Blue Ocean Strategy Chapter 8

1. Blue Ocean StrategyChapter 8 Team 3 Mason Mitchell Randy Greinert Sarah Yelverton Alec Cooper

2. Build Execution into Strategy • Executing Blue Ocean Strategy • Removing roadblocks is key, we are starting with a blank canvas. Want everything right the first time.

3. People • A company is not only top management. • All members, top to bottom, are aligned around a strategy and support it. • You must create a culture of trust and commitment that motivates people to execute the agreed strategy. • People don’t like stepping out of their comfort zones, so implement the strategy from the very beginning.

4. The Sixth Principle of BOS • To build people trust and commitment deep in the ranks and inspire their voluntary cooperation, companies need to build execution into strategy from the start. • Management risk is greater for blue ocean strategy because its execution often requires significant change.

5. Poor Process can Ruin Strategy Execution • Water Based Liquid Coolants • Great Strategy, significantly reduced the purchasing gap. Lead time. • Cut Failure rate from 50%-10% • Doomed from the start. • Never worked with their sales force so it interfered with the sales process. • Had to pull the system and work on building trust with its sales representatives.

6. Power of Fair Process • Fair process’ direct theoretical origin dates back to John W. Thibaut and Laurens Walker • In 1970 created procedural justice by combining psychology of justice with the study of process • They sought to understand what makes people trust a legal system so that they will comply with laws without being coerced

7. Research Results • Established that people care as much about the justice of the process through which an outcome is produced as they do about the outcome itself

8. Fair Process Exercised • When fair process is exercised in the strategy making process, people trust that a level playing field exists • This inspires them to cooperate voluntarily in executing the resulting strategic decisions

9. Voluntary Cooperation • More than mechanical execution, where people only do what it takes to get by • Involves going beyond the call of duty, wherein individuals exert energy and initiative to the best of their abilities

10. 3 E Principles • Consist of engagement, explanation, and clarity of explanation • Whether people are senior executives or shop floor managers, they all look to these elements

11. Engagement • Means involving individuals in the strategic decisions that affect them by asking for their input and allowing them to refute the merits of one another’s ideas and assumptions • Engagement communicates management’s respect for individuals and their ideas

12. Explanation • Means that everyone involved and affected should understand why final strategic decisions are made as they are • An explanation allows employees to trust managers’ decisions even if their own ideas have been rejected • Serves as powerful feedback loop that enhances learning

13. Explanation Clarity • Requires that after a strategy is set, managers state clearly the new rules of the game • Employees should clearly be able to know the standards they are being judged by • The understanding of the goals are more important than the goals themselves

14. A Tale of Two Plants Demonstrates how the three E principles of fair process play a role in a companies ability to implement a new strategy into an organization As domestic demand fell in the elevator industry, sales for Elco, an elevator systems manufacturer, began to decline Elco set out to implement a blue ocean strategy that would offer customers a greater value product while lowering its costs

15. The Two Plants • Elco replaced its batch-maufacturing system with a cellular approach • The first step was to implement the new system at Elco’s Chester plant - “They were the ideal work force” • The company then planned to implement the new system into the High Park plant - They had created a strong union and were expected to “resist change”

16. The Way the Strategic Shift was Made Chester Plant • Ignored Engagement: Consultants were told to work quickly with little disturbance to employees and the plant manager was gone often • The Chester plant failed to Explain why the strategic changes were needed and being made • Managers didn’t clearly communicate with employees their Expectations under the new manufacturing process “Trust and commitment at the Chester plant deteriorated quickly.”

17. The Way the Strategic Shift was Made High Park Plant • Plant managers Engaged employees by introducing them to consultants • Plant meetings were held to discuss the declining business conditions, and the company Explained how they had seen other companies improve from implementing the cellular manufacturing system • Goals and Expectations were made clear to employees

18. Importance of Fair Process Managers discovered: • Violating fair process can result in employee distrust and resistance to change • Practicing fair process builds employee trust and gives them the ability to adapt and execute the most difficult strategic shifts

19. Why does fair process matter? Emotionally Not as labor, personnel, or human resources but as human beings who are treated with full respect and dignity and appreciated for their individual worth regardless of hierarchical level. Intellectual Individuals seek recognition that their ideas are sought after and given thoughtful reflection, and that others think enough of their intelligence to explain their thinking to them.

20. Intellectual and Emotional Recognition Theory There is an eagerness to trust and cherish the individuals as well as a deep-seated confidence in the individuals knowledge, talents, and expertise. When individuals feel recognized intellectually They are willing to share their knowledge. Creating active idea and knowledge sharing When emotionally recognized they feel emotionally tied to the strategy and inspired to give their all.

21. Violation of Fair Process • People will hoard ideas • They will also reject others intellectual worth • People will drag their feet • And my even sabotage the project

22. Voluntary Cooperation in Strategy Execution Intellectual and emotional recognition Fair Process Trust and commitment Refusal to Execute Strategy Intellectual and emotional Indignation Violation of Fair Process Distrust and Resentment

23. Intangible Capital • Commitment, trust, and voluntary cooperation