Discover TBS professor Louise Curran’s point of view on the effect of COVID-19 on international trade policies.

As COVID-19 has spread across the world it has had major impacts on supply chains. It is reasonable to assume that the impact on trade flows may be even greater than that for the GFC in 2009, where world trade fell by over 20%. Most of this is an entirely natural result of the closure of many production structures around the world. However, some trade impacts are the direct result of trade policy interventions by governments, which presage a more major and long-term impact from the current crisis. Discover more in the video below:

[Série – Face à la crise Covid-19] How will Covid-19 impact international trade policies ? from FNEGE MEDIAS on Vimeo.

Discover TBS professor Timo Mandler’s point of view on building brands in markets that have reached the post-globalization stage.

Consumers in Western markets are increasingly critical towards globalization and re-embrace local values. Companies thus must decide whether to continue to pursue global branding strategies and/or rejuvenate local branding strategies. To explore the implications of market globalization for consumer preferences, we use signaling theory to investigate the role of perceived brand globalness and localness as signals of brand credibility, related downstream effects and boundary conditions, across two countries with differing levels of globalization. In globalized markets, brand globalness is a weaker signal of brand credibility than brand localness, whereas in globalizing markets, the two signals are of equal importance.

Building Credible Brands in (Post-)Globalizing Markets from FNEGE MEDIAS on Vimeo.

[su_pullquote align=”right”]By Christina Theodoraki[/su_pullquote]
Based on the article “A social capital approach to the development of sustainable entrepreneurial ecosystems: an explorative study” published in Small Business Economics, 51(1), 153-170.

The creation of sustainable entrepreneurial ecosystems is at the heart of public policy concerns. This type of ecosystem is composed of interconnected actors, within a territory, committed to facilitating the creation of new sustainable businesses. In this context, many questions need to be asked: Is it possible to replicate Silicon Valley’s success? Should governments continue to ‘infuse’ the ecosystem eternally with financial endowments or can the ecosystem reach a maturity threshold that allowed it to self-finance itself to evolve? What action plan must be considered to reach this maturity threshold? The social capital perspective is an interesting integrative framework that deserves to be analyzed to answer these questions.

The context and its evolution

The evolution of the entrepreneurial environment reinforces these questions. The economic crisis, the decline in public funding, the increase in the number of actors who revolve around the entrepreneur, competition between public, semi-public and private actors, the emergence of new entrants are new factors that threaten the survival of existing actors and force them to review their economic model or their contribution to the proper functioning of the ecosystem.

Thus, the university is one of the historical and founding actors of entrepreneurial ecosystems. The contribution of universities to the sustainability of the entrepreneurial ecosystem is important. They contribute to the creation of knowledge that they transfer to students in order to prepare them to integrate the entrepreneurial ecosystem. In parallel, the establishment of academic incubators promotes technology transfer, commercialization and value creation through the creation of spin-offs and young innovative companies. These incubators are intermediate actors who build the bridge between the supported companies and their external environment. Their objective is “to act as a neutral coordinator to promote the interests of academic entrepreneurs, remove barriers to their success, and connect them to entrepreneurship support mechanisms both inside and outside the university” (Hayter 2016, p. 651-652).

However, even if the role and contribution of some actors in the ecosystem seems obvious, current research fails to explain why some ecosystems are more “sustainable” than others. The synthesis of studies in this field distinguishes three characteristics to promote a sustainable ecosystem: (i) the consideration of territorial specificities; (ii) the effect of a supportive entrepreneurial culture; and (iii) the continuous interaction and interdependence of its components. The social capital perspective represents the configuration of a sustainable entrepreneurial ecosystem.

The key role of social capital

Social capital is composed of tangible and intangible elements grouped into three dimensions: the structural one, the cognitive one and the relational one (see figure 1). The structural dimension describes the properties of the ecosystem (the number of ties between members, the configuration of these ties and their stability); the cognitive dimension refers to the shared culture within the ecosystem (shared goals and language, shared narratives); the relational dimension refers to the behavior of members (the norms to be respected, the members’ obligations, the identification of each member – who does what -, and the trust they build between them). Combining these dimensions promotes the optimal configuration of the ecosystem and contributes to its sustainability.

We can therefore assume that if we have devoted resources to structuring the ecosystem, creating a shared culture and languages, and fostering stakeholder relationships with norms and obligations of members, our ecosystem will be sustainable. Unfortunately, it is not enough to only build the structural, cognitive and relational dimensions of the ecosystem. These dimensions are interconnected, and their interactions promote the adaptation of the ecosystem to the specificities of each territory and each ecosystem.

The key ingredient for the well-functioning of the ecosystem is to consider the interactions of its dimensions. It is important to build bridges between these dimensions to promote exchanges and the interconnectivity of the elements. It is this interconnectivity that is the key to the success of a sustainable entrepreneurial ecosystem.

Figure 1: The Social Capital Perspective of the Entrepreneurial Ecosystem

Managerial applications in different contexts

This study provides a better understanding of the composition of the entrepreneurial ecosystem and proposes a framework (through the social capital perspective) for configuring a sustainable ecosystem. Despite the focus of this study on academic incubators, our results are applicable in different sectors and contexts. In order to build a sustainable entrepreneurial ecosystem, it is advisable to: 1) create dense and strong relationships between members to compensate for the scarcity of resources; 2) develop a common culture and values within the ecosystem to ensure solidarity among members; 3) develop trust and rules respected by members to strengthen a climate of security conducive to value co-construction; 4) create bridges between mechanisms to fluidize and make flexible the evolution of the ecosystem.

Methodology

The qualitative method using multiple case studies was conducted in Montpellier between 2013 and 2014 on 3 academic incubators. The choice of these incubators met four selection criteria: (i) proximity and commitment to an academic university, (ii) access to university services, (iii) transfer of scientific knowledge and support for the creation of new innovative businesses, (iv) geographical area. In total, we conducted 48 semi-directive interviews with all members of the entrepreneurial ecosystem (incubator managers, staff, incubatees, academic partners, funding entities, other types of incubators, etc.). This collection of ecosystem data with various groups of stakeholders allowed us to have a holistic view of the observed phenomenon, to cross-reference different points of view and to generate results by triangulation. The interviews were conducted using an interview guide, recorded, transcribed and coded to provide a synthesis of the results.
Co-authored by Christina Theodoraki (Professor, TBS Education), Karim Messeghem (Professor, University of Montpellier, co-director of the Jacques Cœur Chair at Labex Entreprendre), and Marc P. Rice (Provost at Babson College).

[su_pullquote align=”right”]By Lambert Jerman and Evelyne Misiaszek[/su_pullquote]
Successful companies like Sigfox, BricoPrivé or Hellocasa all belong to the world of scale-ups. Whether these companies are young or old, their hypergrowth phase is a highly critical period.

These days, the idea of « scale-up » includes businesses with an annual turnover greater than €5m, with growth of at least 10 to 20% over three years. After graduating from being a start-up and having validated its business model, the scale-up must transform rapidly on several levels : internationalization, recruitment, new business, technical or financial partnerships. Its internal piloting system must keep evolving so that the company can face new challenges, while at the same time the director has to ensure that any new management tools put in place are adapted for hypergrowth. It’s a situation that requires a delicate balance between short-term decisions and the company’s long-term strategy.

A loss of proximity and a delicate balance to be achieved

Recruitment needs being, by definition, substantial in companies in hypergrowth, employee numbers are inclined to increase so quickly that before long the director finds him or herself unable to directly supervise the workforce or get to know them personally. This loss of hierarchical proximity is often exacerbated by an ever greater geographical distancing. Information flow can be threatened within that structure, and jeopardise the business’s culture and cohesion. The director’s charisma, values and personal commitment are no longer enough.

To get to grips with this new reality, the director of a scale-up has to adapt and reinforce the way the company is governed and strengthen its piloting system, without curbing the creativity and innovation so vital so its development.

Achieving this delicate balance in a way that maintains responsiveness and the informal coordination inherited from the start-up alongside more formal and rationally-defined procedures necessary to a larger group, is anything but easy. Four drivers of action can nonetheless be identified to make transforming the company less complex, and to maintain as far as possible the proximity necessary for it to remain cohesive.

• The redefinition and effective delegation of responsibilities, by upskilling staff, particularly those with high potential. This requires the director to listen to and support his or her staff, and to trust them and include them in decision-making.
  • Possible actions :
    • Create centres of responsibility with real decision-making powers.
    • Follow the new prorogatives in their entirety, despite the temptation to take « shortcuts » in urgent situations.
  • Information transmission should be agile and reliable. To be able to delegate, the director must implement a reliable information system which can be flexibly adapted to the needs of the company’s decision-makers.
    • Possible actions :
      • Communicate on a regular basis summary reports and key indicators describing the firm’s strategic levers, with the intention to ‘objectivize’ the activity, and in time, to better anticipate and facilitate decision-making.
    • A combination of formal and informal controls.. Alongside the establishment of indicators, the director could create opportunities for regular exchange of ideas with his or her teams to encourage better upward and downward circulation of information.
      • Possible actions :
        • Setting up recurring meetings where technical ideas can be exchanged, as well as more informal and occasional encounters to encourage team involvement.
      • Maintaining the entrepreneurial spirit. The setting up of a more structured piloting system should not put a brake on innovation and creativity within the company. It’s the director’s responsibility to maintain the spirit and values of his or her company by spending time with the teams on a regular basis to share his or her vision, without threatening their much-needed autonomy.
        • Actions :
          • Communicate on a regular basis the goals and values of the company, the director’s strategic vision, day-to-day issues and more strategic ones aimed at successful hypergrowth.

To tackle the two major risks associated with piloting hypergrowth – a more complex business environment and the loss of proximity to its teams – the director of a scale-up needs to let the company find a balance between the very informal piloting system of a start-up and the more formal control of the big groups.

This article has been written under the partnership “Scale UP – Gérer l’hypercroissance”

[su_pullquote align=”right”]By Ingrid Molderez and Kim Ceulemans [/su_pullquote]
Will our future business managers be able to tackle sustainability challenges? Can art contribute to acquiring sustainability competencies in management education? Our study explored the power of art to foster systems thinking, one of the key competencies of sustainability, and to help business students think more creatively about divergent views on sustainability.

Thirty years after the Brundtland Commission popularized the concept of sustainable development, the issue has become more urgent than ever. Global challenges such as climate change, loss of biodiversity, poverty and migration are omnipresent and are affecting everybody in spite of place and time. There are no easy or instant solutions, but education plays an important role in raising awareness on sustainability and in how to respond to these challenges.

Paul Shrivastava, an influential management and sustainability scholar, argues that education for sustainability requires more than just cognitive understanding. We need alternative ways of teaching that incorporate physical and emotional engagement (Shrivastava, 2010). However, pedagogical approaches that combine head, heart and hand are rare in management education. Management students are used to studying topics that immediately impact the knowledge and skills that they will need in a business context. Spiritual and/or creative ways of teaching are nearly absent. Yet, this is what we focused on in our research. We used art as a pedagogical way to enrich the whole person, to encourage critical and creative thinking around sustainability and we explored how management students react to this.

The concept of sustainability brings the importance of interconnections between human beings and nature back to the surface. The boundaries that have been created as splitting forces between humans and their environment have to be perceived as binding again, so that we can see ourselves again as functioning in togetherness. Changing towards sustainability generates intense emotions and at the same time, intense emotions are needed to be able to make a change towards sustainability. Art generates and encourages emotions, triggers our criticism and challenges our comfort. In relation to systems thinking and sustainability, art can help us to regain focus on the connections and interdependences of our systems.

In our study, we exposed management students to paintings during their Master’s level corporate social responsibility course. We did not especially focus on artists that use their art to criticise the negative environmental impacts human beings have. We opted for painters who are not known for their ecological engagement, but whose artwork makes us reflect upon the role human beings have in society. René Magritte’s painting Les Jours Gigantesques was a source of inspiration and reflection to help them think about and discuss boundaries as connecting and disconnecting forces in a sustainability context.

After class, we surveyed the participating students to study their receptiveness towards art in a management course. We explored whether they found art relevant to study three aspects of systems thinking, i.e., the system/environment relationship, thinking in patterns and relationships, and understanding the interactions between system and environment. For each of these aspects, the majority of the surveyed students agreed that art can be very relevant to discuss such issues. The students noted that using art was helpful for showing different points of view, that it facilitated understanding the topic from another perspective, and that it helped them to see the importance of connections within sustainability.

In this study, the majority of the students were receptive for using art because it acts as an eye opener and makes them think differently about sustainability. Nevertheless, some students were also very critical, because they had a fixed idea about art, i.e. only being relevant for an exhibition about sustainability rather than in a more abstract way to understand or discuss sustainability. They thought that showing pictures about what is really happening in the world would be more effective. However, it has to be underlined that art cannot be used in a functional way, as this goes counter to the core concepts of what art is about. Hence, we were not looking for a causal relationship between using art and effectively learning about sustainability, but we intended to explore ways to connect head, hand and heart in management education.

What can we learn from this research?

While management education is known for its functionalist approach, we should remember that business students can be receptive to alternative learning methods. Using paintings can be a relevant method for explaining sustainability topics, encouraging critical thinking, and adopting a holistic approach by triggering their creativity. Art can help students to think critically about sustainability concepts addressed in class, and shows them that there is space for different approaches and interpretations of such complex concepts.

Higher education has an important role to play in sensitising students towards sustainable development, and in helping them to develop competencies for addressing sustainability issues. Art and artists have a gift to make people think in a critical way, to go beyond boundaries, to initiate emotions which are all very relevant if we want to change our mindset on a topic (such as sustainability). Higher education could consider no longer reserving art for students in art-related disciplines, but to surpass the strict boundaries between disciplines. Art can be inspirational for every discipline and is worthy of a place in every study programme, including disciplines that are perceived as less receptive, such as management, engineering, law among many others.

[su_spoiler title=”Methodology”] This article was originally published at Economists Talk Art, based on: Molderez, I. & Ceulemans, K. (2018). The power of art to foster systems thinking, one of the key competencies of education for sustainable development. Journal of Cleaner Production, 186, 758-770. [/su_spoiler]

[su_pullquote align=”right”]By Amadou LÔ [/su_pullquote]
Order or disorder? Stability or flexibility? Control or ‘laissez faire’? Issues linked to the management of long-term collective action have long been presented in a binary logic where choice fell within the scope of exclusivity. Today more than ever, the development of competitive strategies involves a logic suited to economic dynamics whose trends appear contradictory at first glance. At the same time, the evolution of collaborative practices and spaces are playing an important role in the transformation of our ways of working. The company Fab Lab is a manifestation of this which is interesting to analyse.

What is a company Fab Lab?

Recently, a new collaborative workspace dedicated to exploration was born: the Fab Lab. The Fabrication Laboratory [1] – commonly abbreviated to Fab Lab – is a workshop given over to innovation and rapid prototyping. It’s a space where people are free to come and go, swap ideas in a non-formal setting. The Fab Lab was developed at the Massachusetts Institute of Technology (MIT) by professor Neil Gershenfeld in the 2000s. It’s a place that’s open to all, complete with equipment ranging from simple – like a soldering iron – to very sophisticated – like a 3D printer or a laser cutter. Creative and prototyping activities emerge through the interactions of an active community made up of individuals with a range of skills. This all takes place without hierarchies or orders being given.

Originally, Fab Labs were open areas, free and independent facilities located in community settings, whether educational or open to the general public. Up until now, this type of facility existed only in this form. Today, though, big businesses are getting interested in the concept and wish to put it to use in their own organisations in order to stimulate innovation. By opening its exploratory activities to members of production teams, the company Fab Lab poses an interesting challenge: how to reconcile employee production activities and exploratory activities. We worked within the innovation directorate of the French car manufacturer Renault, which has been a pioneer of this process since 2011.

The company Fab Lab, a chance for employees to explore

The Renault Group operates an internal Fab Lab which is a carrier for the upstream phase of the innovation process which is transversal to Renault’s matrix organisation. This process is defined as a regulatory process for all the “vehicle projects,” using precise signposting and a formal distinction in the distribution of functions. However, the people belonging to units of this process dedicated to production activities have complained about poor access to exploration activities.

The Fab Lab was therefore developed within Renault with the aim of bringing new opportunities for employees to get involved in exploratory activities alongside their usual activities. Through its location, its charter, its activities and its digitally-operated machines and tools, the company Fab Lab aspires to be a codified space which is also inclusive and permissive. It was conceived to be directly accessible by employees, so that they can individually carry out exploration activities alongside their production activities, ie, develop their individual ambidexterity.

Practices promoting employee ambidexterity within the company Fab Lab
We have been able to put forward four main practices (table) which characterise the Fab Lab and which explain the emergence of this dynamic: improvisation, innovative design, DIY and rapid prototyping.

Table – practices promoting employee ambidexterity within the company Fab Lab

Practices within the Fab Lab	Promoting employee ambidexterity	Employee comments
Improvisation	Adopting a heuristic process and offering employees the chance to adapt their projects at any time	“Ah, but we didn’t have a model.. I tell you, I went in convinced it had to be done, but we took our first steps with enthusiasm”.
Innovative design	Offering employees methodological support in their creative and innovative activities	“We need people who have time to help us get into this deeply, and that’s where I can see that it’s very complementary. We’re more on the operational side, so there are things that we might miss, with the Fab Lab methods, we can get a wider and deeper perspective, and because of that we come up with different ideas than we would usually.”
DIY	By manipulating and reorganising what is available, individuals learn to cope with a lack of resources and surmount conceptual obstacles “by doing”	“People who try to explain things with slides when they’ve never even touched the products they’re talking about are fooling themselves! You need to touch things, see them, put them to use. And the Fab Lab helps us with that,  with making little models very quickly, with creating little processes very quickly, and to turn our ideas into reality.”
Rapid prototyping	Through activities that bring ideas to life and accelerate the development of innovative projects	“And what also happened here is that we have a concept that’s a bit complicated and which we can’t get to ripen, and that’s when Eric went to see someone at the Fab Lab, and they created a scenario and a model with the 3D printer which showed exactly what we wanted to do.”

Our results show that the company Fab Lab constitutes a space conducive to exploration which supports employees wishing to carry out innovative projects alongside their usual production tasks.

It’s a space conducive to social interaction, open to all and all occupations, giving employees the opportunity to organise their time as they wish, between their usual occupation and their exploratory projects. Through this structure, employees get support for their exploratory activities, in the form of the practices we have highlighted – DIY, improvisation, prototyping and innovative design. The Fab Lab acts as an additional support alongside ordinary work, thus rectifying the lack of exploratory activities for employees. It therefore constitutes a facility for the development of employee ambidexterity.

As a physical space lending itself to social interaction, it is open to all and to all types of occupations, offering employees the chance to freely organise their time between their usual production activities and their exploratory projects. This facility allows employees to avail of assistance for their exploratory activities in the form of the practices already highlighted – DIY, improvisation, prototyping and innovative design. So the Fab Lab offers support that complements the workers’ ordinary activity by fulfilling employees’ need for exploratory activities. It therefore constitutes a facility which allows employees to develop ambidexterity.

Conclusion

The in-house Fab Lab offers an opportunity for businesses to use the digital revolution to deal with and adapt to the ever-changing environment of the markets and innovative practice. By offering employees in production units the chance to carry out exploratory activities, we’ve seen that the in-house Fab Lab plays the role of a valuable tool and a support for emerging employee ambidexterity. It takes the form of a safe space for exploratory activities and offers every employee the chance to manage their own work, between production and exploration, and hence to become ambidextrous.

We saw that when offering employees in production roles the opportunity to carry out exploratory activities, the internal Fab Lab is a useful tool and a support to the emergence of employee ambidexterity.

[su_spoiler title=”Methodology”]Table 1 summarises our collection methodology and the analysis of our research.
Synthesis of the methodological framework of our research

Research Design

Our research was qualitative. The case study being the preferred methodological approach for exploring and understanding a complex phenomenon, we carried out a single, illustrative case study as part of this exploratory and descriptive research. Faced with the inherent complexity of our research subject and therefore the difficulty of drawing firm conclusions, we opted for an abductive reasoning process.

Data collection and processing method

We worked with Renault from September 2013 and we stopped gathering in June 2014 – a period of 10 months. However, our collaboration is ongoing. Everyone was aware of our research activities, so we opted for the observer-participator model because the aim was to understand Renault’s innovation processes on three levels: the official version, the employee version, and our own observations. Thus, our empirical work is based on semi-directed interviews carried out with different players in the company (managers, Fab Lab members, innovation specialists and non-specialists). Over 43 days at the site, we carried out 42 semi-directed interviews of an average duration of 1 hour and 26 minutes, all recorded and transcribed in their entirety. We also kept a working journal where we were able to note the context of our observations during the creativity sessions and meetings we attended. Finally, we had access to a number of internal documents which allowed us to get to grips with the way the business is organised. Our data collection therefore adheres to the principal of data triangulation, and is therefore valid as a research framework.

[/su_spoiler]

By Yuliya SNIHUR

To establish an innovative business model, disruptive start-ups use a strategy resting on two complementary processes: building a discourse which will engage clients and partners in the new ecosystem, also known as framing, and continuous adaptation of their business model in response to the needs of clients. This will be illustrated by the case of Salesforce versus Siebel in the business software industry at the start of the 2000s.

Cases of successful disruptive innovation, where a start-up manages to radically transform the functioning of an industry, remain exceptional. Among the best-known are Amazon with the distribution and sale of books or Netflix which revolutionised the film distribution industry in the United States. They have resulted in the creation of a new business model which shifts the industrial ecosystem’s centre of gravity away from the historic leader and towards the start-up, and ends up creating a new ecosystem around the start-up. Business
model innovation is characterised by new sources of value creation, the arrival of new clients and partners and the implementation of a new kind of organisation, which rivals the business model of the historic leader and gradually replaces it.

Revealing one’s intentions from the outset

Up until now, studies of disruptive innovation have been more interested in the reaction of existing businesses, and much less in the manner in which the start-up succeeded in establishing its business model. Hence, the importance of understanding the processes set
in motion by the disruptor, which starts off with slender means with which to attract clients, partners, the media and analysts, and ends up taking the lead over an established and much more powerful competitor, and in some cases, making it disappear.
This is the process that we call the disruptor strategy, whose aim is to reduce uncertainty in order to engage consumers and partners as players in the creation of the new ecosystem: from the outset, in order to get their attention and support, the start-up reveals its
intentions and ambitions through framing, ie, the construction of an effective discourse and presentation. At the same time, it must adapt its business model and its product to achieve the best possible offer for its clients and partners. The combination of these two actions
creates a virtuous circle and puts the historic leader on the horns of a dilemma: retaliate at the risk of legitimising the new business model, or do nothing and risk being overtaken.

Salesforce and the emergence of the cloud

The study of the emergence of Salesforce between 1999 and 2006 against Siebel in the management and client relation (CRM) software sector illustrates the concept of disruptor strategy. Originally, software publishers (Siebel, SAP) sold their clients CRM software and
costly products associated with maintenance and consulting services. Salesforce’s innovation consisted of coming up with a much less expensive business model, based on cloud computing, with SaaS services available by subscription. In the first instance, this product was aimed at consumers who were not part of the Siebel ecosystem.
Before Salesforce had even launched, it was already addressing the ecosystem with a discourse emphasising its unique affinity with the “no software” revolution, and then its leadership, via press releases, interviews and dramatic stunts. This framing found an echo with start-ups and small-to-medium-sized businesses lacking the means to invest in a heavy system; with partners interested in the new ecosystem; and with the media and analysts who relayed and amplified Salesforce’s discourse and took up a more critical position in relation to Siebel. At the same time as new consumers were starting to get interested in the product, Salesforce was continually improving it to reach the standards expected by the majority of existing consumers. By combining these two framing processes and adapting the business model, the start-up had started to seduce Siebel’s clients and partners within two or three years.
In the face of Salesforce’s offensive, Siebel didn’t react at first. The firm stayed with its old model without taking account of the new needs created by a competitor which it didn’t yet perceive as such. It only launched into the cloud in 2003, three years late. A vicious circle, symmetrical with Salesforce’s virtuous circle, falls into place: poor responses, mounting criticism in the media and from analysts, mass exodus of clients and partners to the new ecosystem. Finally, in 2006, Salesforce became the leading supplier of CRM services, while Siebel was bought by Oracle.

A situation that was hard to predict

The Salesforce-Siebel case is a prime example of the establishment of a new business model. It highlights the importance of these two complementary processes of framing and adaptation in the disruptor’s strategy. This is, of course, an individual case, but it shares elements with other cases of successful disruption like Amazon and Netflix. For businesses, there are a number of lessons to be learned from these results. For the disruptors, it’s about the importance of pulling on both levers at the same time, given that the temporal window is limited. That means they have to find a way to reveal themselves clearly, but without being too precise, so as not to limit their scope for adaptation. In its framing, Salesforce presented itself as the leader by stating that it was offering a better value product and that its service was cheaper, but without going into the key points of the new business model.

For the leader, it’s hard to know how to react. Siebel had logical reasons for not responding to Salesforce in a market sector in which – at first at least – it had no interest. It’s very tricky to predict whether a start-up will be successfully disruptive or not. The problem is that Salesforce gained a competitive advantage by learning faster than Siebel. Siebel didn’t ask itself the right questions for several years, and the needs of Salesforce’s start-up clients were ahead of the needs of its own clients. When the firm did finally take action, its cloud didn’t function as well as Salesforce’s one, despite an R&D budget and far greater human resources.

To avoid this, existing businesses must therefore develop a strategic vision, an understanding of what is happening in their environment, in order to try to learn more quickly than the start-ups and be attentive to the market of tomorrow. But it’s very difficult for a firm to say that in 10 years’ time its clients will want products that are completely different from those it has on offer today.

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Methodology

This article is a synthesis of the publication “An Ecosystem-Level Process Model of Business Model Disruption: The Disruptor’s Gambit”, published in the Journal of Management Studies. It presents the results of a longitudinal study carried out by Yuliya Snihur (Toulouse Business School), Llewellyn D.W. Thomas (Imperial College London, Universitat Ramon Llull) and Robert A. Burgelman (Stanford School of Graduate Business), from the case study of Salesforce and Siebel, combining a theoretical approach and the analysis of a documentary base of historic data.

[su_pullquote align=”right”]By Michaël Laviolette[/su_pullquote]

It seems that every day, the media is full of examples of entrepreneurs and their success stories. They are often presented as heroic characters whose prowess leads most often to successful outcomes, and rarely to unsuccessful ones.

These entrepreneurs are therefore held up as exemplary rôle models according to a concept developed by Albert Bandura, social psychologist and expert in the theory of social learning.

In entrepreneurship, the impact of rôle models is significant because they offer examples which impact on the potential and the intention to engage in entrepreneurship. Many of today’s business people say they took their first steps in entrepreneurship after observing or being influenced by a rôle model. Often, it was someone in their close circle (friend, relative, etc). These are real-life rôle models. But what about symbolic rôle models? By this, we mean people we never actually meet, but whose stories we can identify with. For students, it might be the testimony of Mark Zuckerberg, a Harvard graduate, that they saw in a newspaper, or a former student of a ‘grande école’ turned entrepreneur they hear at a conference. How do these symbolic models influence our own students’ intention to engage in entrepreneurship, depending on whether their stories are of success or failure? What impact do they have relative to certain characteristics (sex, previous experience, etc) of the people exposed to their stories?

We will look at these issues in the educational context because teachers use a lot of these rôle models in the form of testimonies, quotes or case studies. At a time when experiential learning is the order of the day in business schools, these models are being used prescriptively to show the path to follow or not follow when engaging in entrepreneurship. Are these professors’ persuasive tactics effective? What is their impact on student self-efficacy and their intention to be entrepreneurial? In other words, let’s focus on those who are looking at the model, rather than the model itself.

A number of experiments were carried out involving 276 students in a French business school. Some students had been exposed earlier to success or failure stories of former students turned businesspeople. Other groups heard the stories along with a message of encouragement from their tutors. In keeping with the literature, we tested several main and secondary hypotheses of this causal chain which begins with student attitudes to the rôle models’ messages and ends with their intention to engage in entrepreneurship.

Our results were published in three articles in the Journal of Entrepreneurial Behaviour and Research, in the Revue Internationale PME and in the Journal of Enterprising Culture. The first article 2 reveals that symbolic entrepreneur models, whether of success of failure, had a significant impact on students’ intentions to engage in entrepreneurship. The more positive the students’ attitude to the message, the more they were affected or moved by these stories. This “emotional awakening” reinforces their perception of their capacity to be entrepreneurs (‘entrepreneurial self-efficacy’) and, ultimately, their intention to engage in entrepreneurship. We can therefore validate the central hypothesis of the impact of these symbolic models. Positive messages increase the intention to engage, while negative messages reduce it.

However, these effects change depending on the sex of the person receiving the message. Men are more influenced by models of success than women are. The latter are more influenced by negative models. This difference is explained by social norms which exemplify entrepreneurship as an eminently masculine activity. Indeed, men identify more easily with models of success. This upward and positive comparison comes easier to them. Women, on the other hand, have more difficulty identifying with female entrepreneurs and they are more affected by stories of failure. The downward and negative comparison unfortunately comes more easily to them.

The fact that the impact of the messages varies according to the recipient leads us to envisage two persuasive communication tactics in class. It’s important to expose students to both success and failure stories in order to avoid idealising entrepreneurship. It’s also important to emphasise positive models at the expense of negative ones. For the sake of realism, the latter are not to be banned but the lecturer should play a moderating rôle to ensure that the failure models are not too discouraging.

The second article 3 focuses more on the rôle of teacher encouragement when students receive these testimonies of success or failure, As well as the entrepreneurs’ messages, we exposed our students to a second message of encouragement from the teacher, reformulating the messages in order to reinforce their effects.
We thought that this persuasive tactic would strengthen the impact of the initial message if it was positive and weaken it if it was negative. However, the results show that the encouragement discourages rather than encourages when its content is identical whether the receivers are men or women. A finer analysis of the results nonetheless shows interesting differences according to the sex of the students receiving the message.

Although a distraction effect can’t be ruled out with the second message, the principal explanation can be found in Brehm’s reactance theory. When a student is exposed to the message of an individual with whom s/he identifies (a former student), s/he is free to attribute any value s/he wishes to it. On the other hand, when a lecturer intervenes to try to convince or persuade, s/he reduces his or her freedom of interpretation. Indeed, students can re-establish their autonomy by resisting the lecturer’s remarks.

However, reactance is stronger among men than women. This difference can also be explained by social norms which construct entrepreneurship as a fundamentally masculine activity. Encouraged by these norms, men are likely to express an opinion contrary to that of the lecturer to express their free will even if they really think the same thing. For women, the lecturer’s encouragement is sought in order to confirm their opinion and to gain social approval. Indeed, our research shows that lecturer encouragement is more beneficial when female students are exposed to female rôle models.

Our articles also show that in order to understand the impact of rôle models, the characteristics of the recipients (sex, in this case) are important. Thus, our third article 4 focuses on the moderating effects of the characteristics of the recipients, notably self-esteem, locus of control, and previous experience. The locus of control is our feeling that events are within our control or not. Previous experience is students’ past experience of entrepreneurship.

Our results show that the better the students’ self-esteem, locus of internal control and previous experience, the less the recipient is impacted by the message. Indeed, students with high self-esteem and a belief in their capacity to control what happens to them, are naturally less influenced by external models. In other words, they rely more on their own resources in order to believe in their capacity to engage in enterprise, and ultimately, to decide to create.

In contrast, students with weak self-esteem, a weak locus of internal control and weak experience are more influenced by external models. Indeed, these students have a greater need to look for external validation to compensate for the weakness of their own belief in their own capacity for enterprise. These results round off our analyses by showing that it’s just as important to analyse the profile of the recipients if we want to understand the impact of the messages.

What conclusions should be drawn from our studies of the relationship between rôle models and the intention to engage in entrepreneurship in the educational context? First of all, they validate the importance of these models for students’ capacity and intention to engage in entrepreneurship, even if they are only symbolic. They also underline that a variety of models of both failure and success is crucial to offering more credible representations to a student audience. Nonetheless, these rôle models do not impact men and women in the same way.

In view of the predominance of masculine models of entrepreneurship, it is important to temper the impact of these models using lecturer encouragement tactics, particularly for female students. Nonetheless, it should be noted that this encouragement is not effective for men who are often more confident in their own capacity for enterprise. Finally, on the whole, these models have a greater impact on students who doubt their capacity for enterprise due to their weak self-esteem, weak locus of internal control and weak experience.

In conclusion, this research confirms that a single model of entrepreneurial success is not the most effective method for every audience. A plurality of models is needed to convince a diverse audience. Beauty is in the eye of the beholder, as Oscar Wilde reminded us. Look at the model but above all, look at the person who is observing it.

[su_spoiler title=”Approach”]This article synthesizes our work on the influence of role models on students’ intention to engage in entrepreneurship. The work was undertaken jointly with Olivier Brunel, Senior Lecturer in Marketing at the Lyon School of Management (IAE de Lyon) and Miruna Radu-Lefebvre, Professor of Entrepreneurship and chair of Family Business and Society (Entreprise Familiale et Société) at Audiencia Business School, Nantes.[/su_spoiler]

[su_pullquote align=”right”]By Victor DOS SANTOS PAULINO  and Najoua TAHRI[/su_pullquote]
Innovation as the key driver of economic growth is nothing new. However, France, with the rest of Europe, continues to face significant challenges in stimulating innovation in its economy and maintaining its competitive edge.

In a study investigating what discourages French firms from innovating, we find that the biggest barriers to innovation are financial or market-related, and not technological. Financial constraints, lack of competent personnel and a perceived pointlessness of innovating are some of the main culprits behind this lag in innovation. Surprisingly, very few firms cited technological barriers, and similar results have been observed in other parts of the world.

The right skill-mix

Taking a closer look, we observe that many of the obstacles can be traced back to a shortage of managers with the relevant skill set. Various innovation studies point out that innovation success requires the effective combination of different expertise, both technical and commercial. However, managers with both attributes are rare, especially in France. And the absence of versatile managers can result in conflicting viewpoints between technical managers who tend to be preoccupied with technological performances and commercial managers who tend to be focused on market concerns. This in turn can lead to a communication breakdown and cooperation failure, impeding the innovation process.

Add to this, the prevalent culture of “technology push” innovation in France, where by innovation processes are spearheaded by R&D in new technologies but are plagued by a poor understanding of the market. This not only reinforces market barriers to innovation but also leads to financial constraints. Substantial resources end up being pumped into and prolonging the R&D phase, blurring the distinction between inventing something, innovation and achieving innovation success. The development of the Concorde is a good illustration of this. To date there are ongoing debates on whether the supersonic airliner was an innovation success or not. For some, the technological breakthroughs overshadow the fact that only 14 units were sold to two clients. In short, firms are discouraged from innovating because innovation, from their perspective, necessitates considerable resources to cover the excessive costs of invention.

Impact of government support

In Europe and notably in France, public authorities are wrapped up with technological progress leaving little room for commercial expertise in the innovation process. Inventions and discontinuous technologies are favored, often out of sync with market dynamics, and very costly. Too often public funding programs, for instance in the aerospace sector, push firms to undertake projects that are not always economically viable. Thus, firms tend to orientate their strategies on technological advances, to the detriment of market objectives, essential for anticipating returns on investment.

Contextual factors

Breaking down the obstacles by industry, the aerospace industry faces the highest obstacles, followed by the manufacturing and service industries. This is expected as aerospace companies are more likely to be innovative, face high productions costs and heavily rely on public investment. In contrast, firms in the service industry experience the fewest obstacles. The development of new-to-world products is rare in the service industry, where the intangibility of products allows for easy imitation by rival firms and thus raises a serious problem in convincing investors to fund new ventures. Service orientated firms therefore tend to adopt a market pull strategy with focus on continuous innovations, marginally enhancing or upgrading the service offering, and at a much lower cost. It is therefore not surprising that firms in this sector face the lowest financial barriers to innovation.

Overcoming barriers to innovation

As a starting point, firms should accommodate market research in their innovation processes. This is easier said than done as technical managers sometimes first need to move away from the idea that if you don’t know how to make a product, you won’t know how to sell it. Technical managers need to recognize the importance of bringing in the market perspective on board the innovation process. To combat the shortage of managers with both technical and business skills, firms could offer on-the-job training to develop deficient competencies (e.g. granting MBA opportunities to technical managers). Moreover, to tackle the root of the problem, higher learning institutions offering scientific degrees should integrate a strong element of social sciences in their programs. This would not only ensure a commercial dimension in the innovation process but may also go a long way to solving communication issues between technical and commercial teams, and add legitimacy to marketing insights.

However, this is not a substitute for involving commercial managers directly in the innovation process. Ideally, firms should go a step further and create a business intelligence unit to provide information on the market, to work side by side and complement the work of the technological team. The weight accorded to commercial competencies in the innovation process will vary according to the characteristics of the activity sector.

A fundamental change will also have to come from the public authorities who need to redirect their funding to support successful innovations rather than novel technologies, and allow firms to focus on continuous innovation – the natural course for most. By prioritizing downstream innovation processes, such as innovation commercialization, firms will face lower market barriers and innovation costs. To this end, public authorities need to make more room for firms in defining the strategic orientation of public support policies.
Innovation is a powerful means by which to ensure long-term survival. Without innovation, it is extremely difficult to adapt to a changing environment. Although new product failure is high, innovation without any failure is impossible. In a nutshell, successful innovation requires not only a change in the mindset and innovation culture of firms but also shifts in the public institutional framework to be more in favor of continuous innovation. Firms, government agencies, higher education institutions all have a role to play in overcoming barriers to innovation and creating an enabling environment for innovation.

This article is based on the study entitled, “Les obstacles à l’innovation en France : analyse et recommandations ”, co-authored by Victor Dos Santos Paulino and Najoua Tahri, published in Management & Avenir, 2014/3, no. 69, p. 70 – 88, available here

[su_spoiler title=”Méthodologie”]The study, conducted in 2014, is based on the results from the 4th Community Innovation Survey (CIS 4) carried out in France between 2002 and 2004 and published by Eurostat. 175,533 firms in France participated in the survey, indicating if they have experienced any of 11 obstacles to innovation. For the purposes of our study, we then divided the obstacles into four categories: knowledge, market, financial and external obstacles, and analyzed the obstacles by nature of the firm and by sector (manufacturing, services and aerospace, the latter being a key industry in France). [/su_spoiler]

[su_pullquote align=”right”]By Pierre-André Buigues[/su_pullquote]

Despite significant state aid, the French meat sector is losing ground against other European countries which are also in the Eurozone. Indeed, it’s the European market which has caused the deterioration of France’s position, and not globalisation, China, or other emerging economies.

No matter which sector we look at – poultry, pork or cattle – French meat farmers are in difficulties compared with their European competitors.
– The French pork market : Production is markedly down, from 25.5 million pigs a year in 2000 to 21 million in 2016. Over the same period, it went up in several other European countries. In 2000, France and Spain were producing pigs at the same rate, whereas today Spain is producing 46 million pigs a year. France is now a net importer of pork products. The sector’s competitiveness has been eroded due to high costs and lack of investment.
– The French cattle industry : France was the biggest European producer of beef in 2015: 1.49 million tons compared with Germany’s 1.12 tons and the UK’s 0.9 tons. 79% of the meat consumed in France was also produced there. Imports are essentially European. However, the average income of cattle farmers is among the lowest in the farming sector and is projected to decline steeply. In 2014, a typical cattle farmer’s earnings after tax were 22% below the average over an extended period (2000-2013).
– The French poultry sector has also seen a drop in production over the last decade. France used to be the second biggest exporter of poultry in the world, but today it imports 40% of the poultry it consumes. The country has a trade deficit with other European countries in terms of both volume and value, and this deficit continues to deepen. The majority of French imports come from other European countries, with far less coming from non-European countries like Brazil or the USA.

Why are we seeing such a serious deterioration in the French meat sector?
We will look at the two main factors behind the decline: Le refus français d’une industrialisation de la filière viande, d’où des économies d’échelle insuffisantes.
France’s resistance to the industrialisation of its meat sector, and hence insufficient economies of scale: France has always supported family farms but the international meat markets are high-volume markets where price is the determining factor. Unlike the French domestic market where quality is highlighted by labels (red label – farm quality) and constitutes a competitive advantage, on the international market, price is key. While Germany has positioned itself as a producer of cheap and standardised meat products with an “industrial” image, France has a “gourmet” image and premium products. Unfortunately, at this stage in its development, the international meat market, whose growth is being powered by emerging countries, has little interest in quality. Cost is therefore the strategic variable for success on the international markets, so the French sector is paying the price for high costs and an absence of economies of scale.

In the pork production sector, the average size of a pig farm in France is between 1,000 and 2,000 pigs, as against Denmark and Holland, whose farms average 2,000 to 5,000 pigs. Moreover, between 2000 and 2010, the average size of a pig farm has grown by 98% in Denmark, by 37% in the Netherlands, by 29% in Spain and by only 16% in France. Finally, German abattoirs often exceed 50,000 pigs slaughtered annually. In France, what is needed is far fewer abattoirs and comprehensive modernisation.

In the beef and lamb sector, France is likewise suffering from the small size of its farms. The lawsuit taken against the only French farm with 1,000 cows (ultra-modern farm with a giant facility to produce energy from cattle waste via a methanizer and fitted with solar panels), shows how hostile French public opinion is towards industrialised farming.

In poultry production, French farms are far more numerous and also far smaller than German ones: German, Dutch and British poultry farms are the biggest in Europe, with an average volume above 60,000. In France, more than half of all poultry farms have a capacity of between 1,000 and 10,000, because of the importance of quality and origin labels (Red Label, organic, Appellation d’Origine Contrôlée), whose product specifications limit the size of buildings.

With farm sizes which don’t allow for economies of scale, and with labour costs well above some of its European competitors, the French animal agriculture sector is in great difficulty and is losing market share.

An avalanche of costly production standards and over-regulation compared with European norms

Stringent regulation is an indisputable factor in the economic difficulties facing the French meat sector. (2)
Often complicated and sometimes incomprehensible, these regulations place a very heavy administrative burden on farmers. A Senate report estimated that an average farmer spends 15 hours a week on office work. There are two main reasons for the relatively high cost of these production standards in France.

First and foremost, farms in France are, as we have seen, smaller than in European competitor countries. They therefore don’t possess the human or financial means to assimilate and implement these standards. Second, regulations often change in this sector, environmental standards are more and more exacting and require significant investment.

What does the future hold for French meat farming?

European farming is no longer just a sector regulated by the Common Agricultural Policy, but a competitive sector. In order to develop French meat farming, there are two possible strategies:
– Strategic development of a quality-oriented farming sector : How can we find enough outlets for a high-end product with strong export branding to allow small farms to survive with high costs? There is a model in the French wine sector where prices are, on average, twice as high as the competition, and yet which still hold their own. This “high-end” strategy could save French farming. However, it will involve considerable investment in marketing and the international distribution chain.
– Strategic development of intensive, low-cost farming : How can production costs be reduced? By heavy restructuring, and the elimination of uncompetitive “small farms”. Massive investment would also be needed to create ultra-modern farms, with state agencies fostering fully automated mega-farms – a far cry from today’s situation.
Is there a middle way? Xavier Beulin, former president of the FNSEA (the French farmers’ union) has estimated that investment to the tune of 6 billion Euros will be needed “to develop a third way between industrial farming and diversity, high-tech and diversified farming, organic and robotic farming”.

[su_spoiler title=”Methodology”]References: Elie Cohen et Pierre-André Buigues « Le décrochage industriel », Fayard, 2014; and Pierre-André Buigues, « Refonder l’agriculture française » Journée de l’économie, Jeco , Lyon, Novembre 2016 [/su_spoiler]