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.

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.

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.

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

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.

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.

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.

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. 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 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. 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. 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. 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. 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.

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.

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;
  • - 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.

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.

1.3.1. 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 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: fighting against corruption, encouraging loyal competition, etc.;
• – 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.

1.3.2. Companies are more and more concerned

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.

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 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.

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.

1.4.1. 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 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.

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’ 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:

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.).

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.

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 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.

1.5.1. 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”;
• – 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.

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.

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-and-effect relationships between them, notably by distinguishing activity objectives (those that we can act on) and result objectives (which verify the attained progress).

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.

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

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.

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.

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 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.

1.6.1. 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.

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;
• – 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:

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.

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 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 aligned with the good practices described in the Académie’s guide for global performance, since they take into account technological, digital and sociological evolutions of the economic environment in which the enterprise is evolving.

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.

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.

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.