Blue Ocean Strategy

1. Blue Ocean Strategy BUILD EXECUTION INTO STRATEGY Team 3Riley DrummondKara VickersAndrew RichJames EverettAnn-Marie NannyRick HensonBrittany Fowlkes

2. Build Execution into Strategy • How to execute your strategy? • How important is frontline to your strategy? -having everyone understanding strategy is crucial but isn’t everything to executing your strategy • zzzzzzz

3. 6th Principle of Blue Ocean Strategy • 6th Principle: To build execution into strategy from the start, management must build people’s trust and commitment deep in the ranks and inspire their voluntary cooperation • Believing NOT Following -Trepidation builds in frontline if no belief or feeling of irrelevancy • Minimizing management’s risk -distrust, noncooperation, sabotage -exist in red oceans but more prevalent in blue oceans • Fair Process -Presence or absence can make or break your strategy

4. Poor Process • A poor process can ruin strategy execution • EX: Choosing the right coolant for metalworking industry • Devised a system that used artificial intelligence which cut failure rate to less than 10% from industrial average of 50%. • This reduced machine downtime, eased coolant management and raised the overall quality of work. • Simplified the sales process which gave representatives more time to gain new sales.

5. Poor Process • Even though this system worked very well it was doomed from the start because the sales force fought it. • Sales representatives saw this as a direct threat to what they considered their most valuable contribution. • The benefits of the new strategy went unappreciated and management was forced to pull the expert system from the market and work on rebuilding trust with its sales representatives.

6. Poor Process • Even if a strategy is more effective it must be implemented in a way that does not affect the process in a bad way especially the people. • EX: Nike can make soccer balls cheaper in Pakistan with child labor, but some people boycott these soccer balls because of this. • This process has a negative affect on sales and they way some people look at Nike.

7. The Power of Fair Process • John W. Thibaut and Laurens Welker • Sought to understand what makes people trust a legal system so that they will comply with laws without being coerced. • Research results: • Procedural Justice Theory • People trust that a level playing field exists • Voluntary Cooperation • Going beyond the call of duty to execute strategies

8. The Three E Principles of Fair Process • Engagement • Explanation • Clarity of Expectation • Whether in the corporate office or on the sales floor, they all look at these elements.

9. Engagement • Means involving all individuals in decision making that affect them, by asking for their input. • Encouraging individuals to share their ideas builds better collective wisdom. • It results in better decisions by management and greater commitment by those executing the decision. To engage Nike’s more than 30,000 employees worldwide, Nike created an internal online network - the WE Portal - to house its employee engagement programs.

10. Explanation • Means informing everyone involved of why the decisions are made as they are. • It allows employees to trust the managers decision. • Serves as a feedback loop that enhances learning.

11. Expectation Clarity • Clearly states new strategy and all it entails. • To achieve fair process; goals, expectations and responsibilities must be clearly understood. • Once understood people can then focus on executing the strategy rapidly.

12. A Tale of Two Plants • Elco- an elevator systems manufacturer in the late 1980’s • Sales in the elevator industry declined and domestic demand fell • Co. decided to turn things around and create a blue ocean strategy by replacing its batch-manufacturing system with a cellular approach that would allow self-directed teams to achieve superior performance • Management team was in agreement of beginning to execute its new blue ocean strategy and started implementing changes at its two plants

13. A Tale of Two Plants • Would 1st install new system at Elco’s Chester plant then roll it out to its 2nd plant, High Park. -At the Chester plant, there were exemplary employee relations and management was certain it could count on employee cooperation to execute the strategic shift in manufacturing. They were said to be the ideal work force -At the High Park plant, there was a strong union expected to form in resistance to the shift in the manufacturing process, but they thought the positivity from the Chester plant would spillover to the High Park plant • In theory this was all good to go, but there was an unpredicted turn that took place.

14. A Tale of Two Plants • What actually happened once the new manufacturing system was implemented at both plants: -At the Chester plant, disorder and rebellion plagued the introduction of the new system -At the High Park plant, the new system was accepted and followed without resistance • Why did the exact opposite happen than what the managers expected?

15. A Tale of Two Plants • At the Chester plant, Elco managers violated all 3 of the basic principles of fair process. -1st, they failed to engage employees in the strategic decisions that directly affected them. Elco brought in a consulting firm to design the master plan for the conversion. -None of the workers knew who these men and women in black suits were that would stand behind them, whisper, and observe. -Also, the plant manager was increasingly absent due to meetings with the consultants. -the rumor mill started and everyone was convinced the company was downsizing. -trust & commitment soon deteriorated

16. A Tale of Two Plants • 2nd of all, Managers at Chester didn’t explain what strategic decisions were being made the way they were and what those decisions meant to employees’ careers & work methods. -Management unveiled the master plan for change in a 30 minute session with the employees and that was it. • 3rd of all, Managers neglected to make clear what would be expected of employees under the new manufacturing process.

17. A Tale of Two Plants • Violations of the principles of fair process undermined employees’ trust in the strategic shift & in management. -The employees began taking their fear out on one another & refused to do as they were asked, turning down assignments “even if you fire me”. • In the absence of fair process, the Chester plant’s employees rejected the transformation & refused to play a role in executing the new strategy.

18. A Tale of Two Plants • On the other hand at the High Park plant, management abided by all 3 principles of fair process when introducing the strategic shift. -Management engaged employees in plant wide meetings routinely, discussing the declining business trends, and explained the strategic course of action thoroughly. -Goals & expectations were made clear to employees • By practicing the 3 principles of fair process in tandem, management won the understanding & support of High Park employees. When fair process is practiced correctly, the worst employees can be turned into the best.

19. Why does Fair Process Matter? • Intellectual and Emotional recognition • Respect, dignity, individual worth • Universal Value • Nike and the FLA

20. Intellectual and Emotional Recognition Theory • Recognition leads to employees giving: • Active Ideas • Knowledge sharing • Intrinsic motivations • Leads to success • Violation of fair process leads to employees: • holding back their best/most creative ideas • Reject other’ intellectual worth • Drag their feet • Sabotage • Push for rolling back strategies imposed unfairly

21. Intellectual and Emotional Recognition Theory The execution consequences of the presence and absence of fair process in strategy making : Fair Process  Intellectual/emotional  Trust/commitment  Voluntary cooperation recognition in strategy execution Violation of  Intellectual/emotional  Distrust/Resentment  Refusal to execute Fair Process indignation strategy

22. Fair Process and Blue Ocean Strategy • Trust • Heightened confidence in one another’s intentions and actions • Commitment • Willing to override personal self-interest in the interest of the company • Voluntary cooperation

23. Dilemma • How to create trust, commitment and voluntary cooperation within a company? • Many companies separate strategy formulation from execution • Slow and questionable implementation • Traditional incentives • Power and money

24. Fair Process Wrapped Up • People tend to be committed to support the resulting strategy even when it is viewed as not favorable or at odds with their perception of what is strategically correct for their unit. • People realize that compromises and sacrifices are necessary in building a strong company. • They accept the need for short-term personal sacrifices in order to advance the long-term interest of the corporation