The timeless principles of successful business strategy corporate sustainability as the new driving force

Management for Professionals Eric Viardot The Timeless Principles of Successful Business Strategy Corporate Sustainability as the New Driving Force Second Edition Management for Professionals More information about this series at http://www.springer.com/series/10101 Eric Viardot The Timeless Principles of Successful Business Strategy Corporate Sustainability as the New Driving Force Second Edition Eric Viardot Department of Strategy, Leadership and People EADA Business School Barcelona Barcelona, Spain ISSN 2192-8096 ISSN 2192-810X (electronic) Management for Professionals ISBN 978-3-662-54488-4 ISBN 978-3-662-54489-1 (eBook) DOI 10.1007/978-3-662-54489-1 Library of Congress Control Number: 2017939355 # Springer-Verlag GmbH Germany 2017 This work is subject to copyright All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed The use of general descriptive names, registered names, trademarks, service marks, etc in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations Printed on acid-free paper This Springer imprint is published by Springer Nature The registered company is Springer-Verlag GmbH Germany The registered company address is: Heidelberger Platz 3, 14197 Berlin, Germany Acknowledgment For this second edition, I would like to express my gratitude to Daniela Barrenechea and Nathaniel Dolan for the careful review of the manuscript I am also very grateful to Dr Prashanth Mahagaonkar, Ruth Milewski, and Michael Bursik from Springer to have this revised version published with a complete creative freedom Finally, I thank my wife Anne for her patience and her faithful support v Contents The Importance of Sustainability in Corporate Strategy Why Are Corporate Ambition and Culture Vital for Sustainability? 2.1 An Agenda 2.2 A Compass in a Tornado 2.3 A Filter for Selecting Development Paths 2.4 A Unifying Cement 2.5 A Strategic Ambition Needs to be Completed with an Outstanding Corporate Culture 7 Treasuring Selected Customers: The Secret for Sustainability? 3.1 The Importance of Customers 3.2 The Principle of Deep and Constant Understanding 3.3 Needs and Wants 3.4 The Principle of Market Focalization 3.5 The Choice of Profitable Customers 3.6 Offering More Than the Benefit: The Total Value Equation 3.7 Benefit, the Central Core of Value for Customers 3.8 Nurturing Customers’ Loyalty 3.9 Communicate with the Customer 11 11 12 14 15 16 18 19 21 21 How Do Enduring Firms Outlive the Environment and the Competition? 4.1 Political and Legal Environment 4.2 Economic Environment 4.3 Socio-cultural Situation 4.4 Technological Environment 4.5 Ecological Constraints 4.6 The Ethical Imperative 4.7 The Principle of Permanent Monitoring 4.8 A Definition of Competition 4.9 Identification of Competitors 25 25 26 27 27 28 28 29 30 31 vii viii Contents 4.10 4.11 Competitive Asymmetry and Doppler Effect in Competitive Identification How Do Sustainable Firms Outlive the Competition? Why Sustainable Firms Have a Superior Management of Capabilities? 5.1 Resources 5.2 Skills 5.3 Identifying Capabilities 5.4 Utilization of Various Capabilities Available 5.5 The Main Principles of Resource Management: Threshold, Exclusivity, and Mass 5.6 Managing Skills 5.7 The Principle of Alignment 5.8 The Principle of Capabilities Rationing 5.9 The Principle of Valorization 5.10 The Principle of Constant Flexibility 5.11 The Principle of Singularity 5.12 Capabilities Development 32 33 37 37 39 39 40 41 42 42 43 44 45 46 46 Selecting the Right Organization and Structure for Sustainability 6.1 Functional Structure 6.2 Divisional Structure 6.3 Holding Company Structure 6.4 Matrix Structure 6.5 The International Organization: A Non-issue 6.6 Multidisciplinary Teams 49 50 51 52 53 54 54 Learning from the Operational Practices of Sustainable Companies 7.1 Disciplined Autonomy in Decision Making 7.2 The Principle of Efficient Simplicity 7.3 Wise Outsourcing of Operations 7.4 Hierarchical Frugality 7.5 The Practice of Continuous Learning 7.6 Accountable Control System 57 57 58 60 60 61 62 Innovation: The Central Way to Achieve Corporate Sustainability 8.1 Different Categories of Technological Innovation 8.2 Different Types of Organizational Change 8.3 The Reasons Behind Technological Change 8.4 The Origin of Organizational Change 8.5 Preparing for Change 8.6 Necessary Changes: Degree and Interest 8.7 Change and Available Resources 8.8 Capabilities that Must Be Preserved 65 66 67 68 69 70 71 72 72 Contents 8.9 8.10 8.11 8.12 8.13 ix Timeframe for Change Employees’ Motivation to Change The Leaders’ Ability to Lead Change The Credibility of Leaders Support from External Consultants 73 73 74 74 76 Managing Change and Transformation for Corporate Sustainability 9.1 Implementation of Technological Changes 9.2 Development of Technical Innovation 9.3 Implementation of Organizational Changes 9.4 The Principle of Systematic Experimentation 9.5 Controlling the Operational Timetable 9.6 The Appropriate Maneuvering Style 9.7 A Clear, Appropriate, and Reassuring Communication 9.8 Political Agility 9.9 Tenacity in Fulfilling the Change 9.10 Responsibility 9.11 Change in Times of Crisis 77 77 80 81 82 83 84 85 86 86 87 88 10 Growth Strategy for Corporate Sustainability 91 10.1 The Causes of Growth 91 10.2 Increasing the Number of Clients 92 10.3 Increasing Attractiveness 93 10.4 Exploiting an Excess of Resources 94 10.5 Achieving the Economies of Scale and Scope 94 10.6 Dealing with Risks Within the Environment 95 10.7 Responding to Shareholders’ and Managers’ Desires 96 10.8 The Routes to Growth 96 10.9 Specialization 97 10.10 Vertical Integration of Capabilities in Existing Businesses 98 10.11 Leveraging of Existing Capabilities Across New Businesses 98 10.12 Total Diversification 99 10.13 Diversification: The Case of Internationalization 100 10.14 External Growth 101 10.15 The Limits to Growth 102 11 The Value of Great Execution and Humility for Sustainability 11.1 Quality of Operations 11.2 From Success to Failure 11.3 Sustainable Companies Avoid Being Blinded by Present Triumphs 11.4 Accepting Decision Sharing 11.5 Organizing the Succession 12 105 105 106 108 109 110 Conclusion: Timeless Principles of Corporate Sustainability 113 The Importance of Sustainability in Corporate Strategy This book is intended for those who run, or want to run, a business whatever its size or activity, but with the objective to make it sustainable so that it will be a legacy for the future generations Indeed the premise of this book is to consider than the purpose of strategy is not simply to win in the short term but also to endure and to stand the test of time But while it is usually possible for a company to be temporarily profitable it is much more difficult to sustain corporate success over a long time Only a limited number of companies are able to achieve such a feat, even though they are not often in the media spotlight In this regard, companies are like empires The most spectacular are not necessarily the most efficient or the longest-living In fact, the famous empire of Alexander the Great lasted only 12 years, and those of Hitler and Napoleon I both fell after 19 years Conversely, the Ottoman Empire lasted for nearly 650 years; the Roman-Byzantine Empire survived for almost 1500 years and the Empires of China and Japan remained even longer Despite their sometimes discreet place in the history books, those empires left their mark on mankind Similarly, sustainable companies not always create a buzz even though they are present and numerous Today approximately 1700 companies worldwide have been active for more than 150 years Of these 1700 companies, 250 have been in operation for more than 400 years Some have remained modest in size while others have become powerful multinationals The fact that they could survive and prosper is the best example of strategic success in contrast to the many others that have perished Naturally the goal of enduring companies is to be significant over time, and not just to linger and survive Indisputably, there is a greatness in building an enduring firm which achieves long standing recognition at local, national, or global level for the value of its products or services However it is not easy to grow a sustainable company because the pressure of immediate issues in front of the vagueness of the future is driving corporate leaders to focus on the short term Often this trend is reinforced by a compensation system which rewards short term performance over long term results Naturally, short- # Springer-Verlag GmbH Germany 2017 E Viardot, The Timeless Principles of Successful Business Strategy, Management for Professionals, DOI 10.1007/978-3-662-54489-1_1 98 10 Growth Strategy for Corporate Sustainability 10.10 Vertical Integration of Capabilities in Existing Businesses For increasing the revenues of a firm, one route is to increase the value of the solutions provided by the company to its existing customers in its current businesses This requires the development of new activities along the business “value chain” They may be far from the customers such as sourcing raw materials or components to get better quality, more rapid delivery or to secure the supply Other activities may be closer to the clients For instance, when a company decides to have its own distribution network or logistics to offer a superior, faster, and more efficient delivery to its customers Sometimes the building of new capabilities entails buying them from the outside i.e acquiring other firms, which have already developed the know-how or resources As we discuss later, integrating new companies is never easy In any case, the internal or external development of a new set of competences and resources requires a strong ability to manage both technological and organizational changes We have seen in Chaps and that this is one of the forces of sustainable companies 10.11 Leveraging of Existing Capabilities Across New Businesses Another way to increase total turnover is using existing capabilities to develop new businesses that offer new products or services and search for new categories customers The basic idea is to sell more existing products to new customers, newer products to existing clients, or newer products to newer customers This development mode requires special market research First, it is important to understand and identify expectations of existing customers Second, the firm must discover all the needs or desires of new customers that the company can fulfill Experience in communication and brand management is also useful in changing the perception of a new product by the customers Indeed, traditional customers may be destabilized by the fact that their regular supplier offers them something new Conversely, product positioning management skills help to make existing products attractive to new potential customers Business expansion needs the ability of the company to design and manufacture new products with its existing resources and competences It also depends on its skills to create a maintainable competitive advantage (see Chap 3) with unique, unmatched, and evolving skills in relation to market conditions and the environment (see Chap 4) 10.12 Total Diversification 99 10.12 Total Diversification Total diversification means standing out from its core business and developing new capabilities If the new activities have some points in common with the existing activities, diversification is considered related If the activities are completely new to the firm, diversification is called conglomerate, absolute, or total The majority of sustainable companies proceed through related diversification To generate economies of scale and scope, they rely on their portfolio of available resources and enrich it by building or acquiring resources and expertise adjacent with the aim to engage in new activities Related diversification is based on synergies with existing skills and resources of commercial, technical, or managerial nature It is obviously less risky than an absolute diversification since the company diversifies on a familiar terrain, which facilitates experimentation—essential to any major change—and allows for a better control Moreover, in case of failure, related diversification limits risks and avoids catastrophic consequences Indeed, the firm still has the ability to stop the new activity and to turn back without jeopardizing its whole organizational system and its operation Some sustainable firms successfully implement one related diversification to another, which drives them more and more apart from their initial activity, but they it step by step in leveraging existing or recently developed skills In contrast, conglomerate diversification enforces coexistence of completely independent activities that not share common capabilities The only common point is the company headquarters Basically, this type of diversification meets the same logic as that of fund managers who diversify their risks by investing in the capital of several companies Absolute diversification is frequently linked to the strong hold of leaders, usually the founders, whose strategic vision is not limited to just the universal propagation of a single type of solution As such, the diversification reflects changes in their strategic ambition depending on the fluctuations of their reflection, maturity or ongoing desires Other conglomerate diversifications are made to better attenuate the risk when the principal activity is bound to disappear in short or medium term This is how a chemical group evolved into a giant in the tourism business; how a company originally in the field of paper pulp has become a leading mobile phone company; and how a company that used to sell soft drinks a century ago is now a leading global hotel chain Clearly, a policy of total diversification can lead to a genuine strategic dilemma when a new activity comes to be more successful than the original activity when the firm was created Faced with this situation, leaders of sustainable firms always define a new strategic plan for their company in order to avoid the fate of corporation that have lost their souls from over diversifying Many of them eventually have disappeared because their customers, their employees, or their partners no 100 10 Growth Strategy for Corporate Sustainability longer understood what they wanted to do, withdrew their confidence, and gradually abandoned them 10.13 Diversification: The Case of Internationalization One frequent avenue for growth is the geographical diversification that offers the benefits of developing turnover while spreading out risks between different zones The majority of enduring companies have successfully internationalized their revenues Yet numerous companies fail to cross their borders because of a lack of resources and of preparation Internationalization is more than just business expansion Too many companies are just internationalizing when they can no longer sell on their home market, either because it is saturated of because there is a recession Then they try to sell their current products to new customers, sometimes at very short notice and with few or no preparation No wonder they fail on the long term and they prefer to retreat to their domestic markets after suffering a failure The reality is that the growth by internationalization is close to a total diversification as it involves organizational changes often accompanied by cultural changes Internationalization means working in many different countries around the world with executives and employees who speak different languages, have different customs, and hold distinct commercial approaches A strategy of internationalization taken to the extreme, i.e having a worldwide coverage, leads to the development of new offers and the establishment of local structures dedicated to a particular geographic market It requires a de facto development of new skills The experience of sustainable companies indicates that successful internationalization is easier when all employees, regardless of their location, share the strategic ambition and core values of the firm These values provide the benchmarks and bonds necessary for all members of local organizations, sometimes very far from the headquarters, to integrate into the structure and to participate fully in its growth by adapting to the reality of each geographic market The quality of management is also important for a successful internationalization The role of leaders is particularly important to ensure the respect of fundamental values and principles when the commercial development of local entities is implemented When it comes to internationalization, sustainable corporations proceed by successive testing, as with any change To enter into new geographic markets, they usually start indirectly by contracting a distributor or a local partner This allows them to test the water while minimizing risks If the experience proves positive, they move quickly to the next step, which is direct investment in the creation of a local subsidiary This gives them direct contact with the customers and complete control over the operations to be performed to satisfy those goals There is no uniform functioning model to internationalize Several large multinational sustainable companies are centralized while others are decentralized Each mode has its advantages and disadvantages in terms of speed of reaction, adaptation 10.14 External Growth 101 to local markets, capacity to take advantage of synergies, economies of scale or scope, etc 10.14 External Growth Growth is a particular mode of change It has a direct impact on the structure and operation of the business Therefore, as with any transformation, growing never happens without risk External growth through acquisition is usually more complicated than internal—organic growth Various studies show that more than half of mergers or acquisitions turned out to be strategic failures: companies would have been richer, more profitable and more effective had they remained independent One explanation is that many mergers or acquisitions are made for reasons that are more financial than strategic Short-term gains are the priority and leaders have little regard for their company’s real capacity to absorb a new entity This explains many transplant rejections that eventually translate into failed mergers The fact is that any merger process is tricky Consequently, sustainable firms tend to favor acquisitions of small structures rather than large-size companies that are always much more complicated to integrate (see Fig 10.5) In this way, they avoid many unnecessary qualms Rather they focus on the future and the new operations to perform Some sustainable companies give considerable autonomy to the firms they buy or acquire Others prefer to operate in synergy by facilitating the cooperation of the newly acquired within the different units of the group Other enduring firms develop a synergy with their acquisitions through the provision of capabilities from the headquarters such as a brand image, a particular managerial know-how, or a specific technical expertise such as the implementation of an Information Technology system Many firms fail to grow and to endure because they fail to integrate or nurture new skills and resources It is the experimentation and the quality of execution of operations necessary for growth that enable sustainable companies to develop better than others By expanding their markets and resources, they enrich their genetic heritage and contribute to their perpetuation Fig 10.5 Growth is easier with the acquisition of small firms than large companies 102 10 Growth Strategy for Corporate Sustainability 10.15 The Limits to Growth Undoubtedly, any growth policy encounters limits, especially when the company begins to reach a large size (see Fig 10.6) One risk is the actual physical saturation The company undergoes a situation analogous to a water lily doubling in size every day; it takes nine days to occupy half of the pond, but on the tenth day it fills the pond completely Some growth rates are thus unsustainable on the long run They lead the company to an asphyxiating saturation with no more space to grow Or else the company is overheating and thus becomes less profitable because of its diminishing yields or diseconomies of scale There are also some legal risks related to achieving a dominant position in the market As representatives of customers and consumers, governments not appreciate monopolies apart from those that belong to the public sphere The danger for the company is then to be nationalized or forced to sell some activities under penalty of fines that are generally substantial Growth can also cause a “strategic cataract,” that is to say, a clouding of leaders’ vision that occurs when the size and complexity of the organization make them lose touch with reality, especially with the market and the competitors They are engulfed in internal priorities where what is urgent often outweighs what is important, in particular just after an acquisition They then focus only on internal problems and short-term issues, ignoring the real strategic priorities Bankruptcy is not so far away in this case There is also a risk of “strategic astigmatism” due to leaders’ sources of information Through sheer lack of time, leaders come to rely only on the Fig 10.6 The self-generated constraints to unlimited growth 10.15 The Limits to Growth 103 information provided by their subordinates and specialists even though they are interested in what goes on outside The problem is that there is a natural tendency in large organizations and bureaucracies to present only good news to executives This prevents the announcer from suffering the messenger’s syndrome which, in ancient times, implied that the issuer of bad news was considered guilty and then executed Therefore, information is filtered positively at every level of the hierarchy, completely distorting the reality For this reason, leaders of sustainable companies always take the time to talk directly with the customers In this way, they retain a sense of reality and are cautious with excessively positive market analysis Overgrowth may finally cause organizational obesity The company can no longer adapt because of its cumbersome structure that continuously expands and keeps becoming more complex It may become more and more disconnected with changes in its environment or is unable to effectively implement the decisions commanded by the brain The response of enduring firms to corporate obesity shows that the success of a company depends more on its reactivity than its size Actually, they not hesitate to split structures that have become too heavy to make them smaller in order to regain flexibility and velocity This is not an obvious choice because, in times of growth, firms tend to avoid questioning themselves, and to opt for the easy way out by simply adding staff to the existing structure More generally, perennial firms regularly evaluate the potential of each of their businesses in order to make sure that they are not hanging on too long with a failing product or division They have learnt to make exit decisions and to let go when necessary They avoid growing beyond the optimal threshold that will only tire them out This threshold is reached when an activity ceases being profitable because the market is no longer able to sustain further growth, and when investments required to acquire marginal customers become too expensive in relation to the economic returns they bring When they reach this stage, sustainable companies prefer to stop an activity or sell it off, even if that means reconsidering their strategic ambition The Value of Great Execution and Humility for Sustainability 11 The strategic success of a firm can only be measured over time Many companies that were at the top one day can suddenly go bankrupt while firms that did not completely disappear never regained their past success except some very few exceptions The leaders of sustainable companies are aware that one’s fall from grace can come swiftly They know that strategy is not the only element needed to succeed For success also depends on the quality of operations and sometimes on the mere chance of seizing the right opportunity at the right time So, they inject a healthy dose of humility into the relative importance of the strategy they develop as well as for their own actions 11.1 Quality of Operations Execution is as important as strategy in the long-term success of a firm Enduring companies understand that it is not enough that their leaders the right things; the managers and the employees must also the things right (see Fig 11.1) To paraphrase General Moltke, the famous German general of the last century, success in business often depends less on what we than how we it Firm resolution and tenacious execution of a simple idea will most certainly lead to the goal Many brilliant strategies designed by inspiring leaders have failed because the corresponding organizations were unable to perform the necessary operations in due time In this case, Thomas Edison’s maxim is most pertinent: “Vision without execution is hallucination” Sometimes failure comes from the lack of available capabilities The company will explode like the frog who wants to be bigger than the ox in one of Aesop’s fables! The responsibility rests with leaders who failed to choose a strategy commensurate with the capacities at their disposal For this reason, large sustainable companies built well-oiled competences in production, transportation, and distribution for instance # Springer-Verlag GmbH Germany 2017 E Viardot, The Timeless Principles of Successful Business Strategy, Management for Professionals, DOI 10.1007/978-3-662-54489-1_11 105 106 11 The Value of Great Execution and Humility for Sustainability Fig 11.1 Strategic vision and operational execution However, an impaired performance may also be related to a lack of training or of employees’ discipline It is not by chance that enduring companies demonstrate an obsession with the training and the empowerment of their workers, especially the front line employees They echo the soldiers of the Macedonian phalanx, the Roman legion, or the Prussian Army, whose rigorous training led them to victory even with fewer troops than their opponents with larger and theoretically more powerful forces Enduring companies also follow a strict financial discipline, especially in costs and cash flow control Doing so, they avoid the fate of many companies that choked themselves in growing too fast Victims of their own commercial success, these firms were left without cash to pay their employees, suppliers, or their funds providers; or without any means to finance the necessary investments to ensure their sustainability Nevertheless, a perfect operational performance is neither an end in itself nor an absolute guarantee of sustainability It may even become a liability Indeed, a company that gets used to excelling in one area can be caught up in its own arrogance and die of its own success: it falls victim to the Icarus Syndrome Icarus’ artificial wings allowed him to fly from his prison, but they also failed him: as he flew near the sun, the heat melted the wax holding his wings and he drowned in the Aegean Sea 11.2 From Success to Failure Factors fueling a firm’s success can also lead it to failure if it pushes it to the extreme Excessive success sometimes leads to complacency, dogmatism, ritualization, and excessive specialization For instance, some successful firms systematically repeat the strategy that was successful in a particular area in other contexts It is not a surprise if they fail most of the time because their new clients, environment, and competitors are different from the initial situation 11.2 From Success to Failure 107 Fig 11.2 Main risks of having too much success in business For other companies, being perfectionist does more harm to their cause than good Where attention to detail was once a productive feature, it becomes a nagging obsession; an innovative research becomes a trivial pursuit of inventions; and well thought-out growth turns into a raging expansion Other winning companies idolize one key resource or one skill at the expense of all others that are virtually forgotten This results in the hyper-specialization of a strategy, which then loses its equilibrium and becomes risky The phenomenon worsens when leaders make causal inversion, i.e they consider that the company’s success comes from a determined function or activity when in fact it is only the result of something else This contributes to building even more on that activity and losing sight of all the components of reality (Fig 11.2) The reason for all these perversions is usually because the strategy and the systems implied are rooted in the employees’ mentality and everyday behavior to the extent that it becomes an implicit cultural phenomenon for all, backed by symbols, procedures and organizational routines To challenge them means to question the strategy, thus the whole company These strategic drifts caused by too much success are far from being uncommon Besides the companies that disappear because of their failures, there are also those that are blinded by their own success and perish because they are unable to adapt to new situations Leaders of sustainable companies avoid this fate by maintaining a certain degree of humility First, they not allow themselves to be dazzled by their triumphs Then, they agree to share making decision They also know to build trust with their employees and yield to them Finally, they never consider themselves as indispensable and irreplaceable (Fig 11.3) 108 11 The Value of Great Execution and Humility for Sustainability Fig 11.3 Escaping the main risks of excessive strategic success 11.3 Sustainable Companies Avoid Being Blinded by Present Triumphs To fulfill the company’s strategic ambition, sometimes set by one of their predecessors, the leaders of sustainable companies not hesitate to challenge the current business model They resist the phenomenon of ready-made answer driven by the company’s culture and automatically applied to new circumstances Consequently, they always question the established patterns of thought, including their own They rely on external consultants or external educators who provide them with strategic analysis tools that allow them to view reality differently from what they usually see They also avoid falling into the trap of selective perception and stereotypes For individuals, selective perception is selecting only the information that intuitively seems consistent with their level of knowledge and experience Additionally a stereotyped vision of reality summarizes it in a partially representative model Both simplifying approaches allow leaders to save time However, if such approaches become the exclusive modes of reflection, there is a high risk that any disturbing information will be systematically excluded, and any questioning of the dominant thinking pattern becomes virtually impossible Executives of long lasting companies also keep in mind that, like all decision makers, they tend to exaggerate their own influence or that of the organization on external events This is even more so when their firm has only known success and never endured setbacks Overestimating the capacity of their organization, corporate leaders risk being overwhelmingly proud and develop a superiority complex When succumbing to it, they tend to disdain customers, underestimate competitors, and stop believing in seizing new opportunities Believing with arrogance that the 11.4 Accepting Decision Sharing 109 environment must adapt to their business and not the reverse, they run their company straight towards bankruptcy 11.4 Accepting Decision Sharing Leaders of sustainable companies understand that strategy arises from the variety and the diversity inside and outside the company Indeed, new ideas not come only from the top Ideas from the top may even be rejected if they deviate too much from the dominant cultural model or if they are poorly transmitted They can also reach all levels of the company via transplantation or imitation Executives of enduring firms recognize that innovation may emerge from any level of the organization They often encourage it For example, a top manager liked to remind his middle managers that even if he came up with a brilliant idea per day while all of them came up with one per year, he would still be beaten; because his 365 ideas could not even match the multitude of ideas from his 1000 executives Senior managers of long lasting corporations also admit that an innovation may initially deviate from established standards So, they tolerate this deviation in some parts of their organizations while observing the effects It is a form of experimentation Rather than relying on some outstanding talents or brilliant individuals, they build and then run a system in which teams and an organizational culture favor the success of all employees For it is impossible for an individual, however gifted, to perform a good job in an inefficient system On the other hand, a well-designed system staffed by average but properly trained employees may permanently achieve remarkable results All this implies that corporate leaders accept some form of protest that is reflected in an open and positive mode in terms of recruitment, motivation and promotion of the employees Indeed, it is difficult or even impossible to challenge the status quo when personal criticism is not tolerated such as in those firms whose leaders, wanting to look like giants, surround themselves with dwarves and use fear as a primary mode of management To motivate and lure their troops, leaders of sustainable companies associate their employees with their companies’ victories and say “we” instead of “I” when speaking of actions that led their companies to success They have no problem in recognizing their own weaknesses and admit their mistakes when the company experiences setbacks They say such phrases as “I not know”, “I was wrong” or “I need your support.” Obviously, such phrases seem difficult to pronounce for leaders of powerful corporations, but these phrases demonstrate the leaders’ ability to assume their responsibilities, a quality widely appreciated by all employees On the other hand, refusing to acknowledge mistakes that are often obvious, blaming failures on others, or calling it bad luck is generally regarded as a sign of weakness, or even cowardice or hypocrisy This attitude destroys the leaders’ sense of control, tarnishes their credibility, and undermines the confidence that employees are willing to give 110 11.5 11 The Value of Great Execution and Humility for Sustainability Organizing the Succession Leaders of sustainable companies also express humility when they resign from their top positions This concerns mainly the company’s founder History shows that many companies collapsed or were improperly sold after the death of their founder French writer Chateaubriand noted that “aristocracy has three successive ages: the age of superiority, the age of privileges, and the age of vanities” Originating in the first generation, elitism degenerates in the second, and disappears in the final one Mutatis mutandis, this rule also applies to the business world: the founder successfully creates the company, the children run it, and the grandchildren ruin it In fact, many companies’ succession failures are primarily the founders’ responsibility Considering themselves indispensable, the founders not want to plan ahead the transmission of their businesses to their heirs, assuming that they are not ready for succession When the founders disappear, some misinformed executives make some haphazard and often irreparable decisions As for the family members who are unprepared, they take over the relay, doing their best in learning to manage the company, with the possible help of the company’s executives, but always with the company’s survival at stake Actually, many not manage and turn to executives from outside If some companies became sustainable, it is because they successfully passed this difficult hurdle of the first transmission of power Their creators were wise enough not to think they were eternal They prepared their succession in advance rather than at the last minute, in line with an old German proverb: “It is better to have a cold-blooded discussion about my succession while I am still warm rather than under fire when I’m cold.” In particular, they identify in advance the potential candidates to succeed them and provide for their training insights into the realities and complexities of the business When the time comes, they choose their departure date and introduce their successors While far from being a general rule, some founders choose from the beginning to be succeeded by a professional who is not a family member, selected for his or her competence to develop the company All this helps to avoid the disasters that may come from succession struggles among potential pretenders if no successor has been clearly identified (Table 11.1) If it is useful that the founders care about their replacement while still in place, it becomes absolutely essential when the passing of the torch is not done between members of the same family but between professional managers Sustainable companies, whose life cycle can span beyond 100 years, master this process of management change It is an undeniable factor of their success All said and done, having faith in execution and humility does not reflect a lack of confidence in the leader; it is simply a recognition that the development and success of an enterprise depend both on chance and on obligation Indeed, companies evolve through natural selection according to the value of what they bring to the markets and how they adapt to their environment 11.5 Organizing the Succession 111 Table 11.1 The principles to consolidate the future of a company Avoid the blindness because of the current success Maintain humility Accept to share decisions Organize the transition of the executive power • Value actual business model • Resist group thinking • Trust in consultants or exterior educators • Avoid selective perspectives and stereotypes • Use “us” instead of “I” • Recognize own weaknesses and admit errors • Foment innovation in all levels of the organization • Admit that innovation can deviate from established standards • Experiment • Develop and manage an organizational culture that favors success from all employees • Accept some form of protest • Prepare the succession with time • Identify in advance the potential candidates and train them select an exit date and introduce the successor As in sports where champions are those who commit fewer mistakes than their competitors, leaders of sustainable companies always plan for the best but are prepared for the worst, while keeping an eye open for any opportunities they can seize Conclusion: Timeless Principles of Corporate Sustainability 12 How many companies in existence today will still be present in one century from now? Certainly, a limited number; and probably not all those who make headlines in business newspapers today For instance, from the original index list of the Dow Jones of 1896, there is only one survivor which is General Electric In the UK, only two companies from the original index of the FT35 are still active Moreover, it seems that corporate longevity has been reducing in the recent years: the average length of time of a listed company in the US has shrunk from around 60 years in 1970 to slightly more than 30 years in 2010.1 Thus, the building of a resilient company is obviously challenging Any management book for professional managers must be prescriptive and deliver advice to the reader It is tempting to so at the conclusion of this work Indeed, the experience of sustainable companies as well as academic and professional research works paint a picture of the ideal leaders of sustainable firms These leaders are imaginative in order to make their companies achieve a strategic ambition They listen and pamper their customers They anticipate the changing environment and cultivate their difference with their competitors They demonstrate rational audacity when managing capabilities, setting up the structure, and making strategic decisions about technological change, organizational innovation, and growth management They also ensure the quality of operations in strategy implementation In addition to being creative, they have the intellectual capacity to disassemble situations to rebuild new ones in order to properly adjust their companies to the changing environment But they always ensure to a preliminary analysis and make decisions on hard facts and not on hope, fear, or what the others are doing BCG perspectives: Die another day: What leaders can about the shrinking life expectancy of corporations July 2, 2015 Retrieved at https://www.bcgperspectives.com/content/articles/strate gic-planning-growth-die-another-day/ # Springer-Verlag GmbH Germany 2017 E Viardot, The Timeless Principles of Successful Business Strategy, Management for Professionals, DOI 10.1007/978-3-662-54489-1_12 113 114 12 Conclusion: Timeless Principles of Corporate Sustainability With all these qualities, they nevertheless remain humble in putting their role into perspective so as not to be excessively proud and complacent In particular, they take into account all possible sources of new strategic directions such as the ideas of their employees or mere chance Overall, these qualities and behavior are easy to develop and to adopt Thus, provided that the basic principles of corporate strategy are followed, it is not so hard to lead successfully a company and to achieve corporate sustainability! In conclusion, this book is a guide to help readers who run, or want to run, a company with the objective to make it sustainable It is certainly not a manual for recommending specific methods to be applied in certain circumstances It refuses to set up norms in the name of contingency because each company, each situation is unique and because of the fundamental uncertainty that characterized the business world Indeed, there is no standard solution and no magic formula to achieve business success over the long term; if it was the case, that would be too simple and every firm will use it Corporate sustainability requests strong and critical strategic thinking and effective implementation with a personalized perspective for each firm, completed with the stimulating insights from the experience of successful sustainable firms ... Professionals More information about this series at http://www.springer.com/series/10101 Eric Viardot The Timeless Principles of Successful Business Strategy Corporate Sustainability as the New. .. 2017 E Viardot, The Timeless Principles of Successful Business Strategy, Management for Professionals, DOI 10.1007/978-3-662-54489-1_1 The Importance of Sustainability in Corporate Strategy termism... customers assure revenues More so they provide the cash flow essential for the firm’s operations They also participate in the firm’s growth and profitability As a matter of fact, the more they buy, the