Blue Ocean StrategyChapter 8

Team 3Mason MitchellRandy GreinertSarah YelvertonAlec Cooper

Executing Blue Ocean Strategy Removing roadblocks is key, we are starting

with a blank canvas. Want everything right the first time.

Build Execution into Strategy

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.

People

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.

The Sixth Principle of BOS

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.

Poor Process can Ruin Strategy Execution

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

Power of Fair Process

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

Research Results

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

Fair Process Exercised

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

Voluntary Cooperation

Consist of engagement, explanation, and clarity of explanation

Whether people are senior executives or shop floor managers, they all look to these elements

3 E Principles

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

Engagement

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

Explanation

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

Explanation Clarity

A Tale of Two PlantsDemonstrates 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

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”

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.”

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

Importance of Fair ProcessManagers 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

Why does fair process matter?

IntellectualIndividuals 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.

EmotionallyNot 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.

There is an eagerness to trust and cherish the individuals as well as a deep-seated confidence in the individuals knowledge, talents, and expertise.

Intellectual and Emotional Recognition Theory

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.

People will hoard ideas They will also reject others intellectual

worth People will drag their feet And my even sabotage the project

Violation of Fair Process

Fair Process

Intellectual and emotional recognition

Trust and commitment

Voluntary Cooperation in Strategy Execution

Violation of Fair Process

Intellectual and emotional Indignation

Distrust and Resentment

Refusal to Execute Strategy

Commitment, trust, and voluntary cooperation

Intangible Capital