights abuse at all levels, etc.; – observation and respect for their relationships and work conditions: social dialog, health and security at work, etc.; – respect for environmental constraints: reducing fossil energies thanks to reducing carbon footprints, pollution prevention, respecting biodiversity, water savings, etc.; – emphasizing loyal practices: encouraging loyal competition, etc.;

fighting

against

corruption,

– promoting the study and analysis of all questions relative to consumers and clients: private life protection and safety, etc.; – taking into account communities and local development: involvement and investment in local life, access to culture, etc. Since the so-called Grenelle II law – supporting French national commitment to the environment – the major contractors have implemented many internal measures and codes of conduct and have constantly “empowered” their suppliers and various partners with their purchase and subcontracting policies. The latter are thus made aware of the CSR approach and, whatever their size, they become aware of its importance and take initiative in this direction. The approach has been optional, but the integration of CSR into enterprises may become mandatory in a few years. This integration presents challenges as well as opportunities.

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1.3.2. Companies are more and more concerned 1.3.2.1. What major contractors require from their suppliers In this day and age, where business ethics is becoming a key aspect of the social side of CSR, major contractors’ needs tend to become more demanding. Decree 225 of the Grenelle II law asks large enterprises to account for the social and environmental impact of their activities. This is done directly, and also indirectly, by integrating clients, suppliers and partners. To anticipate the potential risks related to the bad environmental and social practices of their suppliers, the public and private actors elaborate questionnaires that are more and more precise with requests for supporting documents (code of conduct, politics of sustainable development, definition of quantified objectives, establishing indicators, independent testimonials). A company that has not adopted a CSR approach will have trouble justifying itself and will be weakened over time when compared to its competitors. The contractor sometimes uses eliminatory points which can eventually blacklist a company (e.g. not responding to questions, not presenting a certain certificate, not having supporting evidence), as ORSE (French network aimed at researching and promoting CSR) reminds us. This is the case for Air France Industries, one of the world leaders in aircraft maintenance for numerous airlines, who established a checklist that holds for all projects. This way, sustainable development aspects converge with business aspects. 1.3.2.2. The demands of capital investment funds Investors and lenders are show a growing interest for environmental, social and governance criteria (ESG) in their financial investment choices and are also invited to do so by European regulation. In 2018, the European Commission revealed its strategy of bringing the financial system to support the European Union’s actions regarding climate and sustainable development. The main elements of the action plan are the creation of labels for green financial products, clarification of obligation for asset managers and institutional investors, taking into account aspects of sustainability, integration of sustainability in prudential

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requirements, and reinforcement of transparency regarding an enterprise’s publication of non-financial information. Every year Novetich analyzes the performance of socially responsible investment funds in France and distinguishes funds based on social responsibility: the 123 funds classified by Novethic as SRI in 2017 showed stronger dynamic growth (+42.5%) than the totality of 404 SRI funds distributed throughout the French market (+14%). 1.3.3. The challenge of CSR for enterprises Now that enterprises have become aware of the importance of CSR for their continuous development, they are starting to integrate it into their strategy. In order to do this, they must analyze the impact they might have on each major stakeholder from the environment, as shown in Table 1.2.

Ecological Ecological environment

×

×

×

×

×

×

Commercial practices

×

×

×

×

× ×

Economic Fair trade practices Local environment and communities

Financers

× ×

Public sphere

Partners

Stakeholders

Employees

× ×

Suppliers

×

Working conditions

Competitors

Socio-cultural Human rights

Customers

Clients

ACTORS

×

×

×

×

×

×

×

× ×

×

Table 1.2. Impact of the company on environmental actors in the context of the company’s social responsibility

For example, in April 2018, the French government presented its roadmap for a circular economy. This first axis of this roadmap is extending the lifespan of products and developing reparation. In order

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to do this, the government wants to establish a “reparability” rating for electric and electronic products and furniture. The second is product recycling, once they can no longer be reused. In order to compensate for France’s delay, the roadmap not only relies on simplifying sorting habits but also on developing deposit return systems for glass bottles and widening the “the polluter pays” principle. One of the key objectives is to reach a 100% recycling rate of plastic waste in 2025. Mobilization is international, as seen in the launch of March 18th as a Global Recycling Day. Created on the initiative of the Bureau of International Recycling (BIR), the objective of the event is to reunite citizens, experts and professionals in the industry around a single message: today’s waste is tomorrow’s resource, with particular attention given to rare metals that are essential to the development of innovative high-tech industries, notably those associated with green energy. The adoption of a CSR approach happens through the enterprise’s strategic choices and can imply large organizational changes. Indeed, large strategic revisions that aim to better account for the enterprise’s impact on the environment can have a heavy impact on the method of production, distribution or communication. Enterprises are demanding when it comes to experience and good practices relative to the achievement of CSR approaches, but they have to face information dispersion and the fact that these statistics most often only concern large companies. Beginning in 2018, Coca-Cola, McDonald’s and Evian will take action on the path to recycling and eco-design. – Coca-Cola: by 2030, one Coca-Cola bottle recycled for every one sold. – Evian: only recycled plastic in bottles by 2025. – McDonald’s: packaging is now the first environmental concern of McDonald’s customers. Box 1.1. The circular economy: a growing matter of reputation and competitiveness

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1.3.4. The opportunities of CSR for enterprises Adopting CSR politics at the heart of a company promotes an approach that creates value, notably for all stakeholders thanks to its very large scope of influence. Furthermore, it is through the hereafter described opportunities that it constitutes a performance lever. 1.3.4.1. Optimization of resource and energy consumption CSR is often a factor of cost reduction thanks to the resource savings that it enables. For example, if we reduce energy or water consumption in buildings, machines or methods of transport through more efficient management, the costs will automatically reduce. This is also the case for clean energy research. For example, Apple recently announced that all of its sites around the world are now powered by 100% clean energy. The enterprise also announced that 23 partners in the production chain have taken action to power all of their production for Apple with clean energy. 1.3.4.2. Modernization and innovation of enterprises’ operation CSR is also a factor of modernization and innovation, for example, technological, social or related to management, without forgetting wellness in the workplace (Workplace Wellness Indicator (WWI)). It progressively prompts us to revisit and adapt the enterprise’s organization and operations as well as its manner of conceiving and manufacturing products and services. Thus, the enterprise adapts to the growing demands of its customers and consumers, modifies its brand image, wins new markets and improves its margins. After the social crisis that the French telecom operator Orange faced in 2009 as a result of unhappiness in the workplace, Orange has adopted a strengthened approach that listens to its employees and takes innovative measures: a 900 million euro project for understanding uneasiness, becoming aware of employee opinions during transformations, addressing employee wishes and mobilizing for a new business project that reconciles economic performance and social quality. In 2016, a study showed that 93% of employees were

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proud to work for Orange and 87% of them would recommend Orange as a good place to work (Orange, 11th social barometer). 1.3.4.3. Better risk management CSR allows the business to manage risks more efficiently, be they environmental, legal, financial, social or related to reputation. It reassures investors and various financial partners. By accompanying suppliers in this type of approach, the supply chain is improved. Risk reduction and prevention and their impact on image are considered important motivations by seven out of ten executives. This is also the case with Bureau Veritas, where the evaluators’ integrity is fundamental for the business’ reputation in various diverse countries with cultures that vary in terms of risk of corruption. Thus, Bureau Veritas adopted an ethnical approach in a multicultural context. 1.3.4.4. Competitive advantage over major clients Major clients, who have developed their own responsible approach, have introduced CSR criteria in their reference manuals and their calls for tender. It is with this goal in mind that Bouygues Construction created sustainable Construction Clubs that all stakeholders participate in, in order to favor builders’ and sub-contractors’ CSR awareness by responding to major clients and to consumers. 1.3.4.5. Strategy of differentiating the offer One out of two business leaders believes that the application of such actions favors competitivity by allowing a company to set itself apart from the competition. A CSR approach allows the enterprise to find new customers that adhere to good CSR practices while maintaining older customers whose satisfaction will increase all the more when they become aware that products are more respectful of the environment and more “responsible”.

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Fleury Michon, a group in the food industry, brings CSR to the foreground in order to fight against attacks on the food industry and also to present itself as a supplier that is respectful of CSR. 1.3.4.6. Strategy of differentiating hiring It is also differential advantage in operations with regard to hiring new employees, notably young people who consider an enterprise’s social responsibility approach more and more as a determining factor when comparing jobs with equal salaries. CSR is important for hiring as well as for keeping talents. Google just tested this at its own expense with the Maven project for the Pentagon and the resignations that resulted from it. 1.3.4.7. Better social and societal cohesion CSR will also bring the company closer to its employees and motivate them because it responds to their growing expectations as citizens, notably in environmental and social matters. A CSR approach participates in reinforcing cohesion throughout the company. The other interest of CSR is bringing the company closer to territories where it is developing its activities, especially when these territories are already engaged in their own sustainable development projects that the company might take part in. Reinforcing the company’s placement in its local economic fabric often conditions its “social license to operate”. For example, Marsh, an international broker for insurance and risk management, has developed CSR politics centered on the three fundamental aspects: philanthropy and employee volunteering, sustainable development, and business ethics. Marsh’s employees are consequently invited to get involved in the well-being of their communities. The integration of CSR is increasingly noticeable in our businesses, but with a maturity that still has significant margins of progress. A CSR approach that is well adjusted and properly communicated to various stakeholders now constitutes recognition

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from the enterprise’s ecosystem and a competitive advantage, which becomes a lever for global and sustainable performance. 1.4. Translation of strategic objectives at the level of operational processes The enterprise’s operational processes play a key role in the governance process because they also help to: – shape strategic objectives into operational objectives; – mobilize the enterprise’s resources to achieve objectives.

Figure 1.6. Operational business processes and resource mobilization

Once again these objectives must be translated into processimproving projects, and in order for that to happen, executives must integrate it into their management approaches. Here, we are referring to “management by processes”. 1.4.1. Management by processes The difficulty of this translation of strategic objectives exercise arises from the following fact: – strategic objectives are concerned with “finished products” that the company provides to its customers and that are developed thanks to contributions, at varying degrees, from the actors grouped by

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functional departments according to the abilities and missions that characterize them; – and thus the executives of the company, who will be in charge of executing actions that are indispensable for meeting strategic objectives, belong to a structure, most often hierarchical, that is organized by function (production, commercial, marketing, design, development, human resources, finances, etc.). In order to facilitate the management of this entirety that crosses client-oriented objectives and domains of expertise that the business has grouped together in a structured organization system, it is necessary to implement the key notion of operational “macro-processes” that: – are defined by the types of products/services in order to respond, if possible, to needs for clearly defined customer categories; – can be described as the entirety of operations, activities, competences and resources that must be implemented in order to realize these products/services. Macro-processes favor a “transversal” enterprise image that is “customer-oriented”. The resulting “knocking-down of silos” allows us to set concrete objectives that favor a better understanding of customer expectations, be they present or future, sometimes unpredictable, and thus to progressively improve the enterprise’s operational performance in terms of: – quality: through improving the level of service provided to the client by type of Product/Project/Service/Solution. It is possible to rely on ISO 9000 standards, or even other standards, ISO 14000, ISO 26000, etc.; – costs: through constantly researching better use of accessible means for the purpose of improving margins; – delivery time: by following and reducing the time it takes to deliver products/services to the clients. Time becomes a critical element that imposes agility within smaller and smaller periods of time.

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For example, when applying discriminatory criteria to typologies of products/services, clients or the length of the process cycle of operation, it may be appropriate to distinguish: – the logistic process of the “supply chain”, ranging from establishing quotations for taking orders to manufacturing and collecting revenue, going through supply and production; – the “offer creation” process, beginning with strategic marketing and ranging up to launching the production of a prototype, going through phases of conception, development and industrialization. The “supply chain” process has to do with providing customers with products and services under conditions that satisfy their steadily increasing demands. “Offer creation” provides prototypes for the “supply chain” process according to a multi-monthly, even multi-annual rhythm. These two processes obviously do not have the same performance indicators in terms of quality/cost/delivery times, or even the same information system needs. Nevertheless, it is necessary to ensure their coherence in order to sustain high performance, this coherence being one of the keys to performance in that it reduces the number of redundant tasks and the number of ruptures or round trips that penalize the offer’s positioning on the market. In the same way, “support” processes (management, hiring, training, financing, etc.) and the process of “managing customer expectations” (accounting for dissatisfactions but also future needs) will have indicators of performance and information system needs that are very different from other more operational business processes. Despite these differences each process has a positive contribution to the overall performance and it is interesting to be able to clearly identify this contribution so that everyone feels invested in the construction of global and sustainable performance. The correlation between indicators, notably strategic indicators and indicators of performance, renders visible each macro-process’

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contribution in the enterprise’s performance and reinforces the pertinence and priority of actions to take in order to, as quickly as possible, achieve objectives aligned with the enterprise’s strategic objectives. A certain number of decisions that are easy to identify and follow result from these objectives. “Process intelligence” tools allow almost immediate analyses of sensitivity or correctives if needed. Management is carried out as closely as possible, in the execution of operational excellence. For every type of “macro-process”, decisions to be made are very different whether they belong to the operational, economic or strategic level. For example, to illustrate the nature of decisions to be made based on different levels, we cite: – the “operational” level: the optimization of a planned production workload, the knowledge of the shelf availability of products for supermarkets, the stock evaluation based on planned restocking, the analysis of customer purchase habits, the indicators of suppliers’ level of quality and so on; – the “economic” level: do better and spend less with the aim of optimizing the return on capital employed (ROCE) and therefore capital invested (ROCI); – the “strategic” level: information about the competition, market shares, the proportion of new products in sales revenue, the structure of costs and margins with a vision that is likely more global than the economic “mesh”; these decisions can follow a step-by-step plan that aligns with the vision. In a nutshell, the decisions that an enterprises makes in order to execute its strategy are characterized at the same time by the type of process and by the level of the decision (operational, economical/ tactic or strategic). It is therefore possible to segment them according to the following matrix:

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Macro-processes Supply chain Offer creation

Level

Managing customer expectations

Strategic Economical/tactical Operational Table 1.3. Decision-making characteristics

The translation of strategic objectives at the operational level is carried out as part of a plan according to their length in time (short term, medium term, long term). The resulting decisions must mobilize the company’s resources with the aim of achieving objectives. These decisions become reality through the identification of projects or action plans during the budgetary process. Management by processes involves identifying who is responsible for achieving every single one of the objectives and identifying who is responsible for managing the quality and compliance of the processes. To ensure that various actors are animated in doing this, there should be a team in charge of the coherence and integration of the processes as well as the continuity with changes relative to the enterprise’s strategic objectives. 1.4.2. Projects for improvement and resource mobilization Improvement goals that are initially associated with the enterprise’s macro-processes and can be deemed “result objectives” (reducing the time it takes for a product to enter the market for the “supply creation” process, reducing production costs for the supply chain, improving the customer satisfaction rate for the “managing customer expectations” process, etc.) must at this stage be translated into “activity objectives” attributed to executives in charge of operations that contribute to the process’ functions (optimizing the planned production workload, shortening response times to customer questions, coming up with ideas for better targeted new products or services, faster conception of new products or services, etc.).

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The realization of the “activity objectives” will then result in the mobilization of the resources needed to achieve them, for example: – establishing telephone assistance (help desk) to shorten response times to customer questions; – developing “concurrent engineering” or parallel projects in order to speed up the conception of new products or services; – developing economical intelligence in order to identify ideas for better targeted new products and services; – establishing “intelligence process automation” or “robotic process automation” approaches by observing the process phases that could benefit from automatization, but leaving to the human the job of concentrating on certain points that require analyses that machines struggle with; – and so on. The company’s resources (or partner companies’ resources as part of, for example, “extended enterprise”) are classified into four types. Organization – Optimizing activities within a processes by business process re-engineering (BPR) operations, process redesign. – Clarifying the role of operations in order to avoid, for example, “duplication” or “gaps” in the realization of activities. Internal and external competencies – Training or reallocating internal competencies that result from the reconception (re-engineering) of processes. – Constructing, internally or by acquisition (partnership or purchase), the new competencies necessary for the development of emerging products/services that the enterprise wants to position itself on. – As competencies become more and more targeted, this valorizes the management of talents that must be conducted in accordance with the enterprise’s orientations. When the competencies needed by the company are not easily available on the market, it may be wise to

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develop these competencies internally by training or by the acquisition of start-ups. This can become a decisive competitive advantage. – Considering people in their entirety allows us to enhance competencies that were previously not considered in the enterprise: creativity, animation, parenthood, well-being in the work place, etc. The latter, for example, can be measured with the Well-being at Work Index (WWI) index. Some surveys show that this consideration can allow the business to progress its performance, during implementation, by 5 to 15 points – for example, the APICIL group and Mozart Consulting published such a survey in 2017. The information system – This becomes an inescapable resource that is necessary for all processes to work well (even the creation of new processes, for example those related to sales or distribution via the Internet) and to capitalize on the enterprise’s competencies. – The management of the customer relationship is experiencing upheavals that derive from “customer journeys” aiming at anticipating more closely all the potential reactions of customers, or prospects. It is about predicting reactions and providing appropriate responses. The contact times being shorter and shorter, it is essential to be reactive and in phase with the expectations. For this, the data is essential. Processed with artificial intelligence, Big Data and “continuous analysis” tools, it makes the most of the information available to make the proposal. – Computer-aided design, artificial intelligence associated with Big Data, connected object management, 3D printers, etc. can make industrial crafts. They allow the combination of the ready-to-wear and the tailor-made; – The tools of production management are more and more integrated and offer the ability to personalize according to client expectations. It is possible to produce “without stock”, anticipating client needs, notably thanks to connected objects, and by automating production to be able to personalize the product as far down the production chain as possible in order to match the demand.

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– Another evolution is the integration of the increasingly important number of targeted partners, who will allow for the production of less expensive components with a higher quality. – The decisional tools of analysis are more open and integrate internal and external data in order to manage more closely collected data instantly or within several hours’ delay. – These tools allow us to deal with target managers who will have to make use of indicators in order to take corrective action in the case of any slippage. The analyses must support decisions with elaborated and targeted visuals with answers to questions like why? How? By whom? For which product? Finances Financial resources are important, which goes without saying. What was perhaps recognized more recently is that these resources must assure a certain sustainability and continuity. The short term is necessary but not enough to transform the enterprise and build for the long term. It is necessary to reconciliate speed and vision. The shareholders must give the enterprise enough time for transformation in increasingly unstable conditions. It is a challenge and a necessity. Evolutions arrive more and more frequently but the business must be assured of stable resources for investing in ever larger markets. That, among other things, will push back the competition that can come from geographic or sectoral horizons that were unimaginable before. Hence, the shareholder structure is so important; shareholders must, during their engagement, be well informed of the initial situation, and also of evolutions in order to correct or alter trajectories as soon as possible, if necessary. 1.4.3. Human resource, skill and talent management Human resources are an essential key for global performance. Employee well-being not only allows involvement but also offers talent stability and development in conjunction with core business. Human resources management should consider the employee in their globality: janitorial service, day care, aid for parenting, rest and

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conviviality are all considered parts of the whole. It is imperative to attract new talents and young talents, hence the ties with the employer brand, which should be the preoccupation of numerous managers. Human resource management should involve all actors (executives and colleagues) concerned during the hiring process of various profiles, but should also retain talents by allowing them to provide recognized added value to transformation projects. Human capital, its composition, its diversity, its origins and its expertise, is increasingly important and is one of the most essential resources for the enterprise’s value. If human resources are not well managed, there is a risk of discouraging these key potentials and not being able to attract the profiles the enterprise may need. This can even have devastating effects that would hinder the achievement of objectives. This management should focus on the human resources needed for the transformation of the enterprises’ processes. 1.5. Monitoring objective achievement and risk control If the preceding steps in the governance process are more “dynamic”, in that they allow the business to adapt and develop sustainably while creating value, it is just as essential to prevent the business from losing value. This destruction of value can be controlled in the process “loop” by a “monitoring” step, which allows us to enter a process of continuous improvement all while avoiding obstacles that the business is susceptible to encountering on the way. 1.5.1. The “balanced scorecard” The “balanced scorecard” is a common way of pertinently presenting various performance indicators (financial or not) within operational macro-processes, namely: – the “offer creation” process; – the “product or service production” sometimes called “quote to cash”;

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– the “taking into account client expectations” and “handling client dissatisfactions” processes; – “support” processes. Once the all of the macro-process performance indicators (results and activity) have been identified, and improvement objectives have been assigned to them by the Executive Committee, the enterprise will possess an extremely powerful tool for monitoring its long-term performance. So that the Executive Committee can easily follow them, it will be important to place these indicators on a monitoring dashboard called the “balanced scorecard”; proposed by Kaplan and Norton in 1992, which classifies them in a balanced manner into four sections articulated around the enterprise’s strategy: – customers; – internal processes; – training and preparation for the future; – finance.

Figure 1.7. The four sections of the balanced scorecard

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Sustainable Enterprise Performance

What is interesting about this approach is that the financial aspects result from the consideration of client expectations, process optimization and anticipatory competency management in order to prepare for the future all while seeking coherence with the enterprise’s strategy. The “balanced scorecard” gives the business a much more interesting and operational vision than one that is limited to financial aspects. As shown in Figure 1.8, it puts factors back into the right order: we must act on operational objectives in order to obtain financial results, and not the opposite, as some people tend to believe.

Figure 1.8. From internal processes’ performance to financial results

Nevertheless, and despite all pedagogical interests, this approach alone could not result in progress for the business. As a matter of fact, in order to be efficient and concrete, the business must rely on the “process approach” in order to establish coherence between performance indicators. With their transversal character, processes allow us to relate indicators to one another and establish cause-andeffect relationships between them, notably by distinguishing activity objectives (those that we can act on) and result objectives (which verify the attained progress).

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Since macro-processes are transversal to the “balanced scorecard”, each one of them will have indicators attributable to the four sections. For example, for the “quote to cash” process, we can classify the previously identified indicators as follows: – Customers: indicators of the “sales” and “client service” functions. – Internal processes: indicators of the “purchase/procurement”, “production” and “customer service” processes. – Training and preparation for the future: this section will mainly be supported by indicators of enterprise governance including CSR and offer creation. – Finance: in the case of the “quote to cash” process, in this section we will mainly find indicators of production costs for goods and services delivered by the process to the customers of the enterprise. In order to define, foresee and monitor costs, we must take interest in the ABC–ABB–ABM (activity-based costing/budgeting/management) methodology formalized by Cooper and Kaplan in 1988. 1.5.2. Risk mapping and the COSO framework Governance monitoring consists of two distinct but complementary sections. The continuous improvement process involves verifying that goals assigned to operational processes are met, for the purpose of establishing the necessary preventative or corrective measures for current projects, capitalizing on acquired experience, learning from possible failures to give future projects the maximum chance to succeed, and even changing the trajectory if it shows that goals cannot be met or are no longer up to date. This is the level where risk control intervenes in order to identify and limit the impact and the occurrence of threats confronting the business. It is therefore an approach that is symmetrical to value creation, touching on aspects of governance, strategy development, operational processes and supply creation – but with a “pessimistic” attitude.

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Figure 1.9, adapted from the ISO framework of reference, explains the various notions of control in the risk analysis.

Figure 1.9. Security element relationships

Risk management includes internal financial control and also covers more operational risks. The scope, the actors, the analysis methodologies, etc. are all collected in the COSO 2 framework (Committee of Sponsoring Organizations of the Treadway Commission), revised in 2013, which today has authority on the international scale. COSO 2 is represented by the cube shown in Figure 1.10.

Figure 1.10. The COSO 2 framework. For a color version of this figure, see www.iste.co.uk/leignel/enterprise.zip

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COSO 2 suggests a frame of reference for business risk management (the “Enterprise Risk Management Framework”), which is a process that is executed by the Board of Directors, the executives and the staff of an enterprise with the aim of: – managing risks so that they remain within organization’s “risk appetite” limits; – identifying elements that could potentially affect the enterprise; – providing reasonable assurance relative to the enterprise’s goals. The synthesis of risk analysis is a risk map, which should be set for all large enterprises and discussed by the Board of Directors. It is developed through the following five steps. Process review This method consists of taking inventory of different threats to which the enterprise’s activities could be exposed (prospective analysis) in order to assess operational risks originating from the analysis of process vulnerability. This review of processes assumes the existence of a description of the enterprise’s processes with a relatively macro granularity allowing emphasis on risk zones and existing controls. In order to identify risk zones, we must establish classification for operational risks: inadequate procedures, business risks (dangerous products, difficulties in production, obsolescence, etc.), human risks (probity, competency, engagement, etc.), external threats (natural disasters, sabotages, regulatory constraints, etc.) and technological risks. Risk analysis and consequences The goal is to analyze risk events related to each process according to the mapping drawn in the previous step. Causes and consequences are analyzed in order to identify impacts (financial, reputation, etc.) and afterward to develop action plans to be implemented based on causes of dysfunction. For this reason, there must be a mapping between risk events and causes of dysfunction.

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In order to define the causes, we need a framework like Basel II in the banking industry, which suggests four types of causes: – information systems: hardware failure, software bugs, technological obsolescence (hardware, programming languages, etc.); – processes (incorrect entries, non-compliance with procedures, etc.); – people (competencies, education and training, absenteeism, fraud, social movements and also the enterprise’s ability to ensure succession in key positions); – outside events environment, etc.).

(terrorism,

natural

disasters,

regulatory

Controls associated with risk events must be identified in order to measure their effectiveness in terms of both frequency and impact. Risk evaluation Risk evaluation is carried out by taking into account the occurrence probability of each threat, its potential impact on the business’ assets (in terms of finance but also reputation or image) and also the protections put in place to face it. A risk scale must be created and documented for all to use. Risk reduction plans According to the enterprise’s risk appetite level, certain risks must be reduced, an action plan will be implemented and new risk measures will be established. Updating risk mapping The enterprise has to regularly go back through the steps to account for potential new risks and also to measure the effectiveness of risk reduction plans.

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1.5.3. Compliance The governance process accounts for the business’ environment and notably respect for laws and regulations. This conformity, one of the four objectives of the COSO 2 cube, becomes important when we see the fines of several billions of euros inflicted upon certain firms in the name of respect for laws and practices that are more and more supranational and have sometimes become anti-competitive weapons. Yet, in a context of constant and very rapid change, like the current context made up of digital revolutions, the law is established and applied with delay. Thus, professional practices redefine themselves among actors and are finally reapplied or rendered mandatory by the law. This was the case of the European Data Collection Regulation, the Sarbanes–Oxley Law, the Foreign Corrupt Practices Act (FCPA), the UK Bribery Act, Sapin II and many others. The supranationality of these laws should be noted. Certain laws are interconnected, which makes their application difficult. For example, respect for the protection of intellectual property and respect for embargos can result in blocking European airplane sales because of the presence of American parts. “Tainted” technology is a trap to avoid: technology that has been created by the U.S. for military or mixed use is subject to U.S. export control. Even though this technology is incorporated into a much more significant entirety, this entirety will then be subject to U.S. export control. Similarly, the use of U.S. parts or services, or more simply U.S. citizen’s participation in a research and development team, can subject the product to U.S. export control, even though all development was carried out outside of the United States. When specific laws do not exist, rules for good conduct are defined by professional institutions or by businesses themselves. For example, the current debate on the transparency of algorithms is making the

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French National Commission on Information and Liberties think about ethics and some enterprises are taking an edge on the competition by showing a good code of conduct for satisfying their ecosystems. Large enterprises have a Council of Ethics and Compliance that addresses all of these aspects. To illustrate this, the domains that these councils most particularly deal with are: – corruption prevention and respecting international laws in the field (FCPA, UK Bribery Act, Sapin II, etc.); – respect of international embargoes; – competition law; – export control; – European General Data Protection Regulation (GDPR) and respecting good cybersecurity practices; – intellectual property for business assets as well as the use of outside technology; – transfer prices; – labor laws and their adaptations according to local legislation; – the environment and sustainable development; – internal control in a global manner. Failing to comply is a major risk. However, through respecting good codes of conduct, enterprises emphasize their ethics and compliance with laws and regulations across their entire ecosystem and can thus transform constraints into competitive advantages. 1.6. The role of decision-makers in the governance process Throughout the previous chapter relative to the decision chain, main actors were identified. The objective of this chapter is to question their role with regard to enterprise governance.

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1.6.1. Executives: what are they for? In dealing with this study on enterprise governance, our goal is not to define the level and variety of qualities and competencies that executives who are directly or indirectly involved should have in governance, but to highlight, over the course of this chapter, certain aspects and imperatives of the governance process which are critical to the future of the enterprise. These include: – the challenges with which the company is constantly confronted; – the means it has to be provided with in order to face them; – the strategic choices to be able to face all situations, particularly in a time of crisis; – the collection of actions and reactions, initiatives and engagements required in order to ensure not only its development but also the transformations and adaptations necessary for its continuity. These are the various aspects of an enterprise’s life that are addressed in this chapter. They are the base of our research and proposals. In order to highlight them, we have attempted to create the most exhaustive inventory possible of the responsibilities that governance and its network of decision-makers must assume using: – operational systems that are constantly upgraded and inspected; – and indicators originating from these systems, providing indispensable insight into the operations and regulations of various organs within the enterprise, so that nothing serious can disturb or counteract its advances. Thus, governance and its network of decision-makers, informed by real-time instruments of possible diversions versus the strategic goals, will be able to keep permanent control, which will reinforce the collective engagement of all those who have a stake in the enterprise’s performance.

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Therefore, the backbone of this sustainable economy appears to originate from win–win collective projects. 1.6.2. The Executive In this context, the quality and performance of a leader depend largely on their personality, culture and experience, plus a strong will and a true humanism. They must have the charisma to become a leader, a boss who inspires confidence. Taking into consideration the particular business, market and characteristics of the enterprise that they will lead, the executive will acquire the necessary competencies at a different rate depending on their personal adaption qualities. However, this consideration will be a compulsory step in order to take control of the mission and get a good grasp on the means at their disposal to ensure success. The risk associated with taking up these duties is a major element in judging the leader’s aptitude to effectively govern, conscious of the responsibilities that they must assume in order to establish continuity in the business’ life through projects where ethics will challenge collective performance. Concerning the action an Executive should take: – they appreciate and develop the value of the tangible and intangible assets entrusted to them by implementing the appropriate processes that they will be able to follow, analyze and even monitor, in order to reach the enterprise’s objectives. – they have a strong command of consistency in governance processes tied to their activity and underlying operational processes. They have the ability to x-ray and transparently view the business they govern;

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– in order to adapt the enterprise, they must quickly understand operational information and process performance indicators, take into account the environment, sometimes including public opinion, and interpret financial data to ensure the business’ continuity. They identify possible scenarios and various trajectories, they are sensitive to NYIH (“Not Yet Invented Here”) innovation and their behavior is structured around three dimensions:

Figure 1.11. Dimensions of an Executive Manager

They will apply these qualities to the business’ projects, favoring one or the other according to the situation at hand: strategy definition, market analysis, negotiation, dialog with staff bodies, internal or external communication, etc. Executive Committee The Executive Committee defines the strategy based on incoming signals (“inputs”) from stakeholders and the environment and takes care that the strategy is permanently adapted according to the

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evolution of the environment and the stakeholder inputs regarding how the enterprise is progressing towards achieving its strategic objectives. It takes on the central role in the conduct of the enterprise governance and is responsible for making sure that operations respect the rules of internal control. Administrators Administrators participate in defining and validating the strategy and suggestions for evolution. They must consider their knowledge of the environment and the industry, as well as their vision for the future of the business. Operational managers and process monitoring Operational managers participate in developing strategic objectives and identifying means to be used for their achievement. In order to put means together to work towards strategic objectives, the management usually has to make arbitrations, constantly keeping the enterprise’s and other departments’ general interest in mind: – they achieve strategic objectives through action plans and shortand long-term projects in order to adapt processes according to resources; – they make processes work efficiently and effectively, with quality and risk control; – they report on strategic objectives’ achievement, performance in everyday functions and risk management. The Chief Information Officer (CIO) Since information systems (IS) are becoming increasingly important for improving the performance of processes that they support, the CIO contributes to translate the strategy in operational terms on the same basis as operational managers. The CIO helps the operational departments to structure and then realize the “IS component” of the process performance improvement projects.

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They participate in strategy development with regard to appropriating means in order to achieve target objectives, notably when the means have strong IS implications. In certain cases, particularly when IS plays a major role in the operation of the business’ processes, he or she can fuel strategic reflection with contributions regarding the information system such as IS flexibility, security of intangible assets embedded in IS systems and the ability to absorb information systems of other firms with which closer ties are on the agenda. Chief Finance Officers and management controllers Chief Finance Officers and management controllers give the Executive Committee elements and analysis based on financial data to help in making decisions to monitor the governance process. They set up measurement instruments that offer objective and professional insight concerning strategic objectives’ achievement, financial and economic performance, and risk management. They help operational staff in identifying and structuring corrective action plans. They make sure that operations are carried out with respect for internal control rules. Internal auditors and compliance officers Internal auditors and compliance officers play a key role in the “monitoring” section of the governance model, notably concerning the following aspects: – respect for internal control rules in the financial, operational and compliance processes (separation of functions in order to avoid risks of fraud, financial information alteration, communicating confidential information, quality norms violation, etc.);

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– risk control of the enterprise’s recurring processes (availability, integrity, confidentiality) and of projects (their execution and ability to achieve target objectives); – respect for regulations. They report on all these aspects to the Executive Committee and the Board of Directors, and also to the audit committee, of which they are the first information source for evaluating internal control, providing an independent insight that is as objective as possible, which allows the audit committee to: – define and adapt, if necessary, action plans and ongoing projects; – get the most out of “project assessments” in order to give future projects a better chance to succeed; – potentially adapt the strategy if it turns out that the objectives were not or are no longer achievable for some reason or another, internal or external. Statutory auditors Although they are not part of the business’ internal control system, statutory auditors have a role akin to that of internal auditors. While respecting their non-interference obligation, they focus on: – the quality of financial information; – internal control and respect for regulations; – equality among shareholders. 1.7. Case studies: assessing the maturity of the governance process 1.7.1. Gexpertise Group: assessing the maturity of the governance process without CSR The Gexpertise Group agreed to test the questionnaire by evaluating its maturity in terms of sustainable development. The

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following rubric concerning the governance process is provided to illustrate the method. The test was conducted by the authors, in the form of discussions with representatives from the company, whom we thank sincerely. The maturity evaluations obtained this way correspond to perceptions, which would obviously need to be supported by precise audits for their confirmation. The Gexpertise Group is a true crossroad of skills, concentrating the expertise of 220 employees dedicated to geotechnical engineering, topographical and property engineering, construction engineering and real estate data engineering, accompanying its clients through the entire lifespan of a building. Gexpertise has management approaches practices described in the Académie’s guide since they take into account technological, evolutions of the economic environment in evolving.

aligned with the good for global performance, digital and sociological which the enterprise is

As for the strategic side, Gexpertise has a clear vision in the medium or long term, namely developing an engineering department of real estate data. It aims to develop abroad in order to accompany its clients wherever they may operate. In order to maintain these strategic orientations, Gexpertise relies on stakeholders that do not focus solely on short-term profitability. The right balance must be found between short-term management and the necessary resources to be implemented for the medium-term strategy. The diversity of points addressed shows not only a good level of control, but also that many points still have to be explored in order to progress in terms of sustainable development, notably in a professional context that is in the middle of evolving.

Project completion is measured regularly with activity and result indicators; corrective action plans are implemented in the case of slip-ups.

Strategic objectives are translated at the macro-process level (operating process, offer creation process, process of accounting for customer expectations/dissatisfactions) and action plans for achieving them show a clear designation of managers as well as other available means and meeting deadlines. ×

×

×

Under control

×

Deploying

The business has defined objectives in its strategy, taking stakeholder expectations and its ecosystem into account.

Discovering

×

Non-existent

The role of committees in charge of making strategic decisions (Board of Directors, Supervisory Board, management committee) has been defined.

Gexpertise Overview of the governance process (without CSR)

Optimized

Administrative management has been developed for the execution of new monitoring tools with the aim of reinforcing an approach for global and sustainable performance.

Defining and sharing the strategy has produced the business “inclusive growth” project which relies on the company’s values (which makes sense for internal teams and the firm at the same time) in order to set rules of conduct for all teams, particularly sales teams.

Gexpertise has adopted a mid- to long-term vision of becoming a “real estate engineering firm” without losing its base of traditional activities. In order to do this and define its strategy, Gexpertise has taken stakeholders’ expectations into account, who are: employees, customers, the Land Surveyors Association, unions, suppliers/sub-contractors, the town and their elected officials, colleagues and the State.

The organs of governance are defined: COPROD, Executive Management Committee (by sector) and COMEX. From 2016–17 strategic seminars were held so that members of these committees shared the same strategic vision. These seminars resulted in the strategy’s formalization so that it can be transmitted and shared.

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60 Sustainable Enterprise Performance

× ×

×

A project has been launched to define indicators that are directly operational for the organs of enterprise governance.



As for or operational processes, an ISO approach is in place to guarantee functioning and quality.

The Association of Land Surveyors regularly inspects internal processes, which can sometimes translate to restraints for growth. In terms of conflict of interest management for example, France has a very restrictive vision based on a set of prohibitions, whereas English-speaking countries have a much more versatile approach based on “transparency”.

As part of the ISO approach, audits are realized with the help of external inspection. This approach predicts didactic training coupled with exercises and continuous assessment.

Notably the role of the “innovation pole”. Monitoring digital technology leads to concrete projects that differentiate themselves from the competition, such as the ADDEL project (Assistance à la diffusion de documents en ligne) or even the HappyHand project (identifying areas not accessible for wheelchairs).

1 “Sustainable business performance: what are the indicators for a global evaluation?” Available at: http://lacademie.info/content/download/ 9355/146165/version/1/file/Cahier_Academie_33.pdf.

Table 1.4. Gexpertise: overview of governance process maturity. Summary of results of the detailed evaluation grid from the guide “Performance durable de l’entreprise : quels indicateurs pour une évaluation globale ?”1

The business has established monitoring for its governance process.

The business regularly audits the controls in place (both manual and automatic) to protect against the risk of fraud.

Risk mapping has been done to guarantee good operational functioning and trustworthy financial information. ×

×

Current transformation projects are monitored by audits adapted for their purposes.

Legal constraints or professional norms are closely monitored.

×

The business carries out systematic and formalized reflections on the competencies and technology that it must develop internally or externally in order to differentiate itself from the competition.

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1.7.2. L’Oréal: assessing the maturity of the governance process with CSR The L’Oréal Group agreed to test the questionnaire by evaluating its maturity in terms of sustainable development. The following rubric concerning the governance process is provided to illustrate the method. The test was conducted by the authors in the form of discussions with representatives from the Group, whom we thank sincerely. The maturity evaluations obtained in this way correspond to perceptions, which would obviously need to be supported by precise audits for their confirmation. The L’Oréal Group, a world leader in cosmetic products with an impressive portfolio of brands such as L’Oréal Paris, Lancôme, Vichy, Yves Saint Laurent, Kérastase, etc., has been engaged in sustainable development for more than 25 years, beyond its solid economic performance in the long term. Sustainable innovation relies on several levers for action: reduction of the environmental footprint of formulas, respect for biodiversity via sustainable and responsible supply politics for raw materials, ecodesign of packing, etc. Industrial performance integrates objectives for sustainable production: reducing CO2 emissions, water consumption and waste generation, as well as diminishing impacts related to transportation. L’Oréal set the goal of reducing 60% of the environmental footprint of their factories and distribution plants by 2020 compared to 2005. The goal is to progress towards “dry factories”. In 2017, the factories and plants reduced their water consumption by 48% compared to 2005.

×

Under control

×

×

Employer–employee relations are balanced, based on respect for each other’s rights and duties. They make an effort to limit insecurity.

The business has identified different types of pollution caused by its activities, products and services, as well as resources that it consumes. It takes necessary measures to prevent or reduce them.

×

Deploying

The business has identified risks associated with human rights violations in its value chain (e.g. suppliers, lenders, sub-contractors) and the territories in which it operates.

Discovering

×

Non-existent

The executives have defined values in line with the principles of sustainable development and regularly follow the indicators (environmental, social, economic) for monitoring the entity’s activities.

L’Oréal Overview of the governance process (with CSR)

Optimized

All advancements in terms of sustainable development are quantified and measured. For example, for product improvement, more than 80% of products launched in 2016 have an improved environmental or social profile. Every time a new product is created or updated, its contribution to sustainable development is taken into account beyond its performance or profitability.

Appropriate education and training assure personal development for all employees and adapted communication allows L’Oréal to share results and advancements in social matters.

L’Oréal’s goal is to allow its employees, wherever they are in the world, access to health coverage and financial protection and education/training, all as part of a workplace with an improved environmental and social impact. L’Oréal considers its suppliers’ activity as part of its greater environmental and social footprint.

The L’Oréal Group’s engagements and actions in terms of sustainable development are formalized and structured on a strategic level as part of the Sharing Beauty With All project, which is based on four pillars: innovate, produce, consume sustainably and share growth.

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×

Commercial practices are loyal, and contracts and information provided to consumers or users are clear and encourage sustainable consumption.

×

L’Oréal is also launching sharing programs to give more than 100,000 people in struggling communities access to a job by 2020, nearly as many jobs as internal personnel within the group. These programs involve solidarity purchases, professional education and training, and the inclusion of people with disabilities. In 2016, more than 67,000 people in the world gained access to a job in this way. The program engages regional managers, brand managers, all departments such as procurement and human resources, all within a dynamic of overall and sustainable performance.

L’Oréal encourages its consumers to make sustainable choices by communicating the environmental and social profile of its products and by deploying plans for continuous improvement among its brands.

An ethics chart from L’Oréal is available in 45 languages. It covers, among others, the fight against corruption and insists on the engagement of each and every employee in order to guarantee the quality and safety of all products offered to consumers.

2 “Sustainable business performance: what are the indicators for a global evaluation?” Available at: http://lacademie.info/content/download/ 9355/146165/version/1/file/Cahier_Academie_33.pdf.

Table 1.5. L’Oréal Group: overview of maturity of governance processes and CSR practices. Summary of results of the detailed evaluation grid from the guide “Performance 2 durable de l’entreprise : quelsindicateurs pour uneévaluationglobale ?”

The entity takes into account specific local contexts. It participates in the life of the territories in which it operates, seeks to develop jobs and takes care of the health of the local inhabitants.

×

All along its value chain, the business promotes principles and practices of societal responsibility, fighting against corruption and avoiding conflicts of interest.

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Sustainable development benefits from strong support from employees. These dimensions are also accounted for by financial analysts that follow the Group’s activity. They notably appreciate economic efficiency, valorization and ROI calculations in this domain. Reports on performance in terms of sustainable development are developed by external stakeholders. In 2016 and 2017, the Carbon Disclosure Project (CDP) distinguished L’Oréal for its leadership in environmental matters, with a triple A for its fight against climate change, water management and fight against deforestation. L’Oréal would like to offer consumers responsible consumption choices, which means giving them information about the environmental and social impact of the products and heightening awareness of the environment in which they live. L’Oréal set ambitious and quantified goals in all CSR domains and produces a measurement report each year for achieving these goals.

2 The Process of Creating Product Offerings

2.1. Introduction Globalization is the great economic phenomenon of our time. Opening economies, developed or not, to international commerce leads them to confrontation with outside competition. With one click of a mouse, at all times, all around the world, a multitude of actors decide to respond to offers, or to choose suppliers, on the basis of largely accessible technical and economic information, in a universe without borders. It is a fundamental structural trend that will be generalized because it corresponds to a necessary phenomenon. No country could reasonably hope to produce every single good expected by its consumers, at least under satisfying supply conditions (cost, quality, availability) for buyers. The first effect of globalization is that productive apparati from various nations, or groups of nations such as the European community, for example, are directly introduced to competition. There is a confrontation on product markets presented by firms from numerous countries, and the combinations of price and quality that best respond to consumer expectations are the ones that win.

Sustainable Enterprise Performance: A Comprehensive Evaluation Method, First Edition. Jean-Louis Leignel, Emmanuel Ménager and Serge Yablonsky. © ISTE Ltd 2019. Published by ISTE Ltd and John Wiley & Sons, Inc.

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If, as the OECD says, “competitiveness is the latitude that a developing country has under free and fair market to produce goods and services that satisfy the international market norms while maintaining and simultaneously increasing its inhabitants’ real incomes in the long term”, then globalization is forcing all countries to find solvent customers for their products, so that they can finance their foreign trade within the scope of acceptable growth. Competitive countries are therefore those that sell comparatively more than others (exports as well as domestic) and sustainably increase domestic wealth. Historically, balances have always been found, even for the least competitive countries, through devaluations that allow them to find a satisfying quality–price relationship for foreign buyers. Deleting this adjustment variable, at least within the eurozone, renders the requirement of endogenous competitiveness even more necessary. In addition, a major crisis has spread around the world, accelerating history in all financial, geo-economic and geopolitical dimensions. Like the retiring tide reveals the many rocks that were more or less hidden before, this crisis renders competitiveness even more difficult to attain, since countries no longer have sufficient room for maneuver to mask their actual shortcomings. If we add to this picture the arrival of the third industrial revolution represented by the advent of “digitization”, the search for “real competitiveness” becomes a condition of economic survival for all countries and forces each of them to make good choices in terms of product specialization (by developing their comparative advantages or by creating new ones) and of best adapted economic politics (policy based on offer rather than Keynesian policy based on demand). Since competitiveness cannot be obtained through lower production costs than “developing countries”, it can only derive from a strategy of “differentiation” based on the offer quality and the innovation speed… without neglecting, however, cost strategy factors such as the cost or duration of labor.

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This macroeconomic analysis feeds back on the enterprise level and gives particular priority (or even urgency) to the creation of product offerings (not just products, but services or a combination of products and services) relative to other processes which, of course, must be performed, but their performance becomes a nondifferentiating prerequisite… unlike offer creation. Today, associating services with products is a fundamental trend for offer creation and its evolution. The goal of enterprise governance, as presented above, is to formalize a vision of global corporate management by emphasizing a meta-process, the “governance process”, and by specifying the role of executives and also decisions to be made in order to make it work efficiently. In order to ensure that the decisions taken in the governance process will be efficiently implemented at the operational level, the governance process will rely on operational macro processes, namely: – the product “offer creation” process; – the “order to cash” or “supply chain” process; – the process of taking into account clients’ expectations; – and the “support” processes. Haven taken into account the importance of offer creation and its strategic pre-eminence in the current geo-economical context, it was essential to us to focus the “offer creation process” in order to give executives elements of reflection that will allow them to better take up the major challenges confronting enterprises today, and those that will be confronting enterprises in the future. Indeed, the globalization of economies is irreversible and speeding up, which generates new needs for monitoring and predictive sensitivity analysis tools. In a moving economic context and a society of consumption where needs are incessantly renewed, one enterprise will succeed where another enterprise will fail, simply because the first knew to identify the opportunity at the right moment with adapted service offers and a fitting business model. Furthermore, the development of this offer,

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from appraising the investment opportunity up until the final product proposal, goes through various stages and processes specific to each enterprise. Furthermore, there are a certain number of invariant factors and we thought it would be pedagogical to present the subject of offer governance using the image of a tree whose fruits represent the products and services offered, their quality being the result of the quality of accomplished work from the roots up to the branches. The objective is to show the extent to which the various processes must, if they are not already, be articulated and synchronized in order to propose a good offer at the right moment and thus allow the enterprise to develop by meeting its goals for profit and continuity.

Figure 2.1. The product offer creation tree. For a color version of this figure, see www.iste.co.uk/leignel/enterprise.zip

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The humus The humus is the environment in which the business in question lives. The business must analyze this environment, understand it and master it in order to make the best and develop an offer that matches its market. An important example of this is Auchan, who, by actions centered on its staff and customers and the help of specialized startups, endeavors to sell products invented by staff or customers. Here, the business uses knowledge of the environment and takes advantage of open opportunities to condition its continuity. The roots The roots carry food to the tree, supporting its stability, which it needs to grow. Transposed to levels within the business, the roots refer to key competencies of a varying nature (human, financial, technological and organizational) that the business will rely on in order to develop an offer that is well adapted to market expectations and develop a stable competitive advantage over the competition. New “Web 3.0” technology, that facilitates an exchange of expertise, knowledge and competencies and allows projects to be realized over networks, is a boost that allows the business to find more appropriate internal or external resources to ensure its development. The trunk Relying on the humus (knowledge of the environment) and the roots (key competencies), the trunk represents the offer creation process, strictly speaking, and therefore the ability to transform the company’s expertise into marketable products or services. It is from this trunk that the branches extend and later bear fruit. It is imperative that the trunk is viable and sufficiently “strong”. The branches The branches correspond to potential segmentation in the global offer, according to the market segments where the business has positioned itself, and also, on a second level, to the various

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distribution channels that will allow each segment of offer to be delivered on the market. In the dynamic vision of the skill tree, if certain branches turn out to be unsustainable, the idea is that it is better to cut them off in a timely fashion (thus giving the tree the power to replace them with more promising branches) rather than cut the entire trunk later. The fruit The fruit is the finished product or the final proposal of a service on the market or in each segment of the market. At this stage, the business must listen to the market and constantly observe, following the product’s life cycle so that new offers can be introduced at the right moment. Digitization plays a particular role in that it is used to develop new functions and new services associated with the offer (customization, logistics, reputation, mobility, etc.) thanks to contributions from economic intelligence. The atmosphere The atmosphere consists of all outside agents that dictate constraints and offer opportunities. It is at this level that the actor’s trust is established, which is necessary for the offer’s full development. However, it is also at this level that slip-ups violate rules and destroy trust. The recent example of horse meat having a negative impact on the entire agro-food sector is striking. Similar to how we cannot dissociate the different tree parts and hope that the tree will still prosper and produce good fruit, the different sections of offer governance are bound together with systemic logic. The business will have to make the best of its humus (notably in the context of an economic crisis) and capitalize on resources and competencies (roots) at its disposal. Using these development processes (trunk), it will develop a product or service (fruit) that will be offered to the customer at the end of the chain.

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The customer’s reaction to this offer or the life cycle that the customer imposes on that offer will allow the business to learn lessons and adapt its strategy. 2.2. The business’ economic environment and its ecosystem or “humus” Increasingly, in order to develop itself the offer must integrate customer-oriented communication from the outset. This wellconstructed communication is a key factor of success. The customer must be well informed on the content and access conditions that are being offered. Management cannot be content with the development of an offer with quality. In order to assure the business’ development, revenues and continuity, the offer must be well received and solicited. Computer architectures 2.0 with messages like those of interactive websites, mail, Twitter, etc., with different combinations of these different customer oriented techniques, optimize the offer’s success. Implementing “customer itinerary” monitoring with performance indicators that are monitored and analyzed through different mediums of communication reinforces the effectiveness of business’ customer communication. But the necessary condition is not enough. It also becomes necessary to, as quickly as possible, raise aspirations, expectations, surprises, and customer deceptions in order to assure the offer’s redeployment and transformation. Through new computer architectures 3.0, the customer is connected with the supplier, such that he or she is part of all information that could potentially affect the customer–supplier relationship. This new orientation is not strictly speaking marketing but directly listening. In addition, it must consist of analysis filters that could result in the creation of new offers. Digital architectures can be intrusive and can push for significant modifications to the offer. Management has the information right in its hands, accessible in real time and allowing agility and even anticipation if trends hold.

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For a long time, consumer associations played a major role, but now there are actors that quickly intrude on and amplify opinions and messages. These actors intervene with values that can carry the offer or the enterprise promoting the offer. On certain markets such as food, pharmaceutical, clothing and automobile markets, the business cannot ignore values that, when associated with the offer, rapidly reinforce or degrade the perception that a customer could have of the offer or the offer bearer. Promoting an offer is often a slow process, although businesses like Apple succeed in rampant launches. Badly controlled degradations can be brutal or even fatal. In order to assure a peaceful launch for a product, businesses must manage as well as possible: – their internal information system with processing activation at the right place at the right time with the right actors; – their communication with the target customer, endeavoring to reach the customer with diverse and complementary media sources; – data feedback from the customers, interpreting this data well in order to adjust the offer and assure its continuity and profitability in the middle and long term; – actor interferences, notably those that convey values and can, through their enterprise–customer intervention, reinforce or destroy the customer’s trust. The business’ ecosystem is principally characterized not only by the abundance and quality of its resources, but also, as mentioned, by the complexity of the current context and its evolution: globalization, instable economic factors, competition, technological innovation, standardization, changes in consumer habits, etc. In any event, the business must be active on all fronts if it wants to continue to produce an adequate offer and win the war of continuity and profitability.

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In the business’ ecosystem, start-ups occupy a particularly important position when it comes to innovation and offer creation. It is often here that “disruptive” ideas are born which business can utilize to forge partnerships or absorb them, but make sure not to kill the start-up’s creativity! 2.2.1. Innovation and start-up Descartes himself, the champion of rational reasoning, had recognized the fundamental importance of imagination, complementing intelligence, in a search for the truth, the source of all creative action. Even though only intelligence is capable of conceiving truth, it must make use of imagination, of the senses and of memory, in order to leave no means unused. Later, science would develop the heuristic approach, which, starting with experiments and relying on levers of intuition and reasoning, gives the mind the extraordinary ability to discover. As rational knowledge threatens to confine reality to determinist models, it is important not to allow it to act alone during decision-making processes if we want it to result in real innovations. Actually, the trick is to harmoniously mix rational approaches based on methods to help thinking, such as “core-competence strategy”, “economic intelligence” and “strategic analysis”, among others, with a good dose of “creativity” which will play the role of an indispensable spark for putting the offer into a truly innovative orbit. Figure 2.2 shows the key role of creativity, which not only must be encouraged through the formation of a creative ecosystem, but also must be connected to the world of research, ideas and discoveries, and finally, must be monitored by a good offer governance that the enterprise must put in place.

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Figure 2.2. Economic Analysis Council: Creativity and Innovation. Report piloted by Michel Godet, with the participation of Philippe Durance and Marc Mousli, the DATAR and the Academy of Technology, May 2010

As we can see here, the business must act on a certain number of “soft skill” levers in order to create an ecosystem that is conducive to creativity. Soft competencies are human relational qualities that make up the personality of each individual. They complete acquired academic competencies which are naturally more technical, referred to as “hard competencies”. Among the soft competencies, the most appreciated of them within a company are: a sense of efficiency, communication, collaboration, and also flexibility and sense of initiative. The business will encourage them thanks to a set of action plans whose consistency and convergence will create conditions necessary for outbreaks of creativity. As an example, we cite: – a program of human resources oriented towards innovation that favors openness to change;

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– encouraging talents and leadership; – improving competencies in staff and management; – a participative approach for all phases of innovative projects; – a curiosity of mind and a predisposition to watch for breaks in the environment, which may prove to be opportunities for the company, – the suggestion box (projects) among different teams in the business; – “agile” and opportunist management that allows non-planned innovations to emerge; – management that accept risks, under the condition that they are well calculated. It is therefore by playing with these recruitment and managerial culture levers that the business will be able to create fertile ground for an innovative offer that creates value which can bloom. This fertile ground is the necessary condition for acquiring a decisive and defendable competitive advantage that will ensure sustainable development. One of the key factors of innovation consists of combining internal R&D with “Open Innovation”, which consists of involving external stakeholders (customers, suppliers, partners, universities, public research laboratories or start-ups.) in the innovation process and the offer creation process in order to take advantage of the ecosystem’s collective intelligence. Start-ups can be part of a group or simply share a co-creation with more or less mutualized means and a more or less integrated exchange of knowledge. They have the reactivity and agility that more mature structures often lack. The enterprise can therefore draw creativity from these start-up “hives”, thus speeding up innovation cycles. They will have to pay attention to maintaining their creative tension, even in phases of growth or absorption, where they run the risk of being stifled in systems that are too large and rigid.

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It is important for the enterprise to at all times conserve the possibility of stopping, pursuing or deviating its project, according to innovations that arise from start-ups and the ecosystem in which they evolve. Combining the principles of Lean with those of “start-ups” has led to the emergence of “Lean start-up”, which aims to speed up the commercialization cycles of offers, regularly measure progress realized with a view to continuous improvement, all while taking user feedback into account and minimizing costs inherent to the offer’s delivery. 2.2.2. Economic intelligence The goal of economic intelligence is to give the business a more balanced and realistic perception of its environment and capabilities; its ability to anticipate depends on it. This perception is constructed thanks to a structured collection of information internal and external to the company. This mass of information must be handled appropriately. On the one hand, these are syntheses communicated to General Management, allowing the company to decide on how the offer should evolve and on the internal correlative actions required in order to facilitate its realization. In this respect, these syntheses can be very sensitive for the company and must therefore be protected. On the other hand, these are communication packages targeted for lobbying actions (or influence management) intended to facilitate the offer deployment (recommendations, ethical rules and behavioral norms). Each organization, based on its ability to anticipate, seeks autonomy with regard to its environment. This autonomy can be defined as the extent of disturbances that an organization is able to correctly overcome and its ability to pursue objectives without being counteracted by others. This intelligence, which constitutes one of the

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guarantees of the company’s sustainability, must be protected according to the level of impact on the enterprise a potential disclosure would have, as shown in Figure 2.3.

Figure 2.3. Impact of disclosure of information on an organization. Source: CGPME 75: Guide Pratique du secret d’entreprise

Business economic intelligence feeds on: – all kinds of monitoring: research (literary research), technology (products and process), competition (products, patents), regulations (norms, legislation, certification, etc.); – surveys, studies, panels on local economic environments, social behaviors, market expectations, the tissue of activities and the infrastructures and services that holds them together; – evaluation of internal or easily accessible aptitudes, fair awareness of weaknesses and strengths. Economic intelligence is concerned with internally maintaining an enterprise culture favorable to its development by ensuring the link and synergy among actors, and externally maintaining a positive image and expectations for renewals of the offer within the enterprise’s environment.

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Economic intelligence is to be constructed, but it must also evolve and expand. The reasons for this are touched upon as examples hereafter: – new institutional environment with growing complexities, such as agreements and collective convention, legislation, professional insurances, decrees, municipal bylaws, etc.; – growing competition; – faster technological changes (e.g. digital tools); – quicker market cycles; – well-developed, faster information (email, SMS, subscriptions, etc.); – competition for accessing means and competences; – the arisal of misinformation (intended or not); – the arisal of threats and opportunities (intended or not); – control of access to internal/external information flows. Fortunately, at the same time, the plethora of tools at our disposal to build this intelligence is constantly increasing. We must know how to use these tools. 2.2.3. Strategic marketing (or “upstream” marketing) Apart from major setbacks that oblige the enterprise to “reduce sail”, the enterprise seeks growth, following the adage: “to stand still is to retreat”. Upstream, defining a strategy responds to this concern. As we tried to show in the publication “Guide for Good Enterprise Governance Practices”,1 has tried to show, designing a strategy that takes the enterprise’s stakeholders’ expectations into consideration (customers, staff, suppliers/partners, shareholders, etc.) is the key to success in enterprise governance, under the condition that the enterprise knows how to translate this strategy into concrete objectives which can be allocated to the enterprise’s macro processes. 1 Leignel J.-L., Ménager E. and Yablonsky S. (2009). Guide for Good Enterprise Governance Practices. Académie des Sciences et Techniques Comptables et Financières de l’Ordre des Experts Comptables, Cahier no. 14.

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By nature, the strategy and its operational translation define middle- and long-term orientations that constitute the context of everyone’s day-to-day actions. The offer creation process, declined according to the seven functions that compose it, must be accommodated in the same framework as that of the business’ other operational processes (“order to cash”, taking into account customer expectations, etc.) or support (finance, human resources, etc.). Strategic Marketing means conceptualizing the offer that will best contribute to achieving defined strategic objectives. Thus, the offer is a specific translation of the strategy, aiming to respond to market expectations by relying on the identification of key competencies and knowledge within the business in order to create a competitive advantage that allows the business to differentiate itself from the competition (humus and roots). This function is notably in charge of: – bringing life to the “taking into account customer expectations” process by activating all economic intelligence levers: competitive monitoring, awareness of competition, technology, regulations, economics or even geopolitics, and also monitoring the image perceived by customers, prospects or targets in new markets; – summarizing the entirety of elements gathered in order to imagine existing offer evolutions or new products/services developments. In order for this to happen, it will rely on market segmentation according to targeted client type, allowing us to pertinently analyze their expectations. The stronger of a technical evolution there is, the more it will be necessary to know the customer’s real expectations. Fortunately, this same technology will allow us to better understand them based on varied criteria such as social, environmental, or other aspects in addition to classical criteria of utility and cost. The progress of probes, sensory cameras, geotracking and instant processing of multiple, complex events allows us to follow the customer and propose “circumstantial” offers.

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Generally, the offer’s design calls on two distinct types of processes according to whether you are dealing with novation or evolution. There are specific processes for projects (novation) and permanent processes for evolutions. The line between these two types is however porous. The characteristic of creating a “novelty”, an offer originating from an invention, is that its development results from this innovation and thus cannot result solely from strategic reflection. As an example, we cite: the microwave oven, the laser, the chip card, the Internet in its primitive form, revolving credit, heart transplants, etc. Inversely, the evolution of “renewal” or “improvement” offers will generally result from a strategic approach that links the market’s expectations with the analysis of the enterprise’s key competencies. Let us take a look at this category: vending machines, parking machines, washing machines, wine, dentures, dumpsters, vehicle leases, reservations of all kinds, gambling, etc. The majority of these improvements consist of taking advantage of newly emerging technology in order to enrich an existing product or service. This “upstream” marketing, in contrast to operational marketing that can be qualified as “downstream”, relies on a certain number of tools, such as economic intelligence or strategic analysis in order to take advantage of main sources of inspiration for creating the offer, which are: – market studies and unsatisfied expectations; – research and technology watch; – knowledge of the competition and competitivity improvements; – exploitation of know-how and key competencies that capitalize on the experience gained by the business. These tools are certainly necessary, but far from being enough. In fact, without a good dose of creativity, the offer will not take off, and all of these wonderful studies risk ending up vain.

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2.3. Exploitation of the business’ key assets or “roots” The management of “macro competencies”, also called “core competencies”, “key competencies” or “distinctive competencies”, aims to identify the roots of the business’ success in order to capitalize on them and develop them internally or in combination with external competencies. By their durability, they will give the enterprise a sustainable competitive advantage. The “core competencies” represent a sum of specific knowledge accumulated by trial and error processes integrated into the enterprise, allowing it to succeed when faced with the competition by placing a “differentiating” offer on the market. In the contemporary economy, the business being more and more nested in networks, where resources are parceled out, resource accessibility is a much more significant competitive advantage than the simple detention of its own resources. Looking at the enterprise’s assets and its projected turnover is not enough to identify the firm’s competitive advantage. Business A will have more success than business B if it is in a position to use available resources (internal and external) in a more efficient or effective way than business B. This means that the business most often has to combine its own competencies with those of its partners or even its competitors. We must also take into account the process of erosion, which risks affecting “key competencies”. The status of “core competency” is not immutable and can change at any moment, particularly in a turbulent market where information is rare, changing and asymmetrical. Macro competences: the enterprise’s assets The enterprise’s “key competencies” are characterized by: – a reproducible experience;

organizational

ability,

based

on

gained

– the time required for their construction and the difficulty to imitate and to maintain them; – a unique assembly of know-how and expertise;

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“Key competencies” emphasize the long term. They are the roots and source of creativity for the future, under the condition that they are identified and managed. Some examples of distinctive competencies that have allowed the company’s product offerings to evolve: – mail-order distributors: logistical and cataloging competencies from mail-order distributors combined with digital competencies have transformed their distribution model; – Caterpillar: civil engineering competencies combined with the competencies of Prêt A Porter in order to propose an all-terrain shoe offer; – Apple: integration of IT competencies with those telecommunication and a convivial human/machine interface;

of

– Wintek (subcontractor of Apple): competencies in manufacturing and assembly in very large volumes of electronic parts, but very limited competencies concerning the well-being of employees; – Canon: integration of optical, microelectronic and mechanical precision competencies; – Honda: competencies in motors and gears have led to a development in multiple markets: automobiles, motorcycles, lawnmowers, outboard engines and generators; – Renault: automobile manufacturing competencies coupled with the reuse of products and manufacturing methods as well as using cheaper human resources have allowed Renault to develop vehicles such as the Dacia; – IBM: through its service competencies, it has been able to take a strategic turn towards consulting. In contrast, examples of badly managed competencies that did not allow the offer to evolve:

differentiating

– Kodak, with competencies comparable to those of Canon, has not been able to manage them in a way that allows its offer to follow the

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markets at least, and also notably missed the widespread digitalization of photography; – IBM has provided Microsoft with key competencies in IT, while a good management of those competencies could have resulted in it becoming an incontestable leader in micro-IT, whereas it has now left the market. 2.3.1. Identification and evaluation of competencies and key assets: use a methodology The approach based on resources and competencies will enrich the enterprise’s design process by considering it not only through its product/market activities but also through its ability to mobilize internal resources in order to innovate and create or maintain a competitive advantage. Thus, the strategy no longer appears solely as a rational exercise in adapting to the market’s expectations, but rather as a creative exercise that guides the development of the enterprise’s resources and competencies. From this perspective, it will first identify its resources and key competencies in order to assemble them in an original way that allows the enterprise to imagine an innovative offer. Once this operation has been carried out, this offer should be evaluated in the context of the competitive environment of the enterprise in order to decide whether or not to put it on the market. In order to facilitate the identification of key competencies, the enterprise will take advantage of a map with six competency domains as identified by a certain number of internationally recognized authors such as M.A. Hitt and R.D. Ireland who detail 55 distinctive competencies: 1) financial competencies: the available cash-flow is seen as a strategic asset for developing other internal competencies in the business, even acquiring new external competencies, etc.; 2) human competencies: HR policy favors staff motivation, encouraging regular upgrades in individual competencies, rewarding performance and initiative, etc.;

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3) physical competencies: the production tool’s performance in terms of cost, quality, flexibility, geographic implantation relative to markets, respect for the environment, stock reduction, etc.; 4) organization competencies: quality of the business’ governance and management, pertinent utilization of the information system, implementation of approaches to continuous improvement in performance such as quality, process, etc.; 5) technological competencies: know-how patents, production and conception methods, etc. Some businesses sometimes develop very elaborate prototypes that allow them to test new technology and prospects’ reactions. This is the case for automobiles with car concepts, for aviation with model A380 so that customers can see the new aircraft’s interior space, etc.; 6) finally, reputation, which is an “invisible asset” that is, however, essential for the business (brand image, fame and, e-reputation, for example, are invaluable in creating a competitive advantage). With this in mind, the enterprise has a true inherited asset at its disposal that allows it to see itself as a portfolio of competencies. However, it is not always easy to note these resources, insofar as traditional information systems offer a fragmented and incomplete image. In fact, only the assets that can be isolated and easily measured (fields, factories, equipment, etc.) are accounted by traditional management tools. What renders this identification even more difficult is that analyzing the enterprise’s resources, or even individual competencies in the HR sense of the term, is not sufficient, because when taken in isolation, they rarely constitute value-generating forces. In fact, a core competency is always a combination of individual competencies and sufficiently structured resources to allow learning and self-development, which will be done through capitalizing on gained experience.

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Due to its complexity and tacit dimension that relies on experience, it is difficult to codify the process of learning. Hence, it can be difficult to copy the resulting core competency, which creates a unique “asset” for the enterprise. Among these key competencies, some are “differentiating” enough relative to competition to be qualified as “fundamental”. Here, we will refer to “core competencies” or “strategic competencies”, because they can give the enterprise a sustainable competitive advantage, most often by an original combination of several of them. But in order for this to happen, the enterprise must first be able to recognize them before thinking of a winning combination. Similarly, the enterprise’s human resource management must evolve more and more towards human asset management. Once resources and competencies have been identified, they must be evaluated in the context of their competitive environment. This evaluation constitutes a delicate exercise, subjected to executive perception. The different criteria presented in the literature help in analyzing them. Drawing inspiration from several works, we propose a sequence of five tests that assess the strategic value of resources and competencies. 1) The first test reflects on the pertinence of resources. If the resource allows the business to seize an opportunity in its environment or to escape a threat, then we can consider it pertinent. This pertinence results from a double concordance: between resources and the strategy and between the strategy and the environment. 2) The second test is that of rarity. It separates trivialized resources from those owned by a small number of competitors. Consequently, the rarer the resource is, the more it will be considered strategic. 3) The third test splits easily imitable resources from those that are much less easily imitable. Here, the aim is to determine the sustainability of the advantage procured by resources. Thus, the more intangible resources are, or the more tacit competencies are (non-codified), the less they are visible and therefore imitable. The possibility of reproducing the competency depends just as much on

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the time necessary for its constitution. Some competencies are long forging and cannot easily be imitated. 4) The fourth has to do with the transferability of resources, in other words its specificity and the degree of control exerted by the enterprise that possesses it. An idiosyncratic resource (difficult to redeploy in another context) by definition renders its transfer to another entity problematic. Furthermore, a competency that is simply mobilized but not possessed by the enterprise (the case of individual competencies) is exposed to a higher degree of transferability. 5) Finally, the fifth deals only with resources that have no substitute. This last test is interesting because even though a competency is neither imitable nor transferable, a competitor can manage to neutralize this source of competitive advantage by forging a substitute competency. If the key competencies and their identification as presented above remain up-to-date, there is one resource whose strategic importance has recently made an appearance, and which is the product of technological competency and pertinence with regard to the environment: data. 2.3.2. The value of informational assets With the rapid development of information technology, the digitization of information has gained an extremely significant position in businesses and administrations as well as in the daily lives of each and every one of us. Since the turn of the millennium, the rhythm of technological innovations surrounding digitization has transformed in successive waves that make up a tsunami: the appearance and diffusion of smart phones in record time, with several innovations such as widespread mobile Internet access, geo-tracking, Big Data, cloud computing, MOOCs, etc.

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Other digital innovations are already ready (artificial intelligence, Internet of Things, 3D printing, etc.) or still in a state of research (quantum computing, etc.) without being able to precisely predict their use and therefore their impact on businesses. Today, the digital transformation has changed society as a whole, not just businesses. The importance of this phenomenon and its irreversible character justify talking of a digital revolution. This is one of the key ingredients for the third industrial revolution marked by the appearance of GAFAM2 or their Asian equivalents BATX3 and their supranational power which surpasses that of some developed states. In this digital revolution, the “data” has assumed a predominant and strategic position. In the past, a few years ago, the effort was to make information systems provide the business with value. It was data processing that had value. Today, it is the data itself that has value. Should we have to convince ourselves of this? Consider the recent example of the Facebook and Cambridge Analytica case. The cases affected the very heart of Facebook’s activity: data collection for advertising purposes. This is most often done with a commercial goal in mind, but as we see in this case, the goal can also be political, starting from the misuse of collected data. Specialized in strategic communication, Cambridge Analytica, created in 2013, analyzes mass data by cross-referencing in order to emphasize individual characteristics (or characteristics common to a group of individuals) in order to facilitate targeting these individuals in marketing. In this instance, it has developed software that anticipates how voters will vote in order to tilt the balance in favor of the republican candidate thanks to targeted advertising. This software has gone so far as to create “ideological bubbles” from filters that allow an entirety of information to be cross-referenced, while the isolated data seems insignificant. This cross-referencing allows a behavioral analysis to be 2 Google, Apple, Facebook, Amazon and Microsoft. 3 Baidu, Alibaba, Tencent and Xiaomi.

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carried out and information to be presented from an angle that aims to reinforce certain user behaviors. Thus, the user finds themself “trapped” in a vicious cycle, without ideological debate, which then allows them to be easily influenced. The data that served these analyses concerns 87 million Americans and has been obtained illegally via a false personality test developed by a sub-contracting company and a psychologist from the University of Cambridge. Facebook does not feel guilty, under the pretext that those concerned granted a right of access to their personal data on the platform as well as their hometown, first and last name, but also “likes” and even their “friends”. People are aware that they are providing this information. “No system was infiltrated, no password or sensitive data was stolen or pirated”, Facebook defended itself. Taking into account the extremely high number of people who were made the object of such targeting, counted in tens of millions, in this situation there are grounds to accuse Cambridge Analytica, with the complicity of Facebook, of getting Donald Trump elected by decisively tilting the balance in his favor. Other than shedding light on the dangers concerning personal data encountered when frequenting Internet sites, this scandal also illustrates the considerable, even strategic, stakes with data and the worldwide battle to possess them. They also allow us to approach the issue of the value of data and even “calculate” it: since the stolen data concerns 87 million people and Facebook’s drop in value on the stock market following the scandal comes out to 93 billion dollars, we can deduce that, with a shortcut that has nothing to do with math, the value of personal data is about 1,000 dollars per person! 2.4. Best practice in operations involved in the process or the “trunk” Offer creation generally remains under Executive Management’s initiative (on the contrary, see Kyocera’s “Amoeba Management”). The business, strong from strategic marketing analyses and conscious

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of key competencies at its disposal, can entrust a team with the task of developing ideas and pushing them step by step all the way to the launch on the market. This will commonly take the form of a project, where processes come together to create the initially sought product. It should be known that over the last few decades the principals that preside over the organization of offer creation processes have undergone a profound change. It is worth recalling their essential characteristics. Everybody can observe the effects of modernization. Never have so many businesses been created with ambitions of quickly meeting purely industrial objectives, whether it be in services, “digital” products offers, or in equipment goods, which one would have thought were reserved for large industrial groups. This reality is born from encountering mature markets, eager for the slightest innovation and the proliferation of technology that allows very sophisticated solutions to be developed simply and at low cost around the products. This does not go without repercussions for the conduct of the offer creation process. The agile process The process of offer creation is incorporated in a structured approach. The different functions must be planned agilely by encouraging tasks in parallel. At all times, strategic marketing can introduce new elements that alter the process. If evaluations are inconsistent with expectations, one starts over entirely or with part of the preceding functions in order to obtain satisfaction. For example, one can introduce the notion of Jidoka (Toyota): GO, we continue; NOGO, we stop everything according to an evaluation of established characteristics (quality/industrial gate). These characteristics are not uniquely formulated in economic or financial terms nor in terms of quality, deadlines and technical restraints. New digital technologies (Product Lifecycle Management (PLM), 3D printers, etc.) introduce more agility in the offer creation process by reducing the duration of development steps and allowing novelties to be continually integrated without great difficulty. This new agility offers enterprises the possibility of placing truly “disruptive” innovations on the market.

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The time factors As we try to satisfy expectation for variety on the market (derivation of options, personalization), the enterprise comes under increasing pressure to meet deadlines. “Time to Market”, the delay that separates the identification of a product need from its launch on the market, becomes a determining factor in the construction of a competitive position. This factor considerably influences offer creation processes. We participate in a growing overlap of various phases of this creation (conception, industrialization, manufacturing, distribution). These techniques are grouped together in what is now called “concurrent engineering”, or simultaneous development, which is characterized by: – product renewal by successive “at the margin” developments; – reuse of manufacturing procedures which are progressively adapted; – permanent mobilization of all industrial and commercial information (capitalization of experience, data about the competition, the state of the art) at all stages of manufacturing; – “de-massification” of various processes for the benefit of a better proximity among markets and experimentations; – limitation of dependency on economies of scale. The time factor has become considerably important in the modern economy. It is a criterion of competition among competing businesses. Today, improved or renewed offers proportionately surpass those of novation. Zara, as an example, attests to this phenomenon when it surpasses its competitors due to its aptitude to progressively and permanently renew its collections while others are still concerned with massive, seasonal renewals. In this case (and as many others will confirm), the analysis of speed shows a deep and permanent interaction among different processes, such as: – quantities produced strictly deriving from quantities sold; – conception quickly reacting to the lifecycle of articles; – permanent adaptations of industrialization to quantities; – quick design based on capitalization of experience.

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Potentially dangerous offers In offer creation processes, it is necessary to consider the potential dangers of an offer or its externalities. We cannot simply do whatever we want in the nuclear, aviation or drug industry. However, the risk of utter catastrophe is not always perceived. If we take aircraft construction, for example, the different steps to creation, conception being the one exception perhaps, are marked by multiple regulatory procedures that should be satisfied before pushing further on this creation processes. Thus, we can consider that the aircraft is never completely defined, insofar as at each moment a “service bulletin” could keep it grounded until modifications are applied. There are other activities where the dangers of an offer are not perceived. For example, benefitting from lax regulations, mortgage loans offered by American banks provoked a human financial catastrophe that has gained global significance through its externalities. Strictly speaking, the process of offer creation is a macro process constituted of myriad elementary processes placed under the responsibility of seven larger functions. In order for this process to work well, we aim to make these seven functions work together as far “upstream” as possible, favoring their parallelization rather than sequencing.

Figure 2.4. The trunk or product development process

2.4.1. Product design: defining the product offering From ideas of desirable offer evolutions or from new offers imagined by the “strategic marketing”, the “conception” function relies on external sources of innovation and also on businesses’ macro competencies to give substance to these ideas, if possible defining products and services that are “disruptive” but realizable under good economic conditions.

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Defining the offer consists of making concrete what marketing has conceptualized. Whatever the extent of the design process, the materialization of the offer remains to be built. The definition process will have to select among numerous solutions the one that presents the best advantages with regard to several criteria. These include: – feasibility which is analyzed from a technical point of view, as well as logistic (access to supplies) and economic; – compatibility between the definition and the strategy from a practical point of view. This concerns notably the later aspects of commercialization: distribution and after-sale service. The offer definition will gradually freeze once the choices concerning models and prototypes have been made. A definition will be finally validated and will consist of plans, nomenclatures and, technical or contractual specifications, even for services. This process of definition is of a general scope; a human being needs one way or another to materialize the offers, including those deemed “intangible”! At this stage, the product is materialized, and a sales price can be set that is compatible with the business’ economic objectives. It should be noted that for the definition of an improvement offer, the price is often constrained by the market. 2.4.2. The business model Once the product is defined, its “life” must be planned in terms of time. Attached to this plan are steps where financial means and technical competencies have to be planned, where future revenues are estimated, and where deadlines are to be respected. Mundanely, the business’ interest in the project should be highlighted in terms of profitability by analyzing its anticipated impact on different revenues and charges.

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Based on profit objectives, various scenarios for the offer’s deployment or industrialization will be studied and quantified, which will lead to several iterations of these steps. The “business model” feeds on information all the way through the entire offer creation process, notably during choices pertaining to definition. It will influence choices pertaining to industrialization, all the way to commercialization. It is support for the decision to launch a new offer. It continues to live during later phases, allowing the offer to be refined and enriched. The “business model” must also evaluate the project’s impact on the organization, human and technological competencies, as well as the environment. This step is indispensable for creating the link with the strategy. The first role of the “business model” is to highlight benefits for stakeholders in the short, middle, and long term relative to existing offers. Throughout the entire process, it is important to measure necessary investments well and refocus them according to the value of the projected offer: which offer? For when? For what value? For which customers? On what markets (perspectives, regulations, etc.)? The value proposition and the analysis of its composition take on an increasingly crucial dimension. From the very start of offer creation, implemented tools must be able to follow and monitor profitability while mitigating the risks of slippages with alerts to relevant managers, complying with the enterprise’s monitoring tools. However, although it is indispensable to emphasize the value creation expected by the envisioned changes in the offer, this is not sufficient. In addition, the “business model” will have to question any of the offer’s inherent risks in the commercial, financial and social dimensions. The risks must be identified and relativized according to the process, at least those that the business can measure. Certain risks can in fact contradict or even stop an offer’s development.

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One of the obstacles to be avoided during the set-up of a new offer has to do with rupture and discontinuity, which most often lead to drifts and losses. An example is the departure of a highly skilled employee, whose consequence is a loss of competence and expertise which can be very penalizing, even determining (death of Steve Jobs). 2.4.3. Industrialization Development will be decided on the basis of the validated “business model”. Development will however be launched on the basis of nothing other than a prototype that is concrete enough to be able to verify production costs and delays, as well as risks for creating (or not creating) the new product. It is necessary to consider the components that support the new offer: factories, information systems, processes, organization and so on. The more the offer fits into heavy industry, the more necessary it will be to consider infrastructures, those available internally and under a subcontracting agreement, and those that have not yet been acquired. But be careful, this does not concern traditional industry alone, for example, the software industry is just as much a heavy industry for those who want it to exist over time. In that respect, the notions of process and product must be correlated. Taking norms and standards into account must not, under a facade of simplicity, evade execution that could turn out complex and engaging in the long term. For example, in aeronautics, the lifespan of an aircraft often reaches 30 years. The resulting maintenance and service become dominant in the decision to invest. It is therefore critical to have an approach to industrialization that integrates sustainable development, oriented towards service, recovery and adaptation. At this stage, and when it is possible, some advocate for the product’s premature exposure on the market. It is a matter of putting some demonstrative examples, although realized with a low cost, into the hands of several customers or chosen prospects in order to allow an opinion external to the business to confirm itself, temper or amend the vision of a project that was until then principally carried by the enthusiasm of internal developers. This can result in the project’s

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reorientation or even a reversal for the benefit of an alternative product definition. Generally, development commits according to an arbitration between “Make or Buy”. Traditionally, this arbitration was done based on the consideration that the acquisition of means of production was justified solely by the volumes to be produced. In case of insufficiency, production is entrusted to others. This is sub-contracting or outsourcing. Today, the “Make or Buy” arbitration must take more numerous criteria into account: – the multiplicity of technology and alternatives: rapid evolutions, particular expertise, optimization among costs and quantities; – the increase of cost in creating and renewing the offer: businesses must orient their investment capabilities towards offer creation at the expense of means of production, notably those concerning the manufacturing of detail parts. But separating from workshops in order to entrust production to sub-contractors can be an often-underestimated problem for planning, respect for deadlines and ten-year maintenance guarantees; – heavier regulatory constraints: ecological (painting, surface treatments), tracking (Séveso), etc. and related investments; – willingness to access know-how, or conversely, the responsiveness of certain know-how, which must be mastered in order to avoid their dispersion, regardless of the cost. Thus, this customer–supplier relationship – notably that of sub-contracting – falls within the “supply chain” solidary structure, which is constructed on the foundation of an entirety of common rules and practices established in the long term. This “extended enterprise” includes partners necessary to the offer’s development. The enterprise’s new frontiers include its partners. Managing partners implies a clear and precise definition of expected services which will be a serious help for defining the scope of partners by distinguishing partners and competitors. In fact, a

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partner can be a partner for some offers and a serious competitor for others. The partner relationship needs more and more legal support in order to ascertain each stakeholder’s commitments, limits and protections, as well as service level agreements (SLA) to which service contracts are added. The “purchase” function intervenes here, both according to strategic orientations – supplier choices based on the expected level of collaboration, their proximity and reactivity, their ability to improve – and according to tactical objectives – reduction in the number of suppliers, audits and certifications, partnership contracts. This function implements the supply processes, the communication of forecasts and the rules on collaboration (exchanged information, meeting cycles). The “price” negotiation is very often about volumes, but it can be also about time according to the “learning curves”. This collaboration will touch mainly on: – engineering, to specify component parts and render them more easily manufacturable (or sourceable); – production, to take into account production “upstream” of certain constraints (or opportunities for reuse) in order to optimize production conditions (quality, costs, deadlines); – supply logistics in order to harmonize and streamline the flow of “materials”. For the parts and products whose manufacturing is left to the business, the “Methods” function will prepare for industrialization. Industrialization is an offer’s creation process, which is relatively unfamiliar to the general public. In order to illustrate this, we will cite “concept cars” as a well-known example. It is surprising to see that they attract crowds at fairs but that curiously they are never included in the catalogues afterward. As the name implies, the concept car is the final result of the product conception process since it stands there, it drives and demonstrates its operational possibilities. However, this vehicle has reached neither the definition stage nor the industrialization one.

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In general, the concept car represents a totally immature offer; it is not viable technologically or economically. And even if it were, it cannot be industrialized. This is the reason why, despite its success, we will never see it in a catalogue. However, it shows that the business has a command on the development process and allows us to validate certain structuring hypotheses related to the new offer. It also has an often-positive contribution to the brand and the execution of future offers. At the stage of definition, the offer is a materialized solution. What remains is its realization in production with objectives regarding rhythm, deadlines, stability in technical characteristics and a quality guarantee. Industrialization gives rise to a counter-meaning that probably partly explains why it is so unknown. One often opposes an industrial product with an artisanal product, the latter being proof of quality. However, the goal of a product’s industrialization is to attain a level of quality that the artisan cannot guarantee. This does not contradict the fact that the artisanal product is generally “better” than the industrial product. Mortadella is a product that accurately and simply describes what industrialization is. The definition of mortadella, meaning its constituents and their proportions, how finely it is cut, the principle for cooking it, are all perfectly defined and familiar. However, a careful observer will note that if sausages turn out more or less the same, this cannot be said for mortadella. The more ambitions the grocer has in the quality of the products it distributes, the more the size of the mortadella matters, to the point where high quality traders have a special machine dedicated exclusively to cutting strangely bulky mortadella. The explanation is found in the constraints of industrialization. The quality of mortadella depends on a very particular cooking cycle that is easy to realize (economically and technically,) especially since the mortadella’s dimension is important.

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Using a copper basin for jam is another example of “industrialization”, insofar as it facilitates regularity in the result. Industrialization consists of defining methods (hence the name Department of Methods being attributed to those in the business who assure industrialization) and means to be put to use in order to realize the offer in terms of kind, price, volume, deadlines and regularity. The modification of one of these criteria can lead to re-industrialization. In order to do this, the offer process must benefit from intelligent, well-equipped inspections that track success and difficulty over the course of the creation or transformation. Tools for product management, process framework management and quality are the key to developing offers that are innovative and highly reliable at the same time. Combining methods and tools grants a certain assurance, reliability and transparency in the value creation of a new offer. The process of industrialization is sanctioned and validated after the alpha and beta-tests on the basis of early production runs. The alpha-tests consist of verifying that the various offer functions are correctly assured. The beta-tests consist of verifying that the offer responds to how it can be used. These test respect for technical specifications and their robustness in regular service. Industrialization additionally implicates defining involvement and means as part of after-sale services: the availability of spare parts, maintenance protocols, etc. Thus, industrialization guarantees reproducibility and stability in the production processes, and therefore regularity in finished products, manifesting itself in the abandonment of a “product certificate” in order to make room for a “process certificate”. 2.4.4. Start of production In the context of a new offer and after the alpha-tests, whose goal is to test functioning and compliance among functional subsets joining the product’s make-up, the business proceeds to manufacturing

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pre-series. At this stage, there is a phase of “experimental manufacturing” placed under the responsibility of the “production” function, which precedes normal operations in order to progressively adjust various production settings and work towards stabilized operations that allow customers to be supplied. The articles in the pre-series are generally destined for “chosen” customers that assure the beta-tests. These tests allow us to test products under normal operations. It is not rare for many problems to arise during this stage. Skipping over these tests can end catastrophically. The fact remains that the beta-tests can reveal that an offer was exposed on the market too late. Computer modeling for the offer by means of digital technology such as PLM and 3D printing will contribute to stabilizing the offer, which can be subject to a certain decomposition for the purpose of reducing the system’s complexity all while maintaining innovation objectives at all levels of productions, deployment, support and maintenance, even recovery. This implies equipping ourselves with tools that surpass bureaucracy and documentary management in order to construct a framework of processes and consistent, operant and evolutionary documents. The EFQM approach is a good factor of success in that it assures traceability from start to end. This translation of tasks must be simple and accessible in order to be assimilable by those in charge of instantiating them at the operational level. The offer monitor must be able to transmit documented elements to the owner of the new production process so that they can assure its proper monitoring. 2.4.5. Launch on the market This phase will need contribution from “operational marketing”, “commercial” and “logistics” functions to make sure the new product is launched on the market under conditions laid down in the “business model”. The difficulty of this phase lies in the ability to anticipate a situation in which we have little historical vision. We must find the right balance between advertising, logistical means and production capacity. The two obstacles in this case are both the success of a product that provokes a large rupture, and conversely, the production that cannot be sold by saturation, non-existence or unexpressed needs

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on the market. The flexibility procured by Lean management is a considerable asset in avoiding these obstacles. The channels of communication and commercialization must make the offer known. They are an extension to the business and must be made part of the offer. The more we find ourselves in the general public, the more significant their impact becomes. These channels are sometimes very different in different regions and cultures. An offer that is not known will not be successful. It is necessary to make it known with good media. In certain offers, it is possible to guarantee success before delivery begins. For example, in the movies, the previews and their resulting rumor allow us to predict the success or failure of a movie. There are clear cases where high-technology and media-related products have seen successes before the offer was even delivered to the public. Other great offers remained in the shadows and will remain there indefinitely. Placement on the market implies a good match with customer expectations and therefore the perception of feedback and reactions regarding the new offer. Today, tools for e-reputation and e-value more or less consciously controlled by consumers are essential to ensure this informational feedback. The consumer reacts more and more and wishes not to be manipulated and, if they realize that it is the case, it can result in very negative consequences that the enterprise cannot recover from if it becomes aware too late. We all know very well that it is difficult to build an image but very easy to degrade it, hence the necessity of quality and risk control on the new offer, relying on the well-known past and on the feedbacks collected from all kinds of sensors. Field observations as well as “process intelligence” and “mobility” tools help us efficiently recognize needs expressed by the target or latent needs. Detecting stoppages, ruptures and bottlenecks is sometimes a source of precious and unexpected information on the quality of the relationship with the customer.

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2.4.6. Appraisal Appraisal concerns measuring results relative to the “business model” and learning lessons for future projects. The launch of a product is, for the business, a project’s culmination. At the moment of conception, a feasibility study was conducted, a “business model” was constructed, predicting objectives in terms of quantity, quality, costs and deadlines. When it comes to the time for assessment – and since nothing ever happens as predicted – it is worthwhile to answer these questions: were goals met? Were means allocated? Were deadlines held? This critical analysis of what was actually realized, the problems met along the way, resolved or unresolved, will help capitalize on the business’ experiences. A failure can enrich the business. However, this implies mature hierarchical relationships if we want to shed light on faults and not simply “brush it all under the table” to be soon forgotten. 2.4.7. Best practice in executing the process of creating product offerings The offer creation process goes through the same definition phases as all processes under the control of enterprise governance process when this is implemented. The enterprise is a coherent and integrated system. The processes support the enterprise’s dynamic. This coherence allows us to identify interrelationships that can influence the offer creation process according to the type of offer. Offer creation cannot be carried out without the help of already existing processes and in order for this creation to be efficient and effective, it must structure itself according to a process approach that connects clearly identified, measured and monitored tasks. For example, modifying an offer has to be done in a precise context that calls on various managers to give their agreement, suggestions or veto within an overseen time frame that can be measured and monitored.

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The creation of an improvement or a rupture offer relies on internal competencies (sometimes more than 50%), patents and already existing products (sometimes more than 80%, for example, for ValeoCeisar). The rest comes from external innovations that are integrated into the process that constitutes the offer. An enterprise is never a lonesome entity, it is a part of its environment and has to confront the new potential offer with changes and ruptures on the enterprise’s market of interest. The offer creation process will be different if it initiates a new offer ex nihilo or it turns out to be a transformation of another existing offer. However, in all of these cases, it will have to emphasize great agility and quick corrective decision-making according to the needs and expectations of customers, even though it is necessary to short circuit the processes. The transformation can be analyzed and measured in a variety of ways, some rather classic such as cost, quality and deadline but others less classic like the product renewal cycles. Certain economic sectors, for example telecommunications, and also finance, can have extremely short cycles, whereas others in the industry have long cycles that cannot be reduced. It is important to recognize and manage them. Knowledge, study and analysis of available key competencies will foster continuous creation, or at least the regular creation of new offers. In order to get ideas for change, some tools available today can be used for running analyses on the past and observing the present in order to ensure that the offer is in line with the customer’s expectations. The new offer having also to try to be disruptive on the market, this represents quite a challenge, especially if furthermore its return on investment has to be evaluated taking into account the expected revenue during its lifetime. Great innovations that come from someone’s great ideas must nevertheless take place through a process, all the more structured if the offer is complex.

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The offer must guarantee the integration of processes from creation and concept definition to commercialization going through industrialization and production. Nothing can be left aside under penalty of jeopardizing the improvement or even the existing offer itself. The more integrated the processes are, the more agility is possible because the measurement of impacts is anticipated and the offer becomes a transformation that is regularly managed according to endogenous or exogenous variables by avoiding brutal ruptures whose effects are less predictable. The offer creation process must therefore be both structured and agile, while capitalizing on knowledge and its reuse. As Table 2.1 illustrates, the processes of offer creation and capitalizing on knowledge must be controlled by the enterprise governance process with clearly identified activities to assure the success of the enterprise. Enterprise governance regularly follows critical components and verifies how accessible their management is in order to guarantee a structured and agile offer’s continuity. Each milestone must allow us to measure the results that we expect at this stage, verifying alignment with the business strategy and adjudicating on the GO/NOGO. A halt or a reorientation at the right moment can allow negative impacts to be reduced and potentially generate ideas for new offers. 2.5. Case study: assessing the maturity of the offer creation process 2.5.1. Safran Group The Safran Group agreed to test the questionnaire and evaluate its maturity in terms of sustainable development. The following rubric concerning the governance process was provided to illustrate the method.

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The test was conducted by the authors in the form of discussions with representatives from the Group, who we thank sincerely. The maturity evaluations obtained in this way correspond to perceptions, which would, of course, need to be backed up with precise audits in order to be confirmed. Safran is an international high-technology group operating in the aircraft propulsion and equipment, space and defense markets. Comprising a number of firms, Safran holds, alone or in partnership, world or European leadership positions in its markets. In order to keep pace with its fast-evolving markets, the group undertakes extensive R&D programs, including expenditures of 1.4 billion euros in 2017. In February 2018, Safran took control of Zodiac Aerospace, significantly expanding its aircraft equipment activities. Together with Zodiac Aerospace, the group has more than 91,000 employees and would have approximately 21 billion euros in adjusted revenue (pro-forma 2016). Safran Group has been created by successive purchases of firms with diverse managerial cultures. In order to harmonize and simplify the management system of all of the group’s entities, Safran launched the enterprise’s project “One SAFRAN”, articulated around process optimization. With regard to “offer creation”, the “Develop” and “Program” processes have been identified as having specific objectives. The “Program” process takes care of the customers and ensures operational excellence in terms of the evolutions they ask for, by keeping up with order contracts amendments and customer’s complaints, and also by respecting deadlines. For this to happen, it coordinates the actions of other processes like logistics, manufacturing and above all “Development”, which for its part is responsible for respecting norms, regulations and customer specifications, which are particularly strict in this profession.

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The offer creation processes is regularly reviewed to be adapted for reactivity and the agility necessary to face new customer expectations, particularly those concerning digital transformation.

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Under control

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Deploying

An inventory of the range of competencies is taken in order to identify the range of competencies that the enterprise can rely on for its development.

Discovering

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Non-existent

An analysis of close surroundings (in a “business intelligence” manner) is carried out to keep track of competitors, regulation, the financial world, media, administration, pressure groups, and technological evolutions.

THE SAFRAN GROUP Overview of the product offering creation process

Optimized

The offer creation process has been decomposed into two parts: “monitoring programs” and “development”. The “program” is responsible for customer development and relationships, and subcontracts industrial development and all technical aspects. The program ensures respect for delays and costs, but the development aspect is responsible for the safety of options taken. Through the diversity among the Group’s entities and their objectives, human resource management must exhibit great flexibility and rapid reaction. Reviewing strengths and weaknesses quarterly allows the proper adaptation needed to respond to market needs.

The group’s competencies are monitored and analyzed in order to anticipate needs, allowing it to respond to tomorrow’s challenges by developing tailored training or relying on start-up entities in order to be at the peak of innovation, but without prohibiting oneself from searching for necessary competencies on the market. With the arrival of Zodiac Acrospace, the group now has over 90,000 employees.

Under its development program the group strives to preserve diversity among the group’s entities, each one in charge of developing their offers according to the corresponding market. What is new is the harmonization among each entity, which must not alter each one’s performance but, by researching synergies, reduce tasks that do not create value.

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The executive handles customer concerns by developing trust and anticipating expected services. They maintain contact with technical executives who specify possibilities and breaking points that the business most not cross for obvious security reasons. The business’ survival depends on this.

The decomposition of conception activities into “program” and “development”, at the core of current development, ensures positive encounters among points of view and prioritizes technical, safety, and regulatory aspects over positions that are more marketand customer-oriented. The “technical development executive” handles aeronautical, regulatory and standardization themes, whereas the “program executive” responds to the expectations of customers and prospects while striving for economic balance in the program.

Due to the diversity of the Group’s entities and their objectives, human resources management needs to be highly flexible and responsive. A quarterly review of strengths and weaknesses allows a helpful adaptation to meet the needs of the market.

4 “Sustainable business performance: what are the indicators for a global evaluation?”, available at: http://lacademie.info/content/ download/9355/146165/version/1/file/Cahier_Academie_33.pdf.

Table 2.1. The Safran Group: overview of the maturity of the product offering creation process. Summary of results of the detailed evaluation grid from the guide “Performance 4 durable de l’entreprise : quels indicateurs pour une évaluation globale ?”

Market feedback (changes in value, consumers’ perception, competition, etc.) are used as soon as possible to influence, transform or complete the offer over the course of its lifetime, notably in terms of services.

The deliverables from the conception and industrialization stages are regularly faced with the reality on the market in order to be adapted if necessary.

The business emphasizes human and relational aptitudes pertaining to communication, initiative, collectivity, flexibility, etc.

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2.6. Indicators of the performance of the offer creation process In addition to indicators of maturity in the offer creation process, it is necessary to monitor certain key performance indicators. We suggest a few in the following sections, without providing an exhaustive list. Strategy and compliance – The offer’s coverage level with regard to customers’ expressed needs; – the number of decision-makers involved in the offer’s development (cultural evolutions, learning enterprises, etc.); – the number of control points before arriving on the market, the percentage of time dedicated to control; – the number of stakeholders and components involved in the offer’s development; – the ratio of necessary internal and external resources necessary to the offer’s realization; – the product’s compliance with standards, norms and regulations; – the offer’s projected user cost; – the offer’s projected market shares and potential impact on other offers; – “Design to Cost”: measure of gains in moving from one offer to another. Deadlines – Time required to develop an offer; – time required to cover each step of the offer elaboration process from end to end; – share of the controllable versus incompressible delays (e.g. external validation).

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Costs – Quantities and costs of resources and consumables necessary to the offer’s elaboration; – the number of material components in the product; – the share of purchasing costs in the offer; – the total cost for developing the offer; – the offer’s return on investment (ROI, VAN and PayBack): margin obtained on the offer and service or recycling agreements versus the total cost of development; – the development’s cost share in the total cost of the product. Flexibility – Number of derived products resulting from the offer; – volume of projected products/services resulting from new offers; – minimal production quantity; – number of possible sub-contractors; – number of unique suppliers.

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3.1. The strategic importance of the “supply chain” within digital development The “supply chain” is the logistic chain spanning from taking customer orders to delivering the ordered product or service and receiving the corresponding payment. The supply chain has always been crucial because it is here that all options taken during the strategy and development phase of the product offer are solidified, and where the relationship with the business’ customers takes place, determining their degree of satisfaction. It is inseparable from the strategy because it is not enough to decide on “good things to do”, but we must also “do them well!” This goes for other way around as well. However, with the accelerated development of “digital” technological innovations, performant and competitive “supply chain” management becomes more and more strategic, under penalty of leaving the market. As such, Amazon is a particularly illustrative example: they have been able to combine a range of new services by drawing on digitalization and the logistic chain’s performance by very quickly integrating all useful innovations: robotizing of transfers, the Internet of Things (IoT), and even drones.

Sustainable Enterprise Performance: A Comprehensive Evaluation Method, First Edition. Jean-Louis Leignel, Emmanuel Ménager and Serge Yablonsky. © ISTE Ltd 2019. Published by ISTE Ltd and John Wiley & Sons, Inc.

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A good command of technology, which has an enormous impact on the “supply chain”, is clearly a major competitive factor that can “disrupt” the balance of forces at play on a market. Never in history has innovation had as much of an impact on the production of goods and services than today. Businesses that know how to take advantage of this will create determining competitive advantages. Conversely, those that lag behind will have trouble surviving. The most driving innovations capable of revolutionizing the “supply chain” are improving every day in an exponential manner, for example: – rolling mini-robots, capable of picking and transporting from shelves according to orders taken by the delivery service, aided by artificial intelligence to optimize parcel delivery; – autonomous vehicles, by granting artificial intelligence and adequate sensors to existing trucks so that they can assure delivery without human intervention; – drones, which are already being experimented with by Google, Amazon, and also UPS and FedEx for delivering parcels to the final customer; – smart glasses, which allow repetitive tasks to be performed more quickly and efficiently, all while reducing mistakes; – 3D printing, which is used today for quick prototypes, but could soon replace certain steps in production and thus revolutionize the “supply chain”; – the analysis of purchase data alongside suppliers who, thanks to artificial intelligence, allow us to optimize the supply process by guaranteeing superior service. We note in the previous examples that the interest in innovations is multiplied by the introduction of artificial intelligence coupled with “Big Data”. This association will revolutionize the production of services even further than that of tangible products. As an example, artificial intelligence would handle 50% of questions or problems handled by lawyers and would, in time, cover 85% of back office.

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3.2. Description of the “supply chain” process Robotic or not, with artificial or human intelligence, the “supply chain” process includes, invariantly, a certain number of large functions. We are referring to it as a “macro-process”, because it goes from final customer to final customer (it is sometimes called “quote to cash”) and it is this transversal vision “from start to end” that results in managerial strength. Indeed, what is truly important is the performance of the results seen by the customers of this process: sometimes, it is preferable to degrade a function’s performance in order to optimize the global performance of the process. For example, it is sometimes better to choose a slightly more expensive supplier, but with a better quality and service regularity, allowing the enterprise to respect deadlines and increase customers’ degree of satisfaction. Figure 3.1 shows the sequence of functions implicated in the customer-to-customer supply chain macro-process. The functions are groupings of competencies placed under the same level of hierarchical responsibility in order to realize activities which are executed in order to bring added value to the different transformation steps: manufacturing a part, quality inspection, storage, etc.

Figure 3.1. Supply chain process

(1) Order-taking This activity, which consists of presenting the enterprise’s product offering to customers/prospects and trying to get orders from them, is generally entrusted to commercial function.

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(2) Planning production Starting from the backlog of orders registered or predicted with a certain degree of probability, it is necessary to predict the quantity of materials or components to be supplied, all while taking into account suppliers’ delivery times and scheduling production with available resources (personnel, material). (3) Purchases The “purchases” function identifies potential suppliers based on criteria related to quality, price and provision deadlines. It negotiates prices with suppliers, allowing the supply function to place orders corresponding to the needs expressed by production. (4) Supply On the basis of the planning done in terms of quantity, and on the basis of indications from the “purchase” function in terms of price, the supply function is responsible for passing orders onto suppliers and then verifying that the orders received comply, which triggers the payments. (5) Manufacturing By using supplied materials or components as well as resources in terms of personnel and machines, the activity of manufacturing realizes requested products/services under the stipulated conditions related to quality, cost and deadlines. This goes for products manufactured according to customer orders or products in stock. (6) Delivery/Billing Manufactured products/services are then delivered to the customer in accordance with his order, triggering the billing. (7) Invoice collection Collecting the invoiced amount marks the end of the “product and service production” process, sometimes called the “supply chain”, or more explicitly “quote to cash”.

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3.3. Good practices and performance indicators for operations involved in the production process Since most indicators are objectively measurable in this more operational macro-process, we will focus on performance indicators rather than maturity models as proposed above. The business’ strategic objectives (e.g. five-point increase in the global market section) are broken down into a certain number of “result objectives”. For example: – reduce the average cost of products/services by 5%; – diminish the number of returns due to bad quality by 30%; – reduce the deadline by six months for the development of new products estimated at three years; – reduce the delivery time of an ordered product/service by 15 days. It is often a combination of result objectives that allows the business to meet a strategic goal. These “result objectives” can be assigned to various operational processes within the business. In the above example, all objectives concern the “production” macro-process except for reducing the deadline for development, which concerns the “offer creation” macroprocess. The macro-process performance indicators are support for result objectives assigned to the macro-process in question. In the above example: – the “cost” indicator supports the 5% cost reduction objective; – the “number of returned products” indicator supports the 30% returns decrease objective; – the “delivery time” indicator supports the 15 day delivery decrease goal. The performance indicators of the macro-process “Production” come in four kinds, known as the CQFD process performance indicators: 1) cost (the cost of provided products or services);

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2) quality (the quality of these products or services); 3) flexibility (the process’ ability to adapt to fluctuations in demand); 4) deadlines (respect for deadlines agreed with customers or clients).

Figure 3.2. The CQFD process performance indicators

In order to achieve objectives, we need to deploy performance improvement approaches such as Lean, Six Sigma, Total Quality, etc. So that these improvements can be executed concretely, the result objectives must be decomposed into “activity objectives” assigned to clearly identified functional managers, for example: – for the purchasing function: to renegotiate lower purchase prices in a proportion that is compatible with the result objectives, while taking into account the objectives set to the manufacturing function; – for the production function: reduce the cost of production by process re-engineering operations the process or by investing in more powerful tools, etc.

Figure 3.3. Activity objectives of a process

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As they do for result objectives, the performance indicators will serve as support for “activity objectives”. The performance indicators for the “quote to cash” macro-process can be broken down into: 1) result indicators that express global performance in the provision of finished products/services from the process to customers, according to the criteria: Quality, Cost, Flexibility and Deadlines; 2) activity indicators that allow us to measure performance in the execution of activities contributing to the realization of products and services of the process. 3.3.1. Result indicators Production/logistics Quality

Percentage of customer returns Evolution of volume of work in progress versus produced quantities Number of references, products, processes and production sites that are certified in quality and safety

Cost

Evolution of the unit cost of finished products Evolution of the percentage gross margin: contribution to covering the company’s commercial and administrative expenses

Flexibility Percentage of SKUs that are out of stock Number of products configurable by the customer Proposal of different delivery times according to price Deadlines Service rate (respect for agreed upon deadlines) that is “on time, in full” (OTIF) Evolution of service rate relative to the stock coverage rate

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Sales/customers Quality

Cost

Quality of published information (reliability, pertinence, opportunity) Unit margin per customer/product

Flexibility How far back the backlog goes (months) Deadlines Age of late invoice payment Average delay for customer payments (New Economic Regulation law) Refunds and credits issued to cancel bills

Customer services Quality Cost

Publication of customer satisfaction survey results Quality of answers provided (regularity, clear formulation, etc.) Margin (earnings – costs) for maintenance Margin for guarantees

Flexibility Percentage of product offers with substitute products Delay for the delivery of substitute products Deadlines Average time frame for handling customer complaints Publication of the average delay for putting back into service

3.3.2. Activity indicators Purchases/supply Quality

Cost

Evolution of the number of suppliers under self-control Evolution of the purchasing budget compared to the number of references Evolution of the rate of returns towards suppliers Evolution of purchase prices, for example, for components or suppliers Evolution of percentage of the supply function costs against the purchasing budget Evolution of percentage of total value of products returned to suppliers against the purchasing budget

Flexibility Number of unique source references versus the number of references Number of production delays due to raw material ruptures versus the total number of production delays Deadlines Service rate (respect for agreed deadlines) Delivery time/product/supplier

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Production/logistics Quality

Number of customer complaints recorded by the help desk Non-quality costs + inspection costs + prevention costs Number of defects divided by number of units produced per piece of equipment Number of incorrect withdrawals from stocks versus number of total withdrawals Evolution of number of months of coverage for material stock Evolution of number of months of coverage for finished product stock Stock depreciation rate

Cost

Evolution of unitary cost of the process activities Rate of absenteeism Global productivity per employee = total produced value divided by the number of employees Actual versus target production rate per piece of equipment Rate of material waste per piece of equipment Evolution waste costs Downtime/theoretical hours of use per piece of equipment Valorization of unused production capacity Evolution of indirect costs versus production costs Evolution of fixed costs versus production costs Discrepancies in performance: actual versus standard unitary production costs Evolution of the logistic function’s cost versus production costs Evolution of fixed and variable costs per package, per sales unit Total cost of stocks/COGS (Cost of Goods Sold)

Flexibility Percentage use of production capabilities Evolution of make-ready time/manufacturing time Percentage components that several products have in common Percentage use of logistical capabilities Percentage of outsourcing Deadlines Not applicable

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Sales and customers Quality

Cost

Conversion rate of proposals into orders Number of visits per customer Quality of published information (pertinence, reliability, timing) Percentage renewal of the customer portfolio Number of eco-product references or references from fair trade Cost of the “commercial” function/company’s turnover Price comparison with the competition Decomposition of prices according to services pertaining to the product (transportation, dossiers, guarantees, telephone support, etc.) Evolution of the average bundle of goods purchased per customer

Flexibility Percentage of interchangeable products Deadlines Average delay for processing orders

Customers services Quality Cost

Frequency of customer satisfaction surveys Number of inquiry tickets that have not been solved and their age Not applicable

Flexibility Not applicable Deadlines The time the help desk or customer service department takes to respond to customers

3.4. The economic performance of the processes We hereafter present the ABB–ABC–ABM approach because it is often misunderstood and poorly applied, whereas it should be the management controller’s priority tool for monitoring operational performance. 3.4.1. ABB–ABC–ABM: a management tool to help make decisions under certain conditions The basic underlying principles of ABC (activity-based costing) modeling turn this approach into a potentially tremendous tool for monitoring economic performance at a very operational level. Whether or not it becomes this tremendous tool depends on how we approach its implementation!

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If we are complacent with allocating loads as appropriately as possible for activities and then products in order to calculate the costs, we are using an approach purely based on accounting. Though the allocation keys are sound, we will likely have more accurate costs than traditional approaches. However, we will still be far from a monitoring tool because the relation between these costs and the “operational performance levers”, which management can act on to manage future developments, still remain to be established. Conversely, if the model relies on operational indicators that are representative of the process’ performance, management will be capable of setting “improvement objectives” in accordance with these indicators. Thus, the approach can serve to construct a budget consistent with the entirety of the managerial objectives, then to analyze achievements in order to highlight the performance discrepancies that the managers are accountable for. If this is then used to establish “corrective action plans”, aiming to reach the predicted global performance planned in the budget, then management is equipped with a true tool for monitoring performance, and management control has a remarkable animation tool and a great help in decision-making. The key factor of success in the approach’s execution is therefore designing the model from an ABB (activity-based budgeting) point of view and then using it from an ABM (activity-based management) point of view for managing responsibilities pertaining to performance objectives, the calculation of ABC costs is merely a result. 3.4.2. ABB–ABC–ABM: the logical sequence implementation (ABB, then ABC, and then ABM)

of

A well-constructed ABB–ABC–ABM model highlights the resources consumed by a company’s products or services. It says a lot about what the resources are used for, the importance of the processes and the priority of products. Which products consume the most resources? How are the resources consumed by the processes? This information is not always easy to obtain, notably when resources are shared.

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Figure 3.4. The ABB–ABC–ABM model

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Answering these questions, the method appears as a decisionmaking tool. It helps arbitrate during planning and allows us to better prioritize allocations. What is the logical sequence of operations required to implement an ABB–ABC–ABM model? First of all, we need to design a model based on the following: 1) defining products and services, at the right level of granularity; 2) studying processes homogenous enough with regard to the pursued goal; 3) analyzing activities products/services”;

necessary

for

realizing

“customer

4) identifying resources necessary for realizing these activities. This model has to be designed and used from an ABB perspective in order to work out a forecast budget. This budget is constructed from sales or production forecasts. It integrates all the performance objectives related to the implementation of activities and resources that are necessary for realizing products. In an ABB approach, these performance objectives will be associated with: – “activity drivers”, which allow the volume of the activities to be deducted from the sales and production forecasts; – “resource drivers”, which allow the volume and valorization of the resources to be deducted from the forecasted volumes of the activities. A budget constructed this way is the result of a negotiation concerning volumes to be produced and performance objectives. Thus, the management agrees on operational commitments. By proceeding in this manner, we avoid an approach based purely on accounting and costs calculation. Instead of doing accounting, we are constructing a management tool, which is not the same thing!

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The logical next step after ABB is the forecast calculation of ABC. The same model is used to calculate the cost of the activities, products and services at all stages of the production process. Thus, we end up with standard costs and forecast margins. The final step is ABM. Performance discrepancies between actual data and ABB objectives are analyzed in order to infer action plans. For this purpose, we need to gather real-world information of all kinds: quantities sold, sales revenue, quantities of semi-finished products/components/materials, hours of production, expenses by responsibility centers, etc. This information will be integrated into the model. 3.4.3. Using ABB–ABC–ABM as a tool for “operational management control” In the classical IS pyramid, there are transactional systems at the base that handle the flows of information necessary to the enterprise’s day-to-day functions, which are ERPs, production management and accounting systems, etc. Up top are the Business Intelligence tools, the scorecards and the management consolidation dashboards to be found.

Figure 3.5. Information System pyramid

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Between the two is operational management control. This is fieldoriented, affixed to the enterprise’s product or service production processes. In fact: – transactional systems, by nature, do not handle forecasting matters. The forecasting systems manipulate data that are useless at the transactional level and run simulations that the transactional systems cannot run; – as for systems of reporting and management consolidation, they present themselves as multidimensional cubes. They are capable of aggregating data and analyzing it from many angles. They are also capable of performing a “drill-down” type of reporting that is necessary for a good understanding of what is going on. To achieve this, it is essential to choose the right level of granularity. This choice is fundamental. In order to make decisions, we must define at what level of granularity we want to work. If the grid is too fine, we will get lost within details; however, if it is too large, the data may be inconsistent. We must find the appropriate granularity, which will emphasize, within all indicators of the model, the most important levers of performance. Modeling the enterprise’s processes by highlighting the key performance indicators and defining the right mesh adapted for decision-making are among the most important activities for an operational management controller, who unfortunately is not always prepared for handling these matters. 3.4.4. Approach to implementation and traps to avoid The main trap to avoid is viewing the ABC approach only as an accounting method. Of course, it is more pertinent than other cost calculation methods because it relies on allocation keys that theoretically have a more operational significance. However, in this case, only allocating expenditures would already be known about, because they originate either from “actual” accounting records or from a budget that has been previously prepared by other methods. As a matter of fact, the problem with this accounting approach is that it is always possible to imagine percentages for sharing charges.

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However, it is more difficult to allocate these charges in accordance with performance indicators! This difficulty, however, presents a fundamental advantage because the method, necessarily focuses on the essentials: the actual indicators that are truly operational and useful to the management. The key to success therefore consists of constructing the ABC model within an ABB approach, meaning only operational indicators from which management can set objectives are retained. Defining the ABC model within ABB logic means that the needs have to be calculated based on the sales forecasts (or provision of products/services forecasts), similar to the calculation done by the material requirement planning (MRP) system. Thus, the calculations are done in the “induction” way, meaning that what is produced requires (or induces) activities to be realized which will also induce resource consumption. Be careful to choose the right way, focused on management and not accounting! With the calculation of full costs from the ABC method, we can ascertain that certain products are profitable and others are not. The temptation is to say: “We will get rid of the non-profitable products and focus on the profitable ones.” Questioning profitability is useful but be careful! All of the fixed expenses that make certain products non-profitable will apply to other products and lower their profitability if they remain present. What instrumentation must be used so that exploiting this approach is not too time-consuming? This brings us back to the granularity issue. If the model was constructed with a granularity suitable for highlighting true performance levers, it is obviously essential to implement all the metrology tools necessary to gather the relevant information. Conversely, if the model goes into too many details compared to strict managerial needs, then the implementation of the corresponding metrology tools will cost far too much for a minimum benefit. This will not be “profitable” and the approach will be justifiably judged counterproductive to the enterprise.

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Under the pretext that an ERP delivers results in real-time, it leads to the illusion that it is a decision-making tool. Even though we observe the fluctuations of an actual cost from minute to minute, what kind of relevant decision can be taken, if the reasons for these fluctuations cannot be identified (evolution of objectives/discrepancies vs. one or another indicator, etc.)? What types of action can be triggered if the managers responsible for the decisions that lead to the observed results remain unknown? The calculation of a budgeted standard cost, then the analysis of performance discrepancies relative to objectives which served to work out the budget, present numerous advantages to monitoring performance. 3.4.5. Links with processes Processes have always been very present in industrial enterprise culture. They have been defined as “a sequence of activities, a value chain linking activities”, and process approaches were used without anyone even knowing it! Total quality programs have also generated approaches for stabilizing the company’s processes. These process approaches are intended to reveal dysfunctions related to deadlines and hidden activity costs. However, as sophisticated as it may be, it has always been difficult for management control to account for process optimization issues. It is, in general, more at ease with accounting and financial aspects than with operational approaches at the production floor level. The ABB–ABC–ABM approach is a very powerful “tool” for management control by measuring the efficiency of processes, provided it is implemented correctly and in the right direction (management and not accounting). This approach allows also calculating the actual cost of processes, which classical approaches struggle with. It is easy to know the cost of hierarchical structures in silos. However, the cost calculation of transversal processes requires identifying their activities and

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valorizing them via the resources that they consume. This is precisely what the ABB–ABC–ABM approach allows us to do, though under the condition that each of the actors (or group of actors) indicates the time spent on (and frequency of) each selected activity. Once again, the granularity is crucial to avoid falling into excessive detail that is potentially impractical. These full cost calculations will show that certain processes are not competitive or profitable compared with the competition. If so, they would need a vast reform through a BPR type re-engineering approach. Since the objective is to provide products/services to customers under agreed upon CQFD (cost, quality, flexibility and deadlines) conditions, the notion of cost of products produced by the enterprise’s processes is obviously very present. Regretfully, the ABC approaches described in the literature skip the processes with a shortcut linking directly activities to products. To illustrate the problem of activity versus process, let’s take for example a fairly simple activity: the computer hotline. Answering a call is an activity that impacts at least two customer processes: one of a technical nature: “provision of workstations”, and another of a functional nature: “provision of applications”. So the same activity “I answer a call”, does not represent at all the same thing in these two types of process. For example, for the “provision of applications”, this will have repercussions in corrective maintenance, while for the “provision of workstations” the impacts will rather concern the servers. The process gives substance to the activity. In summary, Figure 3.6 shows, the ABB–ABC–ABM model must be the image of the operational process and its components (products/services, activities, resources) in an economic vision of the process in a “mesh” that is adapted for the decision-making of management.

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Figure 3.6. Generic ABB–ABC–ABM model

3.5. The big picture of performance in the “supply chain” process As we have seen above, two complementary approaches are necessary to steer the “supply chain” process’ performance, namely the “balanced scorecard”, and the ABB–ABC–ABM approach. These approaches are structurally very different: – the balanced scorecard approach’s purpose is to gather all performance indicators of all operational macro-processes not only those of the “supply chain”. However it does not calculate the values, which the company’s diverse information systems are supposed to provide. However, it does not calculate their value; – the ABC–ABB–ABM approach, conversely, has a much more reduced scope, since it is limited to the “supply chain” process for the “finance” section alone. However, it articulates all necessary elements

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for cost calculations and fosters operational monitoring (budget, actual, discrepancies, corrective action plans). However, these two approaches complete each other and interface with each other as shown in Figure 3.7.

Figure 3.7. Measures of performance: the balanced scorecard and ABB–ABC–ABM approaches

The quality, flexibility and deadlines indicators will directly feed into the “internal processes” and “customers” sections of the “balanced scorecard” sections of the balanced scorecard, whereas for the

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“finance” section, most of the indicators will transit through an ABB– ABC–ABM model to have their value consistently calculated. 3.6. Case study: assessing the maturity of the supply chain process 3.6.1. Air France Air France agreed to test the questionnaire and evaluate its maturity in terms of sustainable development. The following question sheet concerning the governance process was provided to illustrate the method. The test was conducted by the authors through discussions with representatives from the company, to whom we are sincerely thankful. The maturity evaluations obtained in this way correspond to perceptions, which would, of course, need to be backed up with precise audits in order to be confirmed. The company Air France, which is a world leading actor in three main professions (i.e. passenger air transport, air freight [cargo] and aircraft maintenance), has paid particular attention to sustainable development for several years. This attention ranges, inter alia, from societal innovations: the Foundation Air France’s action against deforestation, dedicated training, cooperation workshops with partners, etc. In a more general manner, the importance of risk prevention and risk management is crucial in air transport – and vigilance is a duty. All stakeholders are involved in the day-to-day operations of the company, including sub-contractors who play an active role in terms of consolidating global performance. Other stakes: maintaining continuity. If we take, for example, the IT sector, the business continuity plan (BCP) organizes the operation of a degraded mode of business: in case of dysfunction impacting a

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critical process, tests have been run previously in order to guarantee that the BCP remains operational. Simplification is currently a main factor. As a whole, staff is invited to review any suggestions on the ground with the goal of providing concrete solutions. Culturally, the business process approach is also present – this includes paying particular attention to interfaces between activities. Since performance contracts apply by hierarchical functions (the “silos”), the processes that combine those functions allow us to coordinate those contracts within the functions, namely during transversal review sessions. In reality, the enterprise must above all assure operational service without ruptures or patches along the chain of the customer’s experience. That is, the transversal approach by processes constitutes a permanent reference. Feedback from past experiences is of course, taken into account when defining performance contracts. All throughout the year, management reviews monitor the progress of performance contracts and anticipate to avoid “bad surprises”. These reviews are led by steering instances that help inter alia to make choices regarding means and investments. Performance contracts deal with the following aspects: flight safety, health and safety at work, customer quality, operational performance, economy, human resources, environment and sustainable development, food security, safety and IS.

×

×

Optimized

Digitalization makes it easier to track evolutions and improvements with a broad sharing of results, particularly using mobile phones, to capture and report data. The usage of tablets adapted to each business unit is developing more and more in order to increase global efficiency and a better customer focus.

The purpose of their Integrated Management System is to define the methodology to be used in the management system, aiming for integration and consistency. It is the vector for carrying out action plans with qualitative and economic improvements as a result.

There is no Balanced Scorecard, but they use numerous scorecards that integrate visions with multiple aspects, facilitating a global and integrated vision of operations (for example ground operations, industrial maintenance, catering, etc.).

An operations committee meets every 15 days to provide an activity overview, monitored directly by the Chief Operations Officer (COO), who is the accountable manager. Processes and indicators are analyzed and actions or decisions are taken in order to refine the trajectory or correct certain points.

Comments

1 “Sustainable business performance: what are the indicators for a global evaluation?” Available at: http://lacademie.info/content/ download/9355/146165/version/1/file/Cahier_Academie_33.pdf.

Table 3.1. Air France: overview of the maturity of the supply chain process. Summary of results of the detailed evaluation 1 grid from the guide “Performance durable de l’entreprise : quels indicateurs pour une évaluation globale ?”

Process performance tracking benefits from digital tools that upload data online to check its proper execution.

Action plans have been launched in order to correct observed discrepancies, be they qualitative (quality, flexibility, deadlines) or economic (costs). They are regularly monitored.

×

×

Under control

It monitors the evolutions of these indicators with the help of the Balanced Scoreboard, containing four sections: customers, processes, preparation for the future and finances.

Discovering Deploying

×

Non-existent

Within the entirety of its “quote to cash” process functions (purchases and suppliers, production and logistics, sales and customers, customer services), the enterprise has identified performance indicators in terms of quality, cost, flexibility and deadlines.

Air France Overview of the supply chain process

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Focus on Medium- to Long-term Performance Levers

Sustainable Enterprise Performance: A Comprehensive Evaluation Method, First Edition. Jean-Louis Leignel, Emmanuel Ménager and Serge Yablonsky. © ISTE Ltd 2019. Published by ISTE Ltd and John Wiley & Sons, Inc.

4 Digital Transformation

4.1. The importance of managing issues concerning the “digital transformation” Digitization is a major strategic challenge and a matter of life and death for enterprises. Why? Because it has multiple implications; it affects the business model, the modes of management, the interaction among employees, the relationships with customers and suppliers, and the technology. Facing the myriad issues, the CEO and his or her executive committee often feel powerless and unprepared. However, integrating digital technology and the cultural changes that come with it is no longer an option. The “uberization” phenomenon is an example of possible changes that represent a potentially fatal risk. However, it can also be seen as an occasion to grow faster or bounce back with a very classic and traditional structure. We can surely cite examples such as Airbnb for travel, Tesla in the automobile industry, Amazon and Alibaba for distribution, Netflix for entertainment and so on. In certain industries that are largely protected by regulations, digitization becomes more and more important; let us cite Sanofi1 “The idea is to have a global approach to the patient and contribute to taking better care of him”.

1 S.C. (2015). Sanofi va au-delà de la simple fabrication de médicaments. [Online]. Available: https://www.lesechos.fr/10/06/2015/LesEchos/21955-091-ECH_sanofi-vaau-dela-de-la-simple-fabrication-de-medicaments.htm.

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The evolutions currently have a pace that has not been seen before in the governance of large structures. Multiannual or annual plans are no longer appropriate for good growth management. In fact, since the year 2000, more than one in two businesses on the Fortune 500 list has disappeared or gone bankrupt. The prerequisite for a successful digital transformation is the unwavering commitment of the CEO and their front lines. It is strongly recommended that the CEO is personally involved as is the case at AXA and BOLLORE. He or she is often surrounded by a Chief Digital Officer (CDO) who is a member of the Management Committee. He or she is close to or supervises the CIO (Chief Information Officer). A study by Forrester/Russell Reynolds in 2014 indicates that the person who embodies the digital transformation in 30% of cases is the CEO, in 27% the Marketing Director, in 13% the CIO and in 8% a new profile, the CDO. In the latter case, he or she generally has a relay to the various critical departments of the company. Concerning product and service offers, they must be restudied entirely. This is a matter of reviewing their breakdown and mapping with the value chain, selecting various distribution channels and making them work together, and also studying the customer itinerary so that it is fluent and sound from start to finish. The stability of the offers and their associated services is often a sign of a decline and no longer, as before, of robustness. Stability is superseded by speed and reactivity, which are synonyms of agility today. The fast eat the slow! Enterprise governance is involved in digitization, no matter what happens. It has to keep the course on an invariant concern to develop the performance of the customer relationship. The new “Customer Experience” leitmotiv now guides enterprises, and new indicators for measuring customers’ emotions and delight emerge every day. These measures of performance can be evaluated globally or according to more focused areas which are sometimes very new, such as the presence of social media networks and e-reputation. There are not many of these indicators, but they are frequently reviewed to facilitate global performance monitoring. They contribute to a better analysis of the enterprise’s agility when facing challenges in its environment, notably digital matters. Good digital performance reinforces and

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stabilizes the enterprise’s continuity under the condition that this performance is truly monitored with regular reviews. All stakeholders are concerned by the analysis of this performance, regardless of their internal or external status or position in the hierarchy. Digitization is not a passing fad. It must be used as a means of monitoring the enterprise differently and more efficiently in today’s economy. Digitization serves the enterprise’s strategy. This approach pushes us to break down the performance analysis according to different viewpoints. 4.1.1. How can we digitize while accounting for field realities? How can we anticipate new trends on the market? Are digitization projects in touch with the latest innovations? First of all, we should assure that General Management and the members of the Executive Management Committee are aligned and involved in their enterprise’s governance of digitization. The General Management must assure the enterprise’s continuity by harmonizing the present and the future. It must facilitate employees’ transversal functioning and guarantee coherence so that everyone contributes efficiently to global performance and value creation. Digitization reinforces the necessity of monitoring. Decision-making processes must be, as the case may be, proactive or reactive in shorter and shorter periods of time. Space and time scales are getting shortened. New tools integrate the strategic vision through technological, process-related, financial, human, market and other views in order to make decisions with a better impact evaluation and to correct the problem or the focus right away when deviations appear. 4.1.2. How does the enterprise integrate changes in its environment into its organization? Keeping up with technological change is crucial because it avoids delays that could render offers obsolete. Choosing digital projects is aids the structuring for the enterprise because these projects must both

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respond to concrete needs and anticipate future needs. “If you are proud of your product, that means that you have launched it too late!” Innovation and transformation are indispensable and call on multiple competencies. For example, having both marketing and IT competencies facilitates matching innovations with customer’s profound, implicit expectations. The legal aspect integrates ethical matters at all necessary levels by examining the rights and duties concerning the circulation and protection of data related to individuals, customers, products, markets and so on. Conversely, digital developments can potentially lead to threats that must be handled at the opportune moment before they become fatal. Notions of events and customer contacts must be integrated by the organization in order to be correctly considered, analyzed, valorized and used for the purpose of permanently improving the customer experience. It is interesting to consider “DevOps” approaches, which are defined as a movement that reinforces the IS agility, coupled with new digital opportunities. It is indispensable to focus our attention on the value creation, whatever the constraints on the fluidity of exchanges, on space and time pressure. 4.1.3. What impacts do decisions have on the environment and stakeholders? Digitization redistributes economic value by focusing more on the service provided to the final customer. This assumes that the business has structures and processes at its disposal that facilitate listening to stakeholders both upstream and downstream. Providing a service implies consolidating technical and organizational components at the right level, at the right time. Some of these components come from innovative upstream chains that must be consistently integrated into the enterprise’s processes. Safety and ethics are to be considered with vigilance, knowing that many issues still stand before us, and that we are still far from having imagined all possible practices. Large groups are not safe from threats originating from unknown actors who can be so agile, innovative and disruptive that they succeed in creating new markets. The involvement of leaders such as Publicis, Accor, AXA, SNCF, BNP, as well as traditional health insurance companies, etc.

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confirms the importance of accounting for new trends originated by new actors arriving and acting on their markets. For example, Airbnb’s first big investor claimed to have 26 reasons not to invest, yet the enterprise has a market capitalization comparable with that of the hotel chain Hilton Hotel & Resorts! Of course, competition must be monitored, but digitization can also foster the emergence of innovative partnerships such as Suez and SFR, partnered around a system of radiofrequency to transmit data. 4.1.4. What measures are taken to ensure that offers conform to customers’ emotions and expectations? The offer and its evolution relies on the Executive Committee’s responsibility and competency. In order to do this, the transmission of reliable data on customer perception and the offer’s performance should be carried out with filters adapted for highlighting the realities of the market. Rapid analyses with Big Data technologies, streaming analytics or predictive technology have become indispensable for those in charge of monitoring offers; an already established situation in banking and financial sectors, notably with the development of blockchains. However, there is still a great deal to be explored in other sectors. Artificial intelligence and cognitive approaches are being rapidly deployed. Digitization will encourage the emergence of new product offerings like Tesla, or Bolloré in France. These can disrupt the established order and compete with a national operator like EDF (Électricité de France) or the traditional automobile industry. The detection and analysis of latent needs that can be satisfied by new services will very quickly implicate upheaval and lead to the emergence of new markets with unknown actors. Certain companies do not hesitate to encourage the blossoming of a “start-up” ecosystem. The purpose of these light structures is to innovate and create offers, some of which will perhaps be integrated into the strategy of the groups that host them. The culture of failure with its “test and learn” and “fail fast” tactics is increasingly gaining followers. Businesses understand that innovations emerge thanks to agile approaches and can create differentiations that will be decisive to ensure new successes. Offers must be developed within increasingly complex

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digital systems with customer targets that are immediately accessible through multiple channels and processes in perpetual evolution. 4.1.5. How can we measure the operational performance of different lines of products and services? The reality of the market can be instantly measured with digital streaming analytics techniques that combine data from various sources, notably IoT (Internet of Things) connected object sensors. These analyses allow us to know almost in real time what the company’s performance is in terms of energy consumption, environmental impact, e-reputation, etc., beyond more traditional aspects such as production performance (cost, quality, flexibility, deadlines) which must not be forgotten. There are also tools (Process Performance Manager (PPM)) that extract from the processes performance indicators that optimize their monitoring in order to best respond to customers’ needs. People who can intervene and improve the processes in a continuous manner must be allowed to access these scoreboards. 4.2. The importance of monitoring digital developments Digital transformation with components like the cloud, mobility, fast data and social networks shows developments that require sustained monitoring because varied innovations appear at a faster and faster rhythm. New start-up actors emerge with more and more ideas and solutions that can be quickly implemented so that they can disrupt the established situation. All sectors are affected: BtoB, BtoC, public, private, services, industry, distribution and so on. Digital transformation is often compared to the Internet bubble in IT in the 1990s. But this is not so. This time, the development is not only technological since it entails reconsidering everything in-depth: humans, culture, organization, processes and methods. Digital transformation leads to new ethical questions related to processing personal data from various stakeholders (origin, transmittal, sales, exploitation, transformation, etc.). The use of this data is neither predictable nor controlled, see the latest debate around safe harbor. It can oblige the Executive Manager to make decisions and move forward while all indicators show the contrary. We cite Airbnb,

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BlaBlaCar (a French carpooling service) and Uber, to name just a few. Another interesting change to reveal concerns the “Big Four” auditors who acquire programmatic marketing companies with know-how in behavior analysis. This approach allows for traditional auditing and consulting to be broadened in order to bring in new marketing support for customers! It should be noted that in 2017, more and more large enterprises experimented with virtual or augmented reality within their marketing operations. It is thought that this new digital marketing will bring increasingly growing returns. Customers always attract more customers. It may be an anomaly in the industrial history, but it is real thanks to digitization. Other than the positive perspectives brought by digital transformation, the resulting changes may sometimes have impacts so significant that they can destabilize the enterprise. Certain enterprises have already suffered great losses (Nokia, Kodak, etc.). The loss of value, which is detrimental especially to small- and medium-sized companies, appears systematically at the beginning of a transformation process. For Executive Managers, the negative impacts from the first stages of adaption must be anticipation, limited and controlled. Within the enterprise, all operations are affected; certainly, changes have already started in yours. According to the industry, the strategy and the objectives, it will be necessary to make sure that the Managers in the Executive Committee are in line with the approach to be followed in order to benefit from it concretely. Digital transformation dictates continuous training that integrates technological innovations disappearing sometimes just as quickly as they may have appeared. The emergence of MOOCs is a path that is increasingly explored. 4.3. Artificial intelligence and robotization The development of artificial intelligence (AI) has taken a turn with regard to rapid digital developments, notably that of Big Data. AI and Big Data are two new types of technology on the rise, full of promises for businesses in all industries. However, the true revolutionary potential of this technology is probably based on their convergence. AI allows us to simulate reasoning from human intelligence and discharge certain tasks that can be modeled for the

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purpose of handling them quickly, according to well-established rules that can be enriched through self-learning. Some of these identified and described rules open the door to new possibilities for robotization with the arrival of Intelligence Process Automation or Robotic Process Automation. This requires familiarization with processes in order to contribute to availability, speed and reliability. Information collection and its fast processing, based on predetermined recorded knowledge, opens new doors concerning automatic learning and provides precise, documented responses to the questions asked. AI can be both descriptive, meaning that it analyzes what has already happened, and also predictive, meaning that it exploits existing information to learn from it and anticipate an event. AI has become ubiquitous in enterprises of all industries where decisionmaking can be facilitated by smart machines. Big Data’s contributions to AI will allow more elaborate and pertinent decisions to be taken. All sectors must integrate this converging AI and Big Data trend, notably services (e.g. banks, insurance companies, financial services, social media, GAFAM2 , etc.) and industry (automobile, logistics, construction). Customer demands and the necessity of preserving competitive advantages force enterprises to rapidly master increasingly diversified knowledge. Developing machine learning, expert systems and analytic technologies is becoming a necessity for increasingly efficient use. Collecting increasingly numerous data from the IoT requires Big Data and AI to converge in order to be processed. This collection relies on interconnected networks (4G, 5G, etc.), whose deployment becomes strategic on a scale of nations. Sensors, chips, network nodes and software will be connected to AI. The challenge for enterprises is to integrate new means and to foster the emergence of new solutions for the benefit of employees and customers, for example, by wisely introducing conversational agents (chatbots). The right combination of AI and human intelligence, with the power of robots, can as of now help professionals manage the security, compliance and quality of critical data, as well as help also 2 GAFAM – Google, Apple, Facebook, Amazon and Microsoft.

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optimize time. Robots take on a large portion of repetitive tasks and the automatization of inspections and audits. Thus, the actors have pre-processed information, targeted notifications and alerts that allow them to concentrate on decisions, based on their expertise and professional judgment. They can use their entrepreneurial abilities and creativity to accompany the challenges of the transformation. 4.4. Case study: transformation

assessing

the

maturity

of

digital

4.4.1. Lise Charmel The firm Lise Charmel agreed to test the questionnaire and evaluate its maturity in terms of sustainable development. The following rubric concerning digital transformation was provided to illustrate the method. The test was conducted by the authors in the form of discussions with the firm’s General Manager, who we thank sincerely. The maturity evaluations obtained in this way correspond to perceptions, which would, of course, need to be confirmed by precise audits. Lise Charmel is the reference for French lingerie all around the world. The company has a singular history paired with expected knowhow in craftsmanship, innovation and art as well as a constant concern for innovation and integrating advanced techniques into lingerie, all while accounting for fashion and trends. A communication strategy focused on the value of products, original, comfortable and elegant beauty enhancement for women has allowed the brand to benefit from a leading global position in the world of female lingerie today. The brand was created more than half a century ago, in the birthplace of luxury, motivated by constant research on beauty and extreme comfort, and based in the heart of the Lyon silk industry. When Lise Charmel became a brand with international influence and organized distribution in more than 40 countries, it was its digital transformation that allowed it to develop its position as a leader among its customers, unite its network of distributors, open Lise Charmel showrooms in strategic locations, optimize collections, improve its supply chain from cut-outs to assembly through logistics and motivate sales representatives by assisting them.

×

How responsibilities will be assigned within the business and to appointed managers.

Yes, in each service with an IT-involved approach that has a project supervisor role, but also assistance to the project owner.

Evolution of competencies regarding IT in each business unit for a fruitful collaboration. A call to service providers to complement internal competencies when added value is identified.

For example loyalty cards, including distributor networks.

Several projects such as sales forecasts by size/model based on Big Data, networking with the final customer for retention, automating the supply chain with different distributors, collection done completely on tablets with order-taking for sales representatives, as well as logistic optimization and inspection.

The strategy is centered on operational excellence as cited above and focuses more and more on final client satisfaction without forgetting its distributors. Digitization has enabled the ecosystem’s creation and dynamism.

Yes and it is what has allowed the best digital tools to be implemented in optimized textile production for many years, well beyond main competitors.

Comments

3 “Sustainable business performance: what are the indicators for a global evaluation?” Available at: http://lacademie.info/content/ download/9355/146165/version/1/file/Cahier_Academie_33.pdf.

Table 4.1. Lise Charmel: overview of the maturity of the digital transformation focus. Summary of results of the detailed 3 evaluation grid from the guide “Performance durable de l’entreprise : quels indicateurs pour une évaluation globale ?”

×

×

New service projects impacting the relationship with customers have been implemented.

The business has identified its needs in competencies in order to face digital stakes.

×

×

Optimized

Innovative or disruptive projects have been implemented in all of the business’ domains where a lever effect has been identified.

Under control

×

Deploying

The strategy accounts for feedback from observations concerning your ecosystem.

Discovering

×

Non-existent

Technological and competitive vigilance for the digital revolution concerning your ecosystem has been put in place.

LISE CHARMEL Overview of the digital transformation focus

146 Sustainable Enterprise Performance

5 Enterprise Culture

5.1. The importance of enterprise culture for performance Since the advent of globalization and global awareness of strategic issues, which are linked to the appearance of the Internet, systemic uncertainty has grown to the point where top quality is not only the way to generate social recognition but also to adapt to a shifting environment. This applies to individuals as well as organizations. Adapting to socially valorized standards does not suffice anymore; we must be free of these staples in order to be better connected, free of thinking patterns in order to be more innovative. The ability to innovate, to find new solutions to unpredictable problems that arise, is becoming an essential quality. Insofar as today’s concern is customer personalization, we are no longer concerned with the mass production of identical products, characteristic of industrial capitalism. We are now concerned with the production of products that can be adjusted to the particularities of a certain customer or environment. The best-adapted enterprises cultivate adjustment and permanent innovation. For Elliot Jacques from the Tavistock Institute in London, enterprise culture is defined by its way of thinking and acting, which is more or less shared and must be learned and accepted (Jacques 1997). For Maurice Thévenet, enterprise culture is “a set of shared references in the organization, constructed throughout its history in response to problems encountered by the enterprise” (Thévenet 2010).

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Enterprise culture is the combination of different cultural “materials” with very specific characteristics, such as values, symbols, myths, rites and taboos, all aligned with purposes contributing to the company’s global performance. 5.1.1. New criteria for enterprise performance Today, an enterprise’s ability to foster creativity among its members is a determining element of success. The ability to innovate, create new concepts and produce ideas has become an essential competitive advantage. Therefore, we must offer another entrepreneurial model than the one that currently prevails in the majority of traditional organizations. It is an economy of adaption where the ability to execute is what makes the difference; the source of added value becomes the ability to create new things (technological, managerial and organizational innovations, among others). The most ideal environment for innovation is a cooperative environment, as is verified by the artistic world or scientific research. What becomes a decisive factor in terms of entrepreneurial success is the ability to make one’s employees work together as collaboratively as possible. 5.1.2. A key factor in performance We no longer aspire to merely conceive innovative products, but to become intrinsically innovative and capable of providing new solutions to every new situation. Innovation cannot only be a matter of know-how; it also has to be a matter of attitude. In this respect, it is no longer quantities of knowledge that are a deciding factor but the quality of the relationships between the actors with this knowledge, namely, the individuals of an organization. The ability to reconfigure these relationships in order to produce a new product or a new custom-made solution becomes a decisive factor. This collective intelligence is at the heart of winning enterprises’ culture. The challenge for all companies is no longer to instantly conceive the most performance processes for realizing products and services, but to

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create the right conditions under which the entire organization collaborates constantly and agilely, working to attain this quality. 5.1.3. Can an enterprise’s culture stifle progress and innovation? Enterprise culture constitutes a coherent body that cements relationships between individuals and generates a sort of charter that employees must adhere to, under penalty of being rejected. This culture is just as strong as the enterprise is old, prosperous and dominant in its sector. The weight of this culture can become a true burden that prevents personal initiatives, complicating enterprise regroupment operations or acting as a factor of discouragement. We can take the French port industry and press as an example: having a very strong and very rigid culture, often reinforced by a long trade union tradition, they have not been able to adapt to changes in the world economy and have lost their leadership or are sometimes endangered. Conversely, enterprise culture must be an asset for the enterprises’s performance. Companies from very different sectors have understood this well. For example, Toyota by widely deploying the Lean Management, Essilor by encouraging employee participation in the company’s capital, or Google in developing the brand’s attractiveness to young people, have all succeeded in creating a culture that is strong but adaptable to their environment, which has contributed largely to their success. 5.1.4. Enterprise culture: a sustainable resource and a competitive advantage Forming a sustainably innovative enterprise involves a culture that incites individuals to become actors engaged in their fate. It is a matter of considering individuals, as Eugénie Vegleris says: “Wherever there is a human, everything is possible, the best as well as the worst. It is by focusing on the best that we awaken the best” (Vegleris 2006). Thus, a culture of responsibility that takes us from hierarchical obedience to responsible autonomy is a true asset for the enterprise to succeed in competing in a new environment.

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Sustainable Enterprise Performance

This culture must be founded on solid pillars: – A culture of liberty: respect for the individual in their choices, actions, diversity and granted confidence, far from the temptation of formatting and dominating them. – A culture of dialog: the promotion of healthy and transparent of perspective and exchanges building consensus. – A culture of responsibility: forgetting about dirigiste and infantilizing management based on “carrots” and “sticks”. We must strive to create an environment of recognition and pleasure that fosters involvement and creates permanent motivation. – A culture of collaboration: implementing “learning” approaches. 5.2. Case study: assessing the maturity of enterprise culture 5.2.1. H30 H30 agreed to test the questionnaire and evaluate its maturity in terms of sustainable development. The following rubric concerning the enterprise culture was provided to illustrate the method. The test was conducted by the authors in the form of discussions with the president of the firm, whom we thank sincerely. The maturity evaluations obtained in this way correspond to perceptions, which would, of course, need to be confirmed by precise audits. H3O is a very operational consulting firm which also has interim managers notably in the agri-food sector. Enterprise culture is an important aspect of diagnostics done prior to all of H3O’s missions. It often reveals differences between managers’ perceptions of their enterprise and those of their teams compared to the reality that we perceive on the field. This can cause problems with governance and the strategy’s translation, which H3O helps to correct.

H3O

×

Communication, training, collaborative tools, recreational areas, etc. are used to accompany changes towards the target culture.

×

×

Deploying ×

Under control

Optimized

Developments in the enterprises’ culture make up the aspect most sensitive to change among all projects.

In practice, firms on a human scale focus more on the image leading their internal image rather than focusing on tools to develop this culture.

The enterprise culture fosters each employee’s involvement with responsibilities and recognition within the ecosystem.

Analysis of the enterprise’s culture makes it possible to characterizeways of living and being in the company.

It is necessary to reduce discrepancies between the way managers perceive the enterprise culture and the way its employees perceive reality at the ground level.

Comments

1 “Sustainable business performance: what are the indicators for a global evaluation?” Available at: http://lacademie.info/content/download/ 9355/146165/version/1/file/Cahier_Academie_33.pdf.

Table 5.1. H3O: overview of the maturity of the digital transformation focus. Summary of results of the detailed evaluation 1 grid from the guide “Performance durable de l’entreprise : quels indicateurs pour une évaluation globale ?”

The enterprise culture is open to change and innovation (agility, room for error, speed in decision-making, speed in implementation), and the digital transformation is used as a lever for change.

×

The business’ values are identified, shared, and recognized by all employees across all services and hierarchical levels.

Discovering

×

Non-existent

The business has identified, analyzed and measured its culture.

The culture is in line with the business strategy.

Overview of the culture focus

Enterprise Culture 151

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Sustainable Enterprise Performance

Some managers, notably in SMEs, tie their name to a company by associating themselves with it. Culture allows for a way of characterizing the lifestyle within the enterprise. Culture sometimes deeply impregnates the enterprise and makes it difficult to transform with regard to new challenges for the enterprise and its employees. The enterprise must foster the involvement of each and every one of its employees with recognition internally and within the ecosystem. Taking culture into account allows us to naturally place humans once again at the center of the enterprise. Regardless of the position that they occupy, every person should be considered as an actor with competencies and able to address challenges originating from the strategy’s translation at the person’s level. There are fundamentals that must not be forgotten!

6 Ethics and Compliance

6.1. The importance of ethics and compliance issues for performance Business ethics are now at the heart of an enterprise’s performance. Anti-corruption laws as well as the evolution of values towards transparency and more sharing show to what extent an enterprise can be recognized or condemned for its ethics and respect for laws and good practices. France comes in at number 23 in the 2015 Transparency International anti-corruption rankings. There is still action to be taken to improve this. Ethics today are led by anti-corruption laws: Foreign Corrupt Practices Act of 1977 (FCPA) in the USA, the Bribery Act 2010 in the UK and the Sapin II law (2017, and which established the Agence française anticorruption) in France. They are supranational laws and sanctions are starting to fall, stemming from long negotiations. All of these laws have something in common: an approach that empowers enterprises by inviting them to implement good practices. Failure to incorporate these kinds of procedures as well as failure to respect them will result in sanctions. Ethics are not limited to respecting anti-corruption laws. In addition, we find namely subjects relative to enterprise culture. Please see Chapter 5 specifically on “enterprise culture” for more information

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on this. Enterprise ethics have to be taken into consideration during all phases concerning the construction of global performance, from the strategic vision to the offer creation, ending with its production, distribution and evolution. The enterprise adopts ethical behavior when it goes beyond its objectives related to efficiency, production, profit and profitability, in its functioning and in the conduct of missions as well as in its relationships with stakeholders, and takes action for the sake of common good. Compliance can cover a vast domain, primarily legal, including competition law, transfer pricing, embargos, human rights, personal data and intellectual property. More generally, it may cover respect for good enterprise governance practices and aspects of internal control. In the following questionnaire, we emphasized anti-corruption laws, including new French law. The other subjects are of variable interest depending on the enterprise and line of business. Adapted questionnaires can be applied as complements. Ethics (or business ethics) – applies exemplary, responsible behavior in the relationships with the enterprise’s stakeholders; – leads to a core of normative but generally non-imperative rules with multiple and varied scopes of application; – contributes to valorizing the enterprise’s image. Compliance – all actions that aim to assure that executives’ and employees’ behavior complies with laws, directives and regulations that apply to the enterprise; – obligatory characteristic with a scope of application generally restrained to fighting corruption, export control and competition; – avoids penal risk for the enterprise, its executives and employees. Box 6.1. Definitions

Ethics and Compliance

155

6.2. Case study: assessing the maturity of ethics and compliance aspects 6.2.1. iXBlue iXBlue agreed to test the questionnaire and evaluate its maturity in terms of sustainable development. The following rubric concerning the “ethics and compliance” aspects was provided to illustrate the method. The test was conducted by the authors in the form of discussions with the president of the firm, whom we thank sincerely. The maturity evaluations obtained in this way correspond to perceptions, which would, of course, need to be confirmed by precise audits. iXBlue is an independent, high-tech enterprise with more than 600 people and a turnover of 120 million euros, 80% of which are exports. Its products include systems for inertial navigation, positioning, communication and acoustic imaging, boat and aquatic drones, as well as services at sea for hydrographic and oceanographic markets. iXBlue offers cutting-edge technological solutions in the field of defense as well as civil markets in numerous countries around the world. Therefore, iXBlue deals with diverse cultures and complex legislation on a daily basis. In this context, iXBlue has always showed loyalty in its commercial practices, even before the FCPA law. iXBlue has implemented a Compliance and Ethics Committee that consists of two external experts and the internal executive responsible for risk management and compliance. This committee has notably monitored efforts to comply with FCPA.

Non-existent

Discovering

×

Deploying

×

×

×

Under control

×

×

Optimized

New contract-type models with demands reinforced by ethics and probity are currently deploying with commercial partners.

A training plan that complies with the SAPIN II law (French anti-corruption law, equivalent to the FCPA in the USA) has been implemented. An evaluation framework has been defined and is currently deploying.

A committee with two external members and the compliance and risk officer has been created. It is in its third year of operation.

Enshrined in the code of conduct and rules of procedure, this is the second generation of corruption prevention procedures, taking into account feedback from the first.

The tone is set by General Management and is anchored in the enterprise’s culture.

Comments

1 “Sustainable business performance: what are the indicators for a global evaluation?” Available at: http://lacademie.info/content/ download/9355/146165/version/1/file/Cahier_Academie_33.pdf.

Table 6.1. iXBlue: overview of the maturity of the ethics and compliance focus.Summary of results of the detailed 1 evaluation grid from the guide “Performance durable de l’entreprise : quels indicateurs pour une évaluation globale ?”

Contractual relationships, notably those with providers, comply with the models defined by the ethics committee.

Internal and external actors are trained in, aware of, and regularly evaluated on ethical rules defined by the enterprise and its ecosystem.

An ethics and compliance committee guarantees the enterprise’s engagements.

The code of ethics and the plan to prevent corruption are written down and shared. They cover all areas of law, industry standards and good practices.

Compliance and ethics are a part of the enterprise’s main values.

iXBlue Overview of the ethics and compliance focus

156 Sustainable Enterprise Performance

7 Brand Image and Reputation

7.1. The importance of brand image and reputation management for performance Perspectives on change in performance, in order to be complete, must take into account the enterprise’s brand image and reputation analysis. Brand image represents how an enterprise and its products are perceived by the market, that is to say, generally by consumers. Reputation meanwhile measures the notion of being known by a large number of people. Take note: an enterprise can be very well known without having a good brand image. 7.1.1. Brand image Brand image must be the focus of regular studies in order to guarantee coherence with the business strategy. The enterprise must be vigilant and must ensure that perceptions on the target market are in tune with its objectives and values. Brand image concerns not only the way enterprises are perceived by the public but also by stakeholders. It is essential to remain alert and understand the decision

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processes of investors, institutions, banks, partners, suppliers, those currently employed and those to be hired, and of course customers. The enterprise can activate certain levers proactively (communication campaigns, advertising) whereas it will be subjected to others (consumer blogs, comparative sites). It is through these diverse processes and vectors that image and reputation is established. 7.1.2. Brand image measurement criteria The perception of brand image is measured using objective criteria (high-end, innovative technology) and other more subjective criteria (aimed at the youth, good rapport for quality/price). As for objective criteria, brand image must be measured on the one hand in absolute terms and on the other hand, in relative terms to competitors or other actors that could be concerned by the enterprise’s development. Of course, marketing studies must be regularly conducted in order to follow the change in the results. Digital techniques make it possible to precisely and almost immediately monitor the behaviors and perceptions of each and every actor. 7.1.3. Anticipation analysis Brand analysis allows us to better understand the situation at any given time and anticipate decisions to be made that will foster the benevolence of the environment in which the enterprise develops its activities. 7.1.4. Reputation Reputation can be measured spontaneously or with assistance and presented in the form of a percentage. Studies on reputation are excellent indicators, notably following communication or advertising campaigns.

Brand Image and Reputation

159

7.1.5. Means These brand image and reputation studies can be conducted internally or externally, which reinforces their objectivity. Digitalization opens new possibilities; thanks namely to IoT techniques, sensors can allow for better reactivity. It is possible to get quantitative elements about renown, reputation, and the perceived quality of offered products and services that reveal correlations between the brand’s development and the recent offers launched by the enterprise. Certain criteria can be subjective, for example, the emotion evoked by the enterprise’s advertisements or information from third parties. Digital solutions like social networks, user communities and diverse associations must be considered with utmost attention. Several areas of exchanges arise: – the enterprise communicates with its ecosystem; – the environment transmits messages to the enterprise; – third parties interfere with exchanges between the enterprise and its environment; – finally, actors intervene simultaneously with the enterprise, its environment and third parties, in a benevolent or malicious manner. 7.1.6. Communicating values The enterprise must communicate its values, which will reinforce its brand image and reputation. These values can be athletic, sustainable, engaged, ecological, or humanitarian, and can also be quality or safety-oriented, etc. They can be targeted and expressed according to stakeholders. It is important to develop communication acts and analyze their impacts in order to influence and favor stakeholders’ perceptions. Traditional and structured campaigns can be supplemented by coordinated actions that

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Sustainable Enterprise Performance

are available today thanks to digitization. The NPS (Bain & Company’s Net Promoter Score, a tool for measuring customer satisfaction) and the number of “likes” is now part of measuring brand image. Brand image is the result of the “product/service” combination. It evolves over time, for example, going from the notion of a product towards that of a service in the banking or automotive industry. It is also largely influenced by investments in order to support it, such as advertisement campaigns, multichannel campaigns, direct communications, etc. It contributes to improving reputation by relying on visual and auditory memorization techniques: for example, Nike’s “Just Do It”, McDonald’s “I’m Lovin’ It” or Hallmark’s “When you care enough to send the very best”. Certain slogans resonate strongly with the target audience. However, areas of interest can change based on offers, technological context, ecological context, etc. 7.1.7. The enterprise’s attractiveness Brand image and reputation are essential for developing an enterprise’s attractiveness. They are levers for entering new markets, growing one’s margins, forming partnership agreements, proposing innovative solutions, and attracting new financial and human resources (new talents, competencies, profiles, etc.), in short, making people want to collaborate with the enterprise. Internally, the brand image also has consequences on employees. Employee motivation and involvement is measured with 360-degree evaluations (evaluation by the hierarchy, colleagues and also subordinates). This attractiveness translates to the ease (or lack thereof) of finding competencies on the market that are tailored to the enterprise’s needs. “Employer branding” is an indicator that is looked at by the candidates, training bodies and human resource services.

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7.1.8. Brand image deterioration When the brand and its image deteriorate, the negative consequences for the organization are generally significant and brutal (see Box 7.1 for some examples of this). Even worse, above all they are slow or impossible to correct. The impact on brand image is quite costly, on the one hand, due to the shortfall in turnover and, on the other hand, due to the expenses to be spent in restoring the image that the general public and consumers previously perceived. – In 2015, the image of Volkswagen was heavily tarnished by the scandal due to its cheating on anti-pollution standards in the US, despite the company having built its brand image on trust. Following the so-called “Dieselgate” scandal, where Volkswagen manipulated emission measurements, deceiving its customers by indicating values far below the real values, the group had to face countless lawsuits, billions of euros of fines and updates of cars, and saw some of its managers arrested and condemned to prison sentences. – In 2010, Toyota, one of the world’s top automobile manufacturers, having built its image on reliability, had to recall millions of vehicles all over the world, beginning with 3.8 million from the Lexus brand because of a floor mat that supposedly caused the death of four people. Then, to avoid other problems, 2.3 million Corolla, Rav4, Camry, etc. had to be recalled. In total, the manufacturing of eight models was stopped in the United States. As management communication failed, Toyota recorded a tumble that brought the Japanese brand back four years in terms of market share. – The shocking advertisements by the Benetton group focusing on racial and religious issues were ultimately withdrawn, but not without seriously harming the group’s image. Benetton had to face an uprising by its franchisees, furious at having to justify themselves to angry consumers, and especially very unhappy to see their turnover decrease by 10 to 30% because of the controversial advertisements. – In 1990, the announcement of the presence of benzene in bottles of Perrier, a well-known French brand of carbonated mineral water in the United States, opened up a very serious crisis for the brand. Perrier

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only got rid of the problem at the price of the withdrawal from sale of all the bottles throughout the world, even if only a few bottles were concerned and the health risks were nil. The company only regained its sales volume 25 years later. – To be competitive in terms of costs, Nike developed a strategy of subcontracting to predominantly Asian countries, thereby indirectly employing about 550,000 people. A large-scale ethical controversy was then born concerning the non-observance of certain international conventions on freedom of unions, working conditions, forced labor, child labor and wage issues. In 2002, Nike had become the most quoted “unethical” brand, all socio-professional categories combined, while its competitor Adidas enjoyed a good reputation. – Comparable problems of brand image degradation have affected many other companies, such as Blackberry and Samsung for example, and experience shows that it is always very difficult, is very expensive and can take a very long time to recover from this – if it is even possible at all! Box 7.1. Some examples of brand image deterioration

These observations reinforce the necessity of considering brand image and reputation analysis as a high priority, even when all lights are on green. Alerts, including weak signals, must be immediately accounted for and monitored. Brand management requires the implementation of circuits that have the authority and means to react quickly at the right time and with the correct intensity. A brand can disappear very quickly, but proper monitoring can allow brands to last for over a century, for example, Michelin, LVMH, Hermès and many others who are uncontested leaders in their domain. 7.1.9. Rumors and e-reputation Rumors are a phenomenon that must be taken into account, hence the necessity of observing the environment in which the enterprise evolves. This environment becomes increasingly broad due to

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163

globalization and digitization, which multiply the means of communication. E-reputation is the common opinion (information, opinions, exchanges, comments, rumors, etc.) on the Web of a brand, a company or an individual. It corresponds to the identity of that brand or any associated person with the perception that Internet users make of it. It has become a phenomenon that brands try to take advantage of. However, it can also turn against them. Furthermore, prevailing e-reputation is a pressing matter. In order to be more proactive, it forces us to make investments in acquiring new technology and honing new competences. 7.1.10. Performance and sustainability A positive brand image, reputation and e-reputation foster the enterprise’s development and performance through easier product commercialization, often with higher price practices and loyalty that allows for easier offer evolution planning. From the viewpoint of consolidating enterprise performance, brand image and reputation are two invaluable points of vigilance. Allowing budgets for developing them is indispensable. Maintaining them allows the enterprise to anticipate and prepare for potential crises. These investments are indicators of the enterprise’s will to make its development sustainable and reassuring for all stakeholders. Implementing teams in charge of brand improvement actions can give a precious indication as to the ability to anticipate or to react. Brand image and reputation are now inseparable from products or services. They contextualize them and accompany them throughout their life cycle. Other points that require attention concern the Executive Management’s involvement. The Executive Committee must have indicators that are efficient enough to analyze how the brand’s reputation is evolving and determine what decisions are to be made to adjust the governance or sometimes to react to an emergency. If the decision processes are not implemented with adapted filters, decisions can be late, harsh, costly and risky for sustainability.

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Brand image and reputation management require awareness, anticipation, listening and watching, all while integrating new sensors now available if digitization has been implemented. Digitization requires us to continuously put stress on the company's management so that it will be able to make swift decisions with the extent adapted for each situation. Investments concerning digital marketing are becoming increasingly important (Internet networks, blogs, social networks, etc.), sometimes by exceeding the IT investments of other support functions. 7.1.11. Conclusion Good brand image and reputation foster a more profitable economic situation through easier product and service commercialization often, with higher price levels. Like the other aspects of performance analysis, brand image and reputation cannot be considered in isolation. They must be integrated in a coherent approach to governance. 7.2. Case study: assessing the maturity of brand image management 7.2.1. L’Oréal The L’Oréal Group agreed to test the questionnaire and evaluate its maturity in terms of sustainable development. The following rubric concerning the “brand image management” was provided to illustrate the method. The test was conducted by the authors in the form of discussions with representatives from the Group, whom we thank sincerely. The maturity evaluations obtained in this way correspond to perceptions, which would, of course, need to be confirmed by precise audits.

×

×

×

×

Events that have a strong direct or indirect impact on the brand image are regularly revisited to trigger plans of corrective action.

Processes are analyzed in terms of their contribution to the brand image: enhancement andrisk.

Partners and sponsors are regularly reviewed so that they are consistent with the researched image.

The definition of new offers integrates brand image and reputation objectives.

Continuous evolution and the creation or acquisition of products aim to satisfy consumers by relying on characteristics specific to each brand.

The Group has developed partnerships with its main suppliers in order to incorporate them in their CSR politics and use this to promote its brand image.

The sustainable position as the world leader in nearly all markets shows that all of the Group’s practices are in line with this objective.

Brand performance is monitored at all times and any event that could impact reputation is brought up without delay

L’Oréal is very active on social networks, especially among Youtubers, and with all other means of communication utilized to put forward its brand image.

The environmental and social display is adjusted for each brand, pertinent for consumers and in line with European recommendations in the field.

Leading position in almost all of its brands and markets.

Comments

1 “Sustainable business performance: what are the indicators for a global evaluation?” Available at: http://lacademie.info/content/ download/9355/146165/version/1/file/Cahier_Academie_33.pdf.

Table 7.1. L’Oréal Group: overview of the maturity of the brand image and reputation focus. Summary of results of the detailed 1 evaluation grid from the guide “Performance durable de l’entreprise : quels indicateurs pour une évaluation globale ?”

×

×

Optimized

Levers for managing the brand are activated , such as employees, networks, communication plans, product quality, etc.

Under control

×

Deploying

Ethics and CSR are integrated into the construction of brands and reputation.

Discovering

×

Non-existent

The brand, reputation and attractiveness are accounted for in the strategy’s development.

L’Oréal Group Overview of the brand image and reputation focus

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With the wealth and variety of its brand portfolio, L’Oréal has the ambition of covering all territories regarding beauty and responding to the infinite diversity in consumers’ aspirations across the entire world. The L’Oréal Group, the world leader in cosmetic projects, is present in 150 different countries and holds an impressive portfolio of 34 international brands: L’Oréal Paris, Lancôme, Vichy, Yves Saint Laurent, Kérastase, etc.

8 Lean Management

8.1. The importance of “Lean management” concepts for performance Lean management proposes an alternative enterprise governance based on the “extraordinary” industrial approach used by the Japanese vehicle manufacturer Toyota. But is there really a different way, also lean, to measure a business’s, performance? This chapter aims to answer that question. 8.1.1. Toyota: the birthplace of Lean management Over a long period of time, 60 years in fact, Toyota has shown exceptional results in terms of profitability, market penetration and resilience against crises. These results, obtained by steadfast and uninterrupted internal growth, have led this initially modest firm to the global forefront of automobile construction. This leads us to believe that within this family enterprise, there is a particular manner of apprehending performance. An abundance of literature covers the subject. The classical industrial model – mass production and its economies of scale, scientific work organization, and the well known names of Ford, Taylor, Sloan and Fayol – was theorized before it was applied.

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Conversely, the Toyota production system (TPS) was invented and developed within this enterprise in an empirical and pragmatic manner, whereby the only common thread was a single, very simple guideline: eliminate waste. At the end of the day, we must admit that these exceptional performances were obtained by applying practices that were completely opposite to previously acknowledged dogmas. The basic idea of Toyota’s system is the “total elimination of waste”. At the dawn of the 21st Century, this idea sounds familiar and pleasant since it evokes a consensual path to the “holy grail” of our time: Sustainable Development. However, at the end of the 1940s in Japan, when Kiichiro Toyoda, President of Toyota Motor Company, formulated this idea and assigned to his employees the objective of “hunting for waste”, he had quite a different grail in mind: “catch up to the US in three years...”. At first glance, the enterprise’s waste elimination objective seems laughable for the Executive Management: “if it knew about the waste, it would surely eliminate it right away!”. This humorously reveals the inefficiency of traditional tools for management control and measuring performance to meet goals such as those set by Toyota. 8.1.2. Exceptional performance through original practices Now, at the beginning of the 21st Century, a highly performing enterprise is supposed to do good for people. Shareholders should see their savings valued, employees should be emancipated by their work efforts, customers should be thrilled with their purchases and suppliers and bankers should be happy to cooperate a collectivity full of positive externalities. If we had to establish a ranking system according to these criteria, we would be surprised to discover little known and unknown enterprises at the top of the list: a highly performing enterprise does not make headlines! Without doubt, it is among these enterprises that the Toyota plant at Onnaing in the north of France would rank.

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Regardless of how we attempt to approach this ideal, there are the same problems to resolve. Only the solutions are different. They are the result of arbitrations among interests that are a priori divergent and economic contingencies that must be assumed. These solutions are also the result of the priorities that we choose. Choosing waste elimination as a priority means beginning a long-winded and meticulous approach, and abandoning hopes for attaining the objective quickly. Mass production has also shown its efficiency by allowing industries during the 20th Century to develop like never before in the history of humanity. Yet, during World War II efforts, certain individuals (Lawrence Miles, Jerry Leftow and Harry Erlicher at G.E.) observed in the US that this model led to an overabundance that was hardly compatible with the frugality resulting from the war. The idea began to surface that mass production leads to waste. Waste is inherent in mass production because this model draws its strength precisely from the fact that it allows costs that are not directly productive to be diluted thanks to economies of scale. Thus, it turns out to be relatively tolerant regarding practices such as getting rid of scraps, unsold stocks, outdated machinery, underuse of working capacity, etc. Everything that is precisely considered as “waste” and whose eradication is the top priority of the TPS. Therefore, TPS proceeds with a different mindset and offers another perspective on production. 8.2. Measures of Lean performance Lean management defines waste as being the disharmony within an enterprise. Therefore, waste elimination can be seen as the strategy for an enterprise’s development and progress. However, the pathway to the objective has not been theorized, and does not need to be! There are no procedures to follow. There are simply waste elimination mechanics to be put into place. At most there are, like in operational research, protocols determining the order of things in order to avoid dead ends occurring. These protocols have been established

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empirically from experience. They do not offer a “solution”, but merely separate the good ideas from the bad. In order to illustrate this, “One must think before one acts” is a truism! Yet, W. E. Deming’s PDCA (Plan, Do, Check, Act) cycle has been received as a revolution. It defines the “think before you act” protocol for managerial use: – Plan: yes, we must think and reflect, but for the purpose of suggesting a consensual solution; – Do: yes, this solution must be executed, but in a complete (albeit cheap) manner to reach a good prototype for demonstration; – Check: yes, it must be implemented, but for the purpose of showing how it can be used and for testing; – Act: yes, the decision to keep or modify it must be made, but sometimes the decision should be to abandon it based on observed results. If the solution is kept, its realization and implementation must be refined and “toughened up” in order to eliminate potential deviations. It is locked down; – The cycle: the end of one cycle must initiate the start of another. This protocol process is tested and its efficiency is measured by indicators that are fixed at the beginning of the cycle but evolve from cycle to cycle. These indicators simultaneously combine the evaluation of quantitative results with the evaluation of the established process’ formal compliance in order to obtain these results. Thus, any observed divergence in either direction – bad results with a compliant process as well as good results with a non-compliant process – must be handled by either questioning the process or improving it. Based on eliminating waste as closely as possible to real field observations, this protocol mechanically leads to a combined and reciprocal improvement to costs, quality and deadlines. It should be noted that, for industries and services alike, deadline reductions manifest themselves through increased productivity.

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It is notable that governance is incompatible with the existence of a rigid hierarchy in which the “blue collars” must execute the “ukases” of the “white collars”, regardless of what happens. Quite the contrary, here business intelligence is at the service of the workshops. At Toyota, the engineer must “sell” his solution to the worker. Of course, this cannot be improvised. Maturity in terms of Lean management depends on two things: it supposes firstly that the company has achieved a level of waste elimination that is good enough to clarify the problems still to be solved, and secondly, that it has mastered the protocols and necessary tools revealed by the clarification listed above. What is difficult about the Lean model is deciding where to start; it is the “egg – chicken – egg” cycle. Attaining this maturity level means that the enterprise has reached a state of perpetual progress or development which is now part of its DNA. It cannot possibly do otherwise. Every enterprise develops its own solutions reflecting the image of the employees that developed them. Two enterprises with the same activity will follow different paths and end up with different solutions. The performance that they will achieve is the fruit of the PDCA cycles’ slow sedimentation, which structures their incessant quest to eliminate waste. In the classical model, it is the construction of a budget that plans progress and guides development. One talks about a “pro-active” budget or a “saving” budget. The ABC (Activity Based Costing) method helps adjust the trajectory through analyses and dashboards measuring progress and results towards objectives. In the Lean model, all this is useless. There is no operating budget per se. In a Lean enterprise, progress and development are up and running. Governance consists of directing day-to-day operations in selecting the sequence of elementary actions that bring about progress and eventually bolstering them with supplementary means. The key budget of a Lean enterprise is its investment budget, that sets the means to be allocated to run the company according to its capabilities and objectives.

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The performance of Lean management and its measurement focus mainly on how the elimination of waste is going, since this is the motor for its progress, and on how rapidly the company is able to adjust for changes affecting it, since this is the motor for its development. 8.3. Lean management in the IT industry or IT departments of enterprises 8.3.1. The problems inherent in traditional computer systems If the Lean model pursues banal objectives (profitability, development dynamics, resilience against the competition), it suggests that the enterprise achieve them through an approach that differs from the classical mode, notably in terms of organizational modalities. The consequence of this is a doctrine of information technology usage, which is also particular. If we consider manufacturing for example, the possibilities offered by information technology have led to the very early development of applications that assist the management of this production. Under the classic model, these software, encompassed in the generic term CAM (computer-assisted manufacturing), take the form of an activity model that, without going into detail, can be easily described as follows: the data describing each available production agent (machines, staff, capacity in kind and in volumes) form a digital model that is regularly informed of quantities to be produced, in other words, customers’ orders. Thus, computer applications reproduce the best way of producing these quantities (at least in theory!) by establishing day-today activity planning for each production agent. Intellectually irreproachable in a supposedly determinist environment, in other words, predictable and accessible for analysis, this IT assistance runs into numerous practical obstacles: – the hazards of production require the model to be informed in return;

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– regularly observed discrepancies incite us to put the field in accordance with the model, leaving little room for individual initiatives; – respect for economic, minimal production series for economic reasons requires anticipation, that will increase the stocks. Everything contributes to the system’s rigidity. In order to be flexible, the planning horizon would need to be shortened. Going from, for example, monthly planning to weekly planning implies multiplying the planned orders and the feedback from production hazards by four, which will increase the need for anticipation and consequently the stocks. Going in this direction can cause the IS to quickly implode. A corollary of eliminating waste, the singular objective of the Lean model, is permanent research on flexibility in the sense that any anticipation of realization (that will necessarily increase the stocks) will eventually be the source of waste due to irreducible discrepancies between forecats and actual data. Here, CAM in its traditional form is inoperant. Lean organizations adopt a fundamentally different use of IT which consists of monitoring at the margin a productive system that is constructed to ensure invariant production in an autonomous manner: a singular approach that strives for flexibility by constructing a rigid system! English-speaking literature has deemed this “flexible rigidity”. More simply, it follows that the Lean model adopts a servo IS system: CAM meets cybernetics. To achieve performance some common Lean practices have to be applied: – searching for invariants by applying the Pareto law, which is an empirical phenomenon found in many areas: about 80% of the effects are the product of 20% of the causes; – putting production means online according to its invariants; – making means flexible in order to absorb the marginal. All of this is subject to iterative reviews in order to improve, adapt and increase reliability. By definition, a servo system must be adjusted to the nature of the process that it monitors. Here, the IS must be permanently adjusted for changes appearing on the field.

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8.3.2. The best practices of Lean IT The necessary upgradeability of digital applications for the use of Lean organization has turned classical CAM software development practices upside down. A certain form of tyranny from the IT department is no longer valid. When one reviews what has to be done in order to efficiently insert the IT team into a Lean organization, one realizes that it consists of making it work according to Lean practices, since the IT team is expected to: – immerse itself in day-to-day user concerns: priority given to the customer; – not delay an application’s exploitation under the pretext of exhaustivity. Overall, 20% of the variety makes 80% of the volumes and if this is handled well, human initiative on the field level can take care of the rest; – eradicate useless complexities, convoluted user interfaces and algorithmic logics to benefit usage logics; – adopt means of development (platforms, tools, test stands) that allow programs and their functions to be quickly adapted; – participate upstream with the manufacturing operators in order to determine final purposes with the methods departments to ensure consistency; – participate downstream consolidating reliability;

in

reducing

discrepancies

and

– adopt standards that facilitate collaboration; – adapt the IS architecture based on the production system’s architecture by incorporating the logic of the automated or robotized processes, the information captured by sensors, and the flow patterns. 8.4. Lean management in the service industries Here, we are referring to service activities whose production is informational, such as banks, insurance, brokerage, distribution, etc. and also administrative functions within enterprises or the state.

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While the Lean model was initially successful in manufacturing production, professionals from this model have progressively realized that informational production and administrative services, coming out of their first stage of digitalization, presented considerable amounts of waste and therefore a big source of productivity. And once again, that the Lean model and its principles were capable of overcoming this waste. Mutatis mutandis, here is how: – to identify invariants: 20% of provided services or administrative operations represent 80% of volumes; – to trace and process these invariant fluctuations with simplification as the priority: assuring that all collected information is useful, eradicating duplicated entries, only keeping redundancies for security reasons; – the processing chains must be conceived in harmony with capabilities in order to respect standardized deadlines (reduction of variety); – the hardware and logical architecture must be modeled from the architecture of operations organization (the operator’s ability to use their tools); – to reduce the use of information technology down to what is strictly necessary (return on investment calculations). As can be seen at this stage, Lean production and Lean IT practices blend together. However, here more than anywhere else, there is a performance indicator that drives the approach: value stream mapping. It is an indicator that concerns two factors, which are the time and the space necessary to realize the work at hand. The shorter and narrower these factors are, the greater the productivity, and the less room for waste there is. It is intuitive! This does not mean that we have to rush or be all crammed together. It means that the quicker the information is processed, the less its pertinence is altered. The less it stagnates, the less useless complexities (research, verifications, updates, etc.) will

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appear. This also means that the less we spread over a large area, the easier communication will be. Reducing the value chain in time and space is the golden thread to a Lean approach to services. 8.5. What is a “Lean start-up”? The term Lean start-up today refers to an alternative model or process for the creation and development of enterprises, which constitutes a rupture with regard to previous practices in this area. It would be justified to think, considering the terminology, that a Lean start-up is simply the application of Lean principles that would reinvent the manner of introducing an activity on the market. In fact, the Lean start-up draws from several familiar Lean enterprise practices concerning the rules to be followed in terms of offer creation and new product launches. However, in order to understand where the concept of Lean startup stands, some preliminary observations are necessary. While enterprise creation has always existed, a “barrier to entry” conscience very often limited them to the exploration of new activities apart from those of mature and capitalistic industries. But when an attempt to compete against these industries surfaced, in order to mobilize necessary financial means, it became essential to outline the route in the long term, in a highly documented “business plan”. However, in the 1980s, well before Lean’s influence, studies conducted in the USA showed that the majority of “success stories” had to do with creations in which the enterprise knew how to escape from its strict initial project in order to adapt to opportunities encountered along the way, thanks to their own potential. Flexibility took precedence over the rigid and blind “business plan”, even if a priori well laid out.

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Since the end of the century, the proliferation of technology that is more and more permeated by digital intelligence – sometimes combined with the ardent obligation of finally finding solutions to problems concerning global warming – has disrupted the established situations. Nowadays, start-ups post their innovations without complexity in domains that were previously thought to be reserved for major industries: medication, biotechnology, automobile, aeronautical, electricity production, telephone, printing, etc. This momentum reveals entrepreneurship that breaches the “barriers to entry” by adopting new practices from Lean that allow for the chance for success to be optimized at the lowest cost possible. 8.5.1. The motivation for performance in a Lean start-up It would be in vain to go into detail about the various practices that a Lean start-up can use. There are many of them and they are usually specific to the start-up. Remember that Lean was initially defined as a mindset – reducing waste in order to attain the objective at minimal cost – and a set of guiding principles. One of them becomes particularly important in a Lean start-up’s development: the sanction of the market is put at the center of its approach. Starting from an investment that is initially modest in a general sense, the Lean entrepreneur will focus on quickly materializing their product so that they present the most innovative characteristics from the outset. It must be said that for this presentation, they will benefit from a particularly favorable cyclical environment. Over the last few years, an accumulation of “success stories” has created an audience of investors as well as users in search of initiatives of the like.

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The start-up’s development and activity are carried out in an iterative way, with successive approaches from investors and users as the offer is consolidated. This is the beginning of the incubation phase. Contrary to a “business plan” constructed out of sight so that it is protected from potential competitors, and its initial execution realized under the control of a restricted circle of initiates according to a well-established procedure, the Lean start-up quickly becomes public and enriched by the numerous interactions that are made possible by this publicity. This process is very flexible, enriched by experience and open to new, sometimes unexpected evolutions, similar to how a surfer rides a wave. We could easily think that there is a conflict between seriousness and adventurism, professionalism and amateurism but, this is not the case. The Lean start-up, in its completed version, adopts tried and tested Lean practices: – through the iterative Kaizen approach of continuous improvement based on concrete, simple and inexpensive actions. This is a gradual and gentle approach, which is opposed to the more Western concept of brutal reform of the “throw out the whole thing and start anew” type of innovation, which is often the result of a reengineering process. But Kaizen is first and foremost a mindset that requires the involvement of all actors, who it encourages to reflect on their workplace and to propose improvements: – through constant enslavement of prices, quality and offer accessibility to the sanction of the market; – through the combined work of design, realization and commercialization teams and through co-engineering-based evaluation, which is the only means of making sense of the two preceding practices. There are other more specific practices, but the essentials are there. This approach’s performance comes from its Lean mindset: – avoiding dead ends; – getting rid of useless complexities;

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– avoiding the constraints resulting from (necessarily) risky forecasting activity; – satisfying at the lowest cost; – mobilizing a variety of talents. Surely the explosion of technology and, first and foremost, digitalization is the catalyst for the current multiplication of start-ups. Surely the barriers to entry have withered because of the necessity of finding new forms of development. However, Lean start-ups cannot be summarized by an elegantly improvised exploration of new opportunities. The Lean start-up is founded on an old experience that is codified by Lean practices today. These practices are rigorous and require a certain professionalism for success. 8.6. Conclusion As we can see, Lean offers a vast set of practices differentiated by activities and their scope of application. Furthermore, this set conserves the total coherence given by the simplicity of its fundamental principles. These fundamental principles, insofar as they question the traditional performance approach based on economies of scale, have, of course, found their scope of application in manufacturing activities, starting with the automobile industry. These industries will remain the chosen field for the development and application of Lean practices and their didactic reference. Elsewhere, in process industries, in activities from the primary to the tertiary sector as well as in start-up enterprises, the first and foremost principle of removing waste takes its meaning through the practices of Lean manufacturing.

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There is no doubt that there are still technical advances to be discovered, management reflexes to be acquired and rearguard battles to be won over the weight of conservatism. However, the current is flowing, with efficiency as its source of power. 8.7. Case study: assessing the maturity of Lean management practices The Air France company agreed to test the questionnaire and evaluate its maturity in terms of sustainable development. The following rubric concerning “Lean management” was provided to illustrate the method. The test was conducted by the authors in the form of discussions with representatives from the company, whom we thank sincerely. The maturity evaluations obtained in this way correspond to perceptions, which would, of course, need to be confirmed by precise audits. At Air France, a major global player in its three core businesses which are passenger air traffic, air freight (cargo) and aircraft maintenance, the Lean approach drew from the quality approach with, notably, the ISO 9001 and ISO 14001 certifications. An integrated management system (IMS) was implemented in parallel as of 2005, progressively instilling within the entire company the concern of establishing an approach for continuous improvement. All sectors of business are concerned, operational as well as field operations, maintenance, air service, freight, human resources and other support services. The Lean approach incites us to organize analyses in order to better evaluate the efficiency of processes, detect sources of waste and complexity, and identify pertinent improvement actions with operational actors. These analyses assume support from managers; they must all be mobilized and allured by continuous search for improvements.

×

×

×

Under control

×

×

×

Optimized

Simplification is currently a major feature, all while preserving the concern of satisfying different types of clientele.

All services are involved, both operational (ground operations, engine maintenance, passenger support, etc.) as well as organizational (human resources, etc.). An innovation program has been implemented throughout the enterprise.

Workshops combining specialists in charge of various risks and professions that intervene in order to follow decisive actions and rely on digital and documentary means to assure rapid experience feedback.

Every employee must be listened to and will certainly have aspects to bring up concerning their field. Armed with information and results, executives can correctly mobilize the right resources at the right place

Simplification is present throughout, with the concern of conserving the necessary while respecting requirements related to air transport.

Continuous improvement objectives have been set with a method that complies with the PDCA cycle in all management missions.

The Lean approach supports the quality approach,in particular the 9001, 14001 and OHSAS 18001 standards.

Comments

1 “Sustainable business performance: what are the indicators for a global evaluation?” Available at: http://lacademie.info/content/download/ 9355/146165/version/1/file/Cahier_Academie_33.pdf.

Table 8.1. Air France: overview of the maturity of the Lean management focus. Summary of results of the detailed evaluation grid from the guide “Performance durable de l’entreprise : quels indicateurs pour une évaluation globale?”1

The enterprise practices target-costing (a conception based on the objective cost corresponding to the market) particularly by reducing the variety of components.

×

Deploying

All actors are empowered, starting with actors in the field; improvements are initiated at the level of the work position.

Discovering

×

Non-existent

The enterprise measures results relative to objectives, assesses its dysfunctions, and displays changes in performance.

A “customer first” attitude is at the heart of the enterprise’s concerns (satisfaction, complaints, prices and service) and this level of attention is continuously and methodically monitored.

“The hunt for waste”: processes are under control, failures have been identified and corrected, work positions are sorted, flows are determined by demand, and stocks are not justified solely by demand.

The enterprise respects the PDCA cycle of improvement (Plan, Do, Check, Act), assuring flexibility and versatility.

The enterprise has integrated Lean management into its culture and partnerships.

Air France Overview of the Lean management focus

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We must listen to every person, who will certainly have aspects to report from the field. Armed with information and results, the executive can exercise his role which is to mobilize the right resources at the right place. This change is conducted using tools and methods from Lean, 5S2 and the agile approach in order to obtain sustainable results. Managers are in the position of decision-makers with regard to all elements collected and proposed by their teams, ensuring cohesion among the best practices which serve as support for the approach. The company is reaching a new stage, beyond resource management, favoring follow-up tests with feedback which allow them to go even further in participative innovation. The Executive Management is involved in this approach by continuously emphasizing its progress.

2 5 “S” is a Japanese management technique aimed at the continuous improvement of the tasks performed in companies. Developed as part of Toyota’s production system (TPS), it derives its name from the first letter of each of the five principles: – Seiri (delete): lighten the workspace of what is useless; – Seiton (situate): organize the workspace efficiently; – Seiso (make sparkle): improve the cleanliness of places; – Seiketsu (standardize): prevent the appearance of dirt and disorder; – Shitsuke (follow): encourage efforts going in this direction: self-discipline.

Appendix The Evaluation Questionnaire and Trends Observed

A.1. The maturity evaluation questionnaire Based on the maturity evaluation questionnaires for sustainable performance of enterprises, l’Academie carried out an online survey among its subscribers and other firms interested in positioning themselves relative to averages. Even if the survey cannot be considered as representative from a statistical methodology point of view, the authors consider that the results show a good average vision of French companies. This survey relies on nine synthetic questionnaires corresponding to the four main case studies in Part 1 and the five focus area case studies in Part 2. Their goal is to initiate a very “macro” evaluation process which will serve as the “trigger” for a subsequent evaluation of continuous improvement, decided on by the enterprise. The columns in the questionnaires correspond to the maturity level of the various criteria defined in Table A.1. Here, we note that level 5 corresponds to a very high maturity level which is very difficult to attain, and that level 4 can be considered excellent. Level 3 constitutes a good goal, under the condition that it is achieved in all areas and not just some.

Sustainable Enterprise Performance: A Comprehensive Evaluation Method, First Edition. Jean-Louis Leignel, Emmanuel Ménager and Serge Yablonsky. © ISTE Ltd 2019. Published by ISTE Ltd and John Wiley & Sons, Inc.

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Indicators of maturity in terms of sustainable performance Level

Description

1

Non-existent

The enterprise has not yet identified the stakes of sustainable performance

2

Discovering

The stakes have been identified, but no action has been taken to address them

3

Deploying

The main executives are aware of the importance of the sustainability of performance for the enterprise’s development, and action is taken to improve the enterprise’s maturity level

4 Under control The stakes of sustainable development are shared by the entirety of management and are formally integrated into the planning and decision-making process 5

Optimized

The enterprise has developed an approach for continuous improvement and is among the best over time Table A.1. Maturity indicator definitions

A.2. Trends observed in French enterprises The results of the survey, which have been summarized in Figures A.1 and A.2, range from 1.5 to 2.6 according to the considered axis, with an average of 2.2. They show that the average French enterprise has surpassed the “discovered” level and has begun to operationally deploy a certain number of good practices. Even though these results are “decent”, they show that businesses still have a lot to do in order to improve their practices and optimize their performances in the perspective of development in the middle and long term, notably for the “strategy”, “CSR” and “ethics and compliance” axes. In terms of strategy, the main difficulty lies within the translation of strategic objectives at the level of operational processes, management’s accountability in meeting goals, as well as the involvement of the entire workforce.

Appendix

Figure A.1. Maturity evaluation of French enterprises in terms of sustainable performance along the four main axes. For a color version of this figure, see www.iste.co.uk/leignel/enterprise.zip

Figure A.2. Maturity evaluation of French enterprises in terms of sustainable performance across the five focus areas. For a color version of this figure, see www.iste.co.uk/leignel/enterprise.zip

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As for CSR and ethics, the grade stems from low consideration within the enterprise’s concrete functioning for aspects concerning respect for human rights and preventing corruption as a result of new legislation in the subject area (FCPA). The measure of the enterprise’s maturity level for each of the nine areas, and its representation in the form of radars, give a condensed but exhaustive assessment of the current situation, which allows the Executive Committee to become aware of the enterprise’s strengths and weaknesses in terms of sustainable performance. A “macro” evaluation based on simplified questionnaires like those used in the survey are a good starting point to heighten the Executive Committee’s awareness. However, in order to launch actual improvement projects, an evaluation must then be completed with a more in-depth audit approach, which will account for the company’s environment, its line of business, any inherent risks, its size, the organization, the enterprise’s mode of management, and other factors specific to the enterprise. This goal of this book is to contribute more broadly to making enterprises aware of the importance of envisioning performance from the perspective of sustainability, and of the many facets that management must master in order to achieve this.

Glossary

ABB–ABC–ABM

Activity-based budgeting–costing– management is a performance management method that allows us to develop a budget based on indications of operational performance, and to understand the formation of costs and the causes of their variations. It was designed by Cooper and Kaplan in 1988.

Académie des sciences techniques comptables et financières, France

The Académie (Academy of Accounting and Financial Sciences and Techniques) is the first French-speaking and France-based professional network of competencies and influence in serving the economy.

artificial intelligence

Artificial intelligence (AI) is the group of theories and techniques executed in order to implement machines capable of simulating intelligence.

balanced scorecard

The balanced scorecard (BSC) is a method launched by Robert S. Kaplan and David Norton in 1992 that aims to measure a business’ activities according to four main perspectives: learning, processes, customers and finance.

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BATX

The giants of the Chinese Web: Baidu, Alibaba, Tencent and Xiaomi. Also known as the “Chinese GAFAM”.

Big Data

Big Data is a concept for translating the fact that companies can process increasingly considerable volumes of data, presenting strong economical stakes.

blockchain

A blockchain constitutes a database that contains the history of all completed exchanges among its users since its creation. This database is secured and distributed; it is shared by various users, without an intermediary, which allows each one to verify the validity of the chain.

Bribery Act 2010 (UK)

A British law relating to the suppression and prevention of corruption.

business plan

A document describing the financial and commercial strategy chosen to successfully carry out an entrepreneurial project.

business process

A business process is the entirety of correlating or interacting activities that use elements of input to produce a product or service. It can occupy a quite vast domain, for which the term macroprocess is used, or may be decomposed into more limited actions such as activities.

CIMA (Chartered Institute of Management Accountants)

CIMA is the first global professional agency for management control.

Glossary

cloud computing

189

Cloud computing gives businesses computational power and storage on distant computer servers. A network, generally the Internet, serves as an intermediary.

National Commission on Commission nationale de The Informatics and Liberty is an l’informatique et des independent, French administrative libertés (CNIL), France authority. It is in charge of ensuring that computer technology serves the citizen and that it does not violate human rights or jeopardize human identity and private life, or individual and public liberties. corporate social responsibility (CSR)

Corporate social (or societal) responsibility (CSR), on a voluntary basis, takes into account social and environment preoccupations in businesses’ activities and interactions with other economic actors called “potential stakeholders”.

COSO

COSO is an internal control framework defined by the Committee of Sponsoring Organizations of the Treadway Commission. It is used particularly for implementing the US Sarbanes–Oxley Act and the French Financial Security Law for businesses subjected to American and French laws, respectively.

design-to-cost

An approach that consists of conceiving a product or service from a selling price that the business wishes to use on the market.

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digital service company (DSC)

A digital service company is an expert company of services in the domain of new technology and data processing. It can incorporate several professions (consulting, conception and realization of tools, maintenance or even training) and principally aims to accompany a host organization in the realization of a project.

EFQM excellence model

The European model for operational and managerial excellence from the European Foundation for Quality Management.

enterprise resource planning (ERP)

ERP refers to software packages that aim to follow and manage day-to-day operations, the entirety of a company’s transactional information and operational services.

environmental, social and Socially responsible investing (SRI) conveys the objectives of sustainable governance (ESG) development in investment decisions by adding environmental, social and governance (ESG) criteria in addition to traditional financial criteria for selecting issuers. Foreign Corrupt Practices Act of 1977 (FCPA), USA

The US Foreign Corrupt Practices Act (FCPA), or the law concerning practices of corruption abroad, is a US federal law from 1977 for fighting against corrupt public agents abroad. This law entrusts US courts with extraterritorial jurisdiction that can be used to try US citizens and companies that attempt to corrupt foreign government officials or candidates for government positions.

Glossary

191

GAFAM

Acronym for the giants of the Web: Google, Apple, Facebook, Amazon and Microsoft.

General Data Protection Regulations (GDPR), European Union

Regulation no. 2016/679, known as the GDPR, is a regulation of the European Union that constitutes the text of reference in matters concerning the protection of personal data.

governance

Governance is the execution of a set of measures (rules, norms, protocols, conventions, contracts, etc.) in order to assure better coordination between the stakeholders of an organization, each retaining a morsel of power, so as to make consensual decisions and take concerted action.

IoT (Internet of Things)

The IoT (and the Internet of Objects (IoO)) is the materialization of the Internet in the real world. It concerns all objects, cars, buildings and other elements linked to a physical Internet network that allows communication between them, as well as the ability to collect and exchange data.

ISO

The International Standardization.

kaizen

Kaizen is a process of continuous improvement based on simple, concrete and inexpensive actions. Kaizen is a state of mind that requires the implication of all actors.

Organization

for

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Lean

A management method that aims to improve business performance. This method allows us to research ideal conditions of operation by making personnel, facilities and sites work together in order to add value and minimize as much waste as possible.

make or buy

An analysis that allows us to determine whether the internal production tool is suitable for the production of a product and if it would be better to subcontract part of it or to buy it. This analysis emphasizes knowledge of the business and market supply.

Massive Open Online Course (MOOC)

A MOOC is an online course that is open to all.

NFI

Non-financial information.

Organization for Economic Co-operation and Development (OECD)

The OECD is an international organization of economic studies, whose member countries – the majority of which are so-called developed countries – have a common democratic government system and a market economy.

process intelligence

Process intelligence reconstitutes and analyzes processes, and detects any deviation or variation between objectives and reality in order to act more closely. Monitoring reality is proposed to bring about changes with true added value as quickly as possible.

Glossary

193

ProcessWay

An association of professionals that aims to be a reference within the domain of process approaches in a broad sense, including: from the perspective of organization’s governance, companies, administrations or collectivities, in connection with the project’s management, and the architecture of information system, risk control and the issue of sustainable development.

product life cycle management (PLM)

PLM is a business strategy that aims to create, manage and share information regarding the definition, manufacturing, maintenance and recycling of an industrial project, all throughout the course of its life cycle, from preliminary studies to the end of its life.

quote-to-cash

Quote-to-cash refers to the operational process that goes from order intake (quote) to the proceeds of the product (cash), by going through production planning, purchases, supply, manufacturing and delivery. It is often also called the “supply chain”.

robotic process automation (RPA)

RPA solutions aim to improve operations overall by automating the reliability of repetitive tasks and thus allowing staff to commit to tasks with more added value.

Sapin II, France

Sapin II is the common name for the French anti-corruption Law on Transparency, the Fight Against Corruption and the Modernization of Economic Life. It is the equivalent of the USA’s FCPA and the UK’s Bribery Act.

194

Sustainable Enterprise Performance

Sarbanes–Oxley Act of 2002, USA

The Public Company Accounting Reform and Investor Protection Act, commonly known as “Sarbox”, “SOX” or “SOA”, is a US federal law that imposes rules on accounting and financial transparency. It followed various financial scandals that were revealed in the country at the beginning of the 2000s, such as those involving Enron and Worldcom.

Six Sigma

Six Sigma (or 6σ) is a brand owned by Motorola that refers to a structured management method that aims to improve the quality and efficiency of processes.

socially responsible investing (SRI)

SRI refers to an investment that was realized with the consideration of factors outside financial performance, such as social, environmental, ethical and business governance criteria.

stakeholders

Parties with an interest for an entity or a project.

supply chain

The supply chain (or logistic chain) represents the network that allows products and services to be delivered, from raw materials to final customers. It covers the flow of information, physical distribution, as well as financial transactions. In other terms, the supply chain refers to the links of supply logistics: purchases, stock management, handling, storage, distribution, delivery, etc. An extended vision of the supply chain “from customer to customer” includes order taking from customers and merges with the “quote-to-cash” process.

Glossary

195

time to market

The time it takes from a product being conceived to being made available on the market. In addition, the time between the first expenditure and the first revenue, aiming to fill the gap between them and to increase profit.

Workplace Wellness Indicator (WWI) index

The WWI index allows the measurement of wellness in the workplace. It is a powerful tool in achieving improvement in social performance.

References

Our objective was not to further a given subject matter, but rather to reunite with one single approach the nine “pillars” that must be observed in order to seek sustainability in business performance. We only cite several studies that appear pertinent, knowing that the literature is very abundant in each particular subject matter. Academie (2009). La gouvernance d’entreprise: une vision globale du management. Cahiers de l’Académié, no. 14. Academie (2014). La gouvernance de l’offre: une vision globale du management. Cahiers de l’Académié, no. 26. Academie (2017). Performance durable de l’entreprise : quels indicateurs pour une évaluation globale? Cahiers de l’Académié, no. 33. Antoinette R. (2016). Le gouvernement algorithmique ou l’“art” de ne pas changer le monde. Les (n)ombres ou la vie. [Online]. Ballé M., Jones D., Chaize J., Fiume O. (2018). La stratégie Lean. Editions Eyrolles, Paris. Baret P. (2017). Fanny Romestant, La RSE comme opportunité d’innovations : 10 cas de pratiques responsables. Dunod, Malakoff. Bouée Ch.-É. (2017). La chute de l’empire humain. Mémoires d’un robot. Grasset, Paris. Cameron K.S., Quinn R.E. (2011). Diagnosing and Changing Organizational Culture: Based on the Competing Values Framework. John Wiley & Sons, New York.

Sustainable Enterprise Performance: A Comprehensive Evaluation Method, First Edition. Jean-Louis Leignel, Emmanuel Ménager and Serge Yablonsky. © ISTE Ltd 2019. Published by ISTE Ltd and John Wiley & Sons, Inc.

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CNIL (2017). Comment permettre à l’Homme de garder la main? Summary of the CNIL public debate on algorithms, artificial intelligence and ethics. Cooper R., Kaplan R.S. (1988). Measure costs right: Make the right decisions. Harvard Business Review, 66(5), 96–103. Detœuf A. (1937). Propos d’O.L. Barenton, confiseur, ancien élève de l'École polytechnique. Éditions du Tambourinaire, Paris. Fayon D., Tartar M. (2014). Transformation Digitale. Pearson, Montreuil. Fimble E. (2006). Alignement stratégique. Pearson, Montreuil. Godet M. (2013). Libérer l’emploi. Éditions Odile Jacob. Hammer M., Champy J. (1992). Business Process Reengineering: A Manifesto to Business Revolution. Harper Business, New York. Jombart P. (2016). L’excellence opérationnelle - piloter l’entreprise 5.0. Édition L’archipel, Paris. Jones G., Goffee R. (2003). The Character of a Corporation. How Your Company’s Culture Can Make or Break Your Business. Profile Books, London. Kaplan R.S., Norton D.P. (1992). The Balanced Scorecard: Measures that drive performance. Harvard Business Review, 70(1), 71–79. Kaplan R.S., Norton D.P. (1996). The Balanced Scorecard: Translating Strategy into Action. Harvard Business School Press, Boston. OCTO Technology. (2012). Les Géants du Web, Octo, [Online]. Porter M. (1980). Competitive Strategy: Techniques for Analyzing Industries and Competitors. Free Press, New York. Porter M. (1983). Competitive Strategy. Free Press, New York. Porter M. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. Free Press, New York. Scheer A.W. (1989). Business Process Engineering. Springler Verlag, Berlin. Thévenet M. (2010). La culture d’entreprise. PUF, Paris. Vegleris E. (2006). Manager avec la philo. Editions d'Organisation, Paris.

Index

# 3D printing, 42, 89, 91, 101, 112, see also technological developments 5S methodology, 182 A, B, C ABB–ABC–ABM, 47, 120–131 visualizations, 122, 129, 130 ABC (activity-based costing), 120, 125, 126, 171 activity drivers, 123 activity objectives, 40, 116–119 adaptation, 148 added value, xvi agility, xv, 37, 55, 138 digital, 140 innovation, 73, 77 process, 91, 104, 107, 149, 182 Air France, 30, 131–133, 180–182 Airbnb, 137, 140–142 Alibaba (company), 137 Amazon, 111, 112, 137 analytics, 43 anti-corruption laws, 153

Apple (company), 13, 33, 74, 84 artificial intelligence, 42, 88, 112, 113, 141, 143, 144 atmosphere (offer creation tree), 72 Auchan, 72 auditing, 57, 58, 61, 142, 143, see also compliance automation, 42 balanced scorecard, xvii, 44–47, 129, 130, 133 Basel II (law), France, 50 BATX, 89, see also GAFAM Benetton Group, 161 best practice, 21, 32 beta testing, 96, 101 Big Data, 42, 88, 112, 141, 143, 144, 146 branches (offer creation tree), 70–72 brand image, 26, 85, 157–165 deterioration, 161, 162 maturity, 165, 165 monitoring, 157, 158, 162–165 sustainability, 163 Bribery Act, UK, 51, 153 Bureau Veritas (company), 34 business development, 6, 71

Sustainable Enterprise Performance: A Comprehensive Evaluation Method, First Edition. Jean-Louis Leignel, Emmanuel Ménager and Serge Yablonsky. © ISTE Ltd 2019. Published by ISTE Ltd and John Wiley & Sons, Inc.

200

Sustainable Enterprise Performance

business intelligence tools, 124, see also economic intelligence business processes, 36, 38, 45, 56–58, 60, 124 financial growth, 47 improvement, 127, 132 risk, 50 Cambridge Analytica, 89, 90 case studies, 58–65, 105–110, 131–133, 145, 146, 150–152, 155, 156, 164–166, 180–182 Chartered Institute of Management Accountants (CIMA), 3 circular economy, 32 clean energy, 33 client–supplier relationships, 17–20, 30, 73, 97 climate change, 30, 63 cloud computing, 88 Coca-Cola, 32 collaboration, 18, 76, 98, 146, 150, see also strategic alliance Commission nationale de l'informatique et des libertés (Commission on Information and Liberties; CNIL), France, 52 communication, 54, 55, 64, 108 brand image, 158, 159 product offerings, 73, 74 competencies, 24, 41, 54, 61, competitive advantage, 82–84, 88 core, 83, 84, 86, 87 digitalization, 140 identification, 85, 86, 104, 107 innovation, 71, 72, 76, 77 competition, 17, 19, 20, 23–27, 30, 68 differentiation, 84 economic intelligence, 80, 81 market research, 82 sustainability, 87, 140

compliance, 51, 108, 153–156, see also industry standards, regulation definition, 154 maturity, 155, 156 computer-assisted manufacturing (CAM), 172–174 concept products, 98, 99 confidentiality, 79 consumer groups, 74 consumption, 33, 62, 63, 69 continuous improvement, 47, 72, 78, 121, 143, 178, 182, see also Lean management corporate social responsibility (CSR), xvi, 28–30, 32, 60 challenges, 31, 34, 43 ethics, 165 financial growth, 47 opportunities, 33, 47 talent, 35 corruption, 29, 52, 57, 65, 153 COSO framework, 47–49, 51 CQFD (cost, quality, flexibility, deadlines), 115–120, 126, 130 creativity, 75, 76 “customer itinerary”, 73 customers, 42, 45, 74, 108 expectations, 38, 46, 69, 71, 78, 81, 102, 104, 118, 120, digitalization, 138, 141 monitoring, 142 D, E, F data, 89, 90, see also Big Data competencies, 88 protection, 13, see also privacy deadlines, 109, 116 decision-making, 6, 19, 28, 39, 52, 58 ABB–ABC–ABM, 123

Index

brand image, 163 digitalization, 139, 140 innovation, 75 strategy, 104 value creation, 8, 121 demographic factors, 14 Descartes, René, 75 design to cost, 109 DevOps, 140 differentiation, 34, 69 offer creation, 83, 87 digital transformation, 137–146, see also technological developments maturity, 145, 146, 151 digitalization, 68, 72, 91, 111, 133, 137 brand image, 159, 164 Lean management, 172, 175 disclosure, 79 disruption, 91, 93, 101, 146 competition, 112 distribution, 94 diversity, 65 downstream marketing, 82 echo chamber, 89, 90 economic intelligence, 24, 71–73, 75, 88, 107, 124, see also strategic intelligence confidentiality, 79 sustainability, 79 economic policy, 11, 31 ecosystem, 74, 75, 78, 104 creative, 75, 76 European Quality Foundation Model (EFQM), 101 enterprise culture, xvi, 147–156 ethics, 153, 156 Lean management, 181 maturity, 150–152 performance, 148, 156

201

enterprise governance, 3–5, 23, 28 process, 6, 69, 103, 105 sustainability, 149 enterprise resource planning (ERP), 124–127 environmental factors, 14, 29, 30, 31, 62–65 environmental, social and corporate governance, xvi, 30 e-reputation, 86, 102, 142, 157–165 definition, 163 ethics, 30, 35, 51, 52, 65, 153–156 definition, 154 maturity, 155, 156 performance, 153, 156, 165 eurozone, 30, 68 Facebook, 89, 90 “fail fast”, 141 financial factors, 20, 57, 58 Fleury Michon (company), 35 flexibility, 110, 116, 173, 178 “flexible rigidity”, 173 Foreign Corrupt Practices Act (FCPA), USA, 51, 153, 156 fruit (offer creation tree), 70, 72 G, H, I GAFAM, 12, 89, 144 General Data Protection Regulations (GDPR), 9, 51, 52 Gexpertise (company), 58–61 global economy, 11, 67, 68 globalization, 8, 9, 22, 52, 65, 67–69 Google, xv, 13, 113, 149 governance principles, 47, 53 decision-making, 52–54 maturity, 7, 58–65 navigation, 5

202

Sustainable Enterprise Performance

Grenelle II (law), France, 29, 30 growth, 21, 23, 40, 47, 65, 68 brand image, 160 Lean management, 172 product offerings, 70, 74 H3O (company), 150–152 health and safety, 21, 43, 49, 50, 64, 140, see also working conditions human resources, 44, 50, 65 innovation, 76, 77 humus (offer creation tree), 71–73 IBM, 84, 85 ideological bubble, 89, 90 industrialization, 96–100, 108 industry standards, 21, 22, 37, 48, 58, 61, 180 information systems, 2, 56, 57, 80 pyramid, 124 risks, 50 informational assets, 88, 89 innovation, 24, 61, 76, 77, 89, 149 competitive advantage, 148 disruption, 112 Lean management, 181 process, 104, 105 integrated reporting, xvi intellectual property, 13, 51, 52 intelligence, see economic intelligence, strategic intelligence interest groups, 20, 55, 74, 79 International Federation of Accountants (IFAC), 3 International Integrated Reporting Council (IIRC), xvi International Organization for Standardization (ISO), 22, 37, 61 Internet of Things (IoT), 89, 144 interventionism, 21 iXBlue, 155, 156

J, K, L Japan, xiv, 22, 161, 182 Kaizen, 178 key performance indicators (KPIs), 109, 115, 125 digitization, 142 enterprise culture, 148 Keynesian economics, 68 Kodak, 84, 143 Lean management, 101, 102, 116, 149, 167–182, see also continuous improvement best practice, 174 in IT, 172–174 in service industries, 174, 175 maturity, 171, 180–182 performance measures, 169, 172 monitoring, 175 Lean start-up, 78, 176–179 legal factors, 9, 13, 52, 60 compliance, 153, 154 Lise Charmel (company), 145, 146 logistics, see supply chain L’Oréal, 62–65, 164–166 LVMH (company), 162 M, N, O macro competencies, 83 macro-processes, 37–40, 46, 47, 60, 80, 93 supply chain, 113, 115 “management by processes”, 36, 37 market expectations, xv market research, 72–74, 78–80, 108 digitalization, 139, 142 market share, 24, 27, 33, 43, 104 marketing, 74, 82, 94, 102, 143 brand image, 158 slogans, 160

Index

mass production, 147, 169 material requirement planning (MRP), 126 maturity indicator rubric, 184 media, 20, 74 micro-environment, 16, 17, 22, 23 Microsoft, 13, 85, 144 negotiation, 25, 55 net promoter score (NPS), 160 Netflix, 137 Nike, 160, 162 objectives, 53, 58, see also strategy monitoring, 44, 56, 57, 61, 63, 64, 130, 132, 146 Observatoire de la responsabilité sociétale des entreprises (OSRE), France, 30 offer creation, 38, 67–82, 91, 95, 103, 105, see also product offer assessment, 107, 109, 141 ethics, 154 innovation, 148 maturity, 105–110, 165 offer creation tree, 70–72 open innovation, 77 operational management, 124–126 optimization, 41, 46, 124–127, Orange (company), France, 33 Organization for Economic Co-operation and Development (OECD), 68 P, Q, R Pareto principle, 173, 175 patents, 13, 25 PDCA (plan, do, check, act), 170, 171, 181 performance measures, xv, 39, 45, 46, 54, 124, 125, 132, 133, see

203

also key performance measures, result objectives brand image, 157 digitalization, 138, 146 enterprise culture, 147 focus on, 135 Perrier (company), 161 pilot project, 96 pivot, 176, 177 political factors, 12 privacy, 29, 90, see also data protection process activity objectives, see activity objectives, see also result objectives process approach, 46 process improvement, see business processes process intelligence, 29, 102 product design, 75, 93, 94 product launch, 74, 101, 102 product offerings, 24, 27, 38, 67–82, see also offer creation assessment, 103, 104, 107, 123 creation, 45, 67–75, 81, 82, 91–96 digitalization, 138, 141 innovation, 75, 76, 105 lifecycle, 72, 91, 94, 95 management, 100–102 production, 68, 100–102, 114–116 productivity, 170, 175 profit, 70, 74, 94, 95, 126, 128 prototyping, 85, 96, 112 public sphere, 20, 55 quality, 8, 73, 91, 115, 180 industry standards, 22, 37 products, 18, 24, 27, 43, 68 quote-to-cash, 44, 47, 113, 117, 133 recession, 11 recycling, 32, 62

204

Sustainable Enterprise Performance

reduction, 29, 33, 50, 62, 177 regulation, 20, 21, 58, 93, 96, 97 renewable energy, 12 research and development (R&D), 89 resource drivers, 123 resources, 41, 56, 72, 123, see also enterprise resource planning competitive advantages, 83 discontinuity, 96 financial, 43, 45 human, 43, 44, 50, 56, 57, 85, 86 strategic, 87, 88 responsibility, 32 result objectives, 39, 40, 46, 60, 115, 117, 118, see also performance measures return on investment (ROI), 27, 39, 63, 110 revenue, 25 risk mapping, 47, 49, 50, 61 risks, 30, 34, 44, 52, 64 evaluation, 50, 103 innovation, 77, 140 management, 3, 12, 48–50, 56, 58 product offerings, 93–95, 103 robotization, 143, 144 roots (offer creation tree), 70, 71 rumors, 162 S, T, U Safran Group, 105–110 Sapin II (law), France, 51, 153, 156 Sarbanes–Oxley (law), USA, 51 segmentation, 71, 72, 81 service level agreements (SLA), 98

siloization, 37, 127, 132 simplification, 132, 181 simultaneous development, 92 Six Sigma, 116 “social license to operate”, 35 social media, 9, 20, marketing, 159, 160, 164, 165 social responsibility, 31, 35 socio-cultural factors, 13, 22, 31 “soft” skills, 76 start-ups, 141, 142 innovation, 75, 77 Lean management, 176, 177 stakeholders, 14, 15, 28, 31 strategic alliance, 18–20, 98 intelligence, 29, 42 marketing, 80, 81, 91, 93 strategy analysis, 23, 32, 49, 54, 57, 75 brand image, 163–165 development, 47, 60, 82 governance, 24 objectives, 24, 36, 37, 40, 56, 60, 115 process, 26, 28, 53 resources, 87, 88 supply chain, 18, 38, 64, 69, 96, 98, 111–115 maturity, 131–133 process, 113, 129 supranationality, 51, 153 sustainability, 7, 30, 44, 62–65 construction industry, 34 waste elimination, 168 sustainable development, 35, 58–65, 87, 96 management, 46 partnerships, 17

Index

talent, xvi, 35, 43, 44, 54, 64, 82, 85, see also resources: human innovation, 76, 77 technological developments, 12, 28, 33, 56, 57, 111–112, 137 case study, 145, 146 competitive advantages, 84, 88, 89 digitalization, 139, 142–144 economic intelligence, 80–82 Tesla (company), 10, 137, 141 time factors, 37, 38, 40, 92 digitalization, 139 supply chain, 114 Total Quality (program), 116, 127 Toyota, 149, 161, 167 Toyota production system (TPS), 168, 169, 182 training, 45, 47, 50, 61, 64, 150 transparency, 29–31, 51, 58, 61, 65, 100 internal, 54, 150 trunk (offer creation tree), 71, 72, 90

205

turbulence, 10, 11, 19, 43 Twitter, 73 Uber (company), 16, 142 “uberization”, 137 uncertainty, 10 upstream marketing, 82 V, W value creation, 8, 27, 86 value stream mapping, 175 Volkswagen, 161 waste elimination, 168–170 wealth creation, 21 Web 3.0, 71 working conditions, 29, 31, 43, 52, 64, see also health and safety Workplace Wellbeing Index (UK), 42 world-class manufacturing, xvii

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