2.

The transformation of business

2.1 Calling into question the standard business model
The economic, political and technological context gave rise to new forms of organisation.
Transaction costs lowered, techniques for transferring information were standardised and
communication and exchange became secure. By increasing network collaborations,
companies created alliances, franchises and industrial districts or clusters. All kinds of
partnerships were created between suppliers, research laboratories, as well as neighbouring
and competing companies. They called into question the traditional and standard business
model by multiplying different types of collaboration by pushing back the limits between
companies and their environment while developing new ways to create value.
Example
Free software
The 1980s saw the emergence of free software that was developed by independent volunteer
programmers who raised questions concerning the traditional logic of ownership. A new type
of license, the GNU-GPL (General Public License) was invented where the owner of the
source code grants users the right to copy, distribute and modify it. Software programs are
protected with a copyleft prohibiting the source code from being concealed. The new
system of exchange relies on the on-going improvement of software by the users and the
recovery of the program modified by the community. In some ways, the initial donation is
compensated by the derived works of the users.
ICTs are the preferred method of communication used by free software developers. They
form a virtual enterprise based on trust and the logic of give and take while not knowing or
seeing each other.
The economic influence and capacity of this new type of business was substantial. Many
commercial companies quickly saw the interest of investing in free software as they were
able to offer a high level of quality and customised service. In an environment marked by the
standardisation of products and services, free software presented an outstanding level of
expertise and on-going adaptation.
2.2 The sensitisation of results
Concentration movements have increased the power of companies on a worldwide scale. The
decisive role of large corporations is legitimised by the number of employees, their sales
turnover and their increased presence on the international market. However, the
concentration of decision-making power entails a major risk: even if the size of companies
continues to grow, the decisions by which they are governed remain human and individual.
In this framework, the impact of errors is proportionate to the company and its reach. The
heightened responsibility of managers means that it is not uncommon for them to manage
budgets worth several millions of euros, to create procedures affecting thousands of
employees or to communicate information to all the associates within the company.
Example
The launch of Dasani in France, a 20 million Euro marketing policy fiasco

In 2004, Coca-Cola decided to tackle the European bottled water market (Great Britain,
France and Germany). With sales of soft drinks stagnating, water was a new engine for
growth. In the United States, Dasani was just behind Aquafina, the top-selling bottled water
from its New York-based competitor, Pepsi-Cola.
On March 19, 2004, just one week after its launch in Great Britain, Dasani water was
accused of failing to comply with quality standards. Coca-Cola pulled more than 500,000
bottles off the shelves when the level of bromate was revealed to be higher than UK
authorised standards. The British people reacted poorly to the pulling of bottles. Numerous
investigations carried out by consumer associations revealed that Dasani (sold at EUR 1.4 for
a 500 ml bottle) was nothing more than purified tap water. The water arrived at the CocaCola plant in Sidcup (South-East London) through the British water utility company, Thames
Water.
A few moths later, the water was set to be launched in France. However, just two months
before the final deadline, only 50% of French supermarkets had accepted to carry Dasani.
The price policy was attractive with 6 x 1.5 litre bottle packs selling at EUR 2.60 or 20% less
than the price of bottles of Evian, the top seller on the French market. Not only that, the first
bottle of Dasani was reimbursed with the purchase of the second. Despite this, Dasani never
took off in France.
This was a huge loss for Coca-Cola given the marketing and communication campaigns, as
well as a 20 million Euro advertising budget. The failure can be attributed to decisionmaking errors in terms of marketing, particularly the failure to take into account major
marketing parameters, including:
- The saturation of the European bottled water market: 110 brands of mineral, carbonated or
flavoured water.
- Coca-Colas lack of notoriety in European cultures
- The composition of the product which was not natural water

When all is said and done, it is difficult to assess the amount of money lost and the
commercial consequences associated with the fiasco.
2.3 Capitalisation of objectives
More than ever, companies are focused on the creation of financial value. The globalisation
of financial systems, the concentration and restructuring of groups and shareholding, as well
as the increasing importance of pension funds and institutional investors have slowly
financialised the economy. Shareholders increasingly influential role in the decisionmaking process, investment decisions and strategy has also transformed company
management practices. Value based management changes the nature of objectives according
to share prices and the potential of distributing dividends.
But where do human values, the creation of tangible assets and the influence of companies in
their economic, political and geographic environments come in? This question is at the heart
of current debates on management. How much power should shareholders be given in
decisions and management choices? How much importance should be placed on corporate
responsibility, ethics and the ecological and human environment?
Maximizing financial value alters the relationships between shareholders, executives and
employees. By focusing on annual balance sheets, increasing dividends and reducing risks,
companies choices tend to be aimed at short term activities and the factors that limit their
growth potential. Many managers have intensified restructuring, reduced labour costs and cut
jobs in order to favour shareholders stake in the profit.
Companies that have been around for several hundred years have shown that the entire
capital (both human and financial) needs to be developed for the long term. The security of
financial markets, but also job creation, respecting the social and natural environment,
supporting cultural values and creating purpose are the current challenges in management.
Managers need to create a balance between creating financial value and the human and
material reality. They must transform financial value creation objectives into operational
objectives.
2.4 Weakened skills and competencies
Management models based on company-wide communication, the increase of team projects,
flexibility and on-going adaptability demand improved and stimulated skills management.
Sharing know-how, exchanging information, learning, corporate culture and values are the
cornerstone of skills development and flexibility.
On a collective level, skills can be considered as a source of competitive advantage. They go
beyond the simple sum of individual skills, thus giving companies unique characteristics that
are difficult to imitate.

At an individual level, they are crucial in maintaining employability, renewing goods and
services, technologies and manufacturing processes, thus creating as much obsolescence as
innovation. Therefore, through constant learning, by being able to change jobs and upgrade
skills and knowledge, employees can continue to be of use.
In this context, creating and managing skills is of the utmost importance.
To meet these challenges, versatility becomes a priority for employees, managers and
executives. This trend takes on even more importance as teams are changed, restructuring
plans are implemented and management careers are promoted. As a result, managers find
themselves facing a paradox: Companies seek to obtain a level of excellence requiring the
development of specific skills that are quickly and constantly called into question. However,
as versatility and multidisciplinary skills become the general practice, expertise and knowhow is lost.
2.5 The creativity / security paradox
Creativity is the founding principle of the growth process. In a situation where goods and
services need to be renewed often, it addresses the explosion of new technologies, the
expectations of employees, the paramount importance of design, consumer needs and everincreasing organisational changes. In addition to being able to work independently,
employees are now expected to also anticipate, be forward-looking and produce creative
services and systems.
Besides the need for creativity, companies are securing their assets and management
methods. They are committed to a process to optimise efficiency and profitability.
Manufacturing processes are standardised, management methods are harmonised by the
concentration of subsidiaries and groups, and the financialisation of activities establishes
accounting for all activities. Risk aversion has developed at exponential speed while different
views continue to hail the benefits of creation.
Managers are caught in the middle between the pursuit of security and the desire to innovate.
REFERENCE
Economic pressure increases the need for security
The situation today increases the use of familiar and proven solutions. According to Staw,
Sandelands and Duttons threat-rigidity theory (1981), organisations in crisis situations
undergo a mechanistic shift, where they are driven to centralise control, preserve
resources, restrict information processing and focus on known and familiar routines.
Individuals interpret and act according to their experience. Through a simple effect of
exposure, they prefer that which is familiar to them and what they already know. The more
they are confronted with an idea, the more they appreciate it. As a result, they will prefer safe
options and will be more willing to go along with the majority and adopt low-risk strategies
with few implications.

This general tendency to create routine is magnified by firms since habit is the predominant
tool used for coordination, learning and hierarchical control. Firms create systems that
generate action, automatic behaviours that are triggered by fixed points of reference such as
hours, schedules and task distribution.
Consequently, economic pressure leads organisations to a paradox: while they should be
varying their responses and actions, they concentrate even more on their usual and routine
activities, acting as if they were in a stable and consistent environment.
2.6 Human resources pressure
Human Resources Management practices have evolved into a personalised management
model. Individuals:
must enhance their employability in order to secure their future within the company,
are responsible for cross-disciplinary projects which they must develop and oversee,
manage various levels hierarchical or functional relationships,
are expected to develop and use their professional and private networks in order to meet
their objectives,
must become real players within the company,
demonstrate their ability to improve efficiency and performance.
Dominated by versatility, responsibility and independence, these new management methods
were supposed to relax hierarchical ties and promote proactive initiatives and independence.
In France, as well as the rest of Europe, these methods have been seen to make work more
tiresome and monotonous. More and more investigations are seeking to understand the
various aspects of psychological harassment, stress and suffering at the workplace.
In this situation, it is not easy to encourage and motivate teams. What kind of new purpose
can be given to work? How does one manage the ever-increasing level of responsibility of
managers? How can corporate pressure be legitimised when businesses are recording
unprecedented profit? Managers today are caught between the obligation to meet
increasingly demanding objectives and the challenge of offering their teams incentives and
attractive working conditions.
2.7 The customer is king
Before the internet came about, businesses developed contacts through commerce. Suppliers,
producers, manufacturers and logistics companies determined what should be sold, as well as
the distribution and consumption methods.
The proliferation of the internet revolutionised these Business-to- Business relationships. It
made consumers key market players. Today they can browse through different websites in
order to compare products and prices. Data sheets are becoming more and more exhaustive,
while search engines compare prices, sales points, quality and technology in order to help
consumers that are becoming more and more demanding in their choices.

These changes have induced radical consequences on how businesses operate and the role of
managers. Consumers are given even more power than media institutions and traditional
distribution networks. Now more than ever, managers must be capable of listening to the
market and be tuned in to information in the field, in addition to making decisions that are in
touch with the actual reality of customers.
3 Transformation of the role of managers
3.1 Traditional manager roles and functions
A manager is a player in the company who is responsible for the management and
development of work teams with the aim of reaching performance and efficiency objectives.
As a representative of company management, the manager is the interface connecting
strategic targets with day to day work practices. His/her functions go beyond the know-how
and expertise of the trade. They are much more cross-disciplinary as they determine the
methods of collective collaboration and action, resource management methods and the ways
in which objectives are to be met.
Managers traditionally have three types of roles. Decision-making roles involve the ability to
decide, anticipate, plan and follow-up. Interpersonal roles relate to the ability to oversee and
motivate teams, meet customer needs and manage individual and group conflicts.
Informational roles entail transmitting information, managing networks, and internal and
institutional communication. The distribution off these roles may differ and change
depending on the managers role within the company and as a testament to their evolution
within the hierarchical system.
These roles and functions were defined within an environment marked by stability. The
structures were the foundation in terms of respecting hierarchy and defining work standards
and procedures. But today, job descriptions and position within hierarchy determine
managers missions and how they are recognised.
3.2 The new roles and functions of managers
This stable view of the role of managers was significantly changed by the transformation
of the economic environment and the subsequent management challenges that have emerged.
Companies standards are becoming more and more demanding as the work pace becomes
heavier and more irregular. Managers are forced to wear several hats as they switch from one
role to the next, laying aside one task to begin another. They alternate between taking action
and making decisions, directing and overseeing, action and problem solving. Though they are
at the service of the company, their actions are dictated not so much by planning and
organisational factors, but more by customer requirements and the needs of upper
management or co-workers and colleagues. Their traditional functions have become much
more complex because they are required to perform them all at the same time while
generating quality results.
More recently, the evolution of the business environment has altered the traditional roles and
functions of managers. The authority traditionally associated with their position within the
corporate structure has been overstepped by increasing functional and cross-disciplinary
collaborations. Forecasting and planning are much less effective in the face of accelerated

changes. The management of activities and specialties takes on an all-encompassing

dimension where the efficiency of processes and networks is crucial.
As a consequence, the growing instability of the environment pressures businesses and
managers to develop new knowledge and skills. Managing people constitutes a strategic
dimension as a businesss future is directly contingent on the ability of its employees to
evolve and adapt.
Diagram 1. 3: The new roles and functions of managers

1- Relational and contributive

legitimacy: social responsibility,
creation of purpose, combination of
economic and ethical requirements
2- Participative and cooperative
direction, horizontal communication,
mutual adaptations, open-minded and
ability to integrate field information
3- Role of anticipation,
experimentation, creation: constant
adaptation, working around paradoxes

COMPLEXITY

REFLECTION

ATTENTIVENE
SS

SUBJECTIVITY

4- Gradual separation between the

manager function and the structure of
the organization: project developer or
overseers role

CONTEXT

5- The manager is an internal /

external interface: importance of the
network

In this context, managers must be able to listen to their environment in order to create
solutions that are adapted to their current situation. As planning and standardising methods
and solutions is not enough, it is fundamental that managers know how to take a step back to
reflect on their own actions and how to promote the trust, creativity, and learning of their
colleagues. They must also be able to improve their own work methods and decision-making
in order to adapt continually to the changes by which they are affected.