Blue Ocean Strategy Chapter 8: Build Execution into Strategy

Gerald, Brett, Courtney, Ryan, Scott, Brandon, William, Kara

Preview of Main PointsBuild Execution into a StrategyPoor Process Can Ruin Strategy ExecutionThe Power of Fair ProcessThe Three E Principles of Fair ProcessA Tale of Two PlantsWhy Does Fair Process Matter?Intellectual and Emotional Recognition

TheoryFair Process and Blue Ocean StrategyConclusion

Build Execution into StrategyA company equals everyone from the top

to the front lines.Everyone in an organization must support and

be aligned with strategyCreate a culture of trust and commitment

This allows people to embrace new strategy willingly

Involve front lines in creation of strategyFront line employees are the ones who must

execute strategy day in and day out.

Build Execution into StrategyTo build trust and commitment and to inspire

voluntary cooperationBuild execution into strategy from the startReach to fair process in making and executing

of strategy

Poor Process can Ruin Strategy ExecutionStrategy execution for blue oceans requires significant

change and a well thought out process contributed by every level of the company.

When the process is poor, decisions, if made at all, are likely to be poor as well.

Countless mistakes can be made, the issues can be misidentified or dealt with out of order, the process can be too complex with too many steps, or so short and simple that important facts or opinions are not considered.

Ex. Water-based liquid coolants for metalworking industries

Samuel Adams changes strategy• The Company has historically pursued a strategy of combining brewery ownership with production arrangements at breweries owned by third parties.

• Having less control of breweries owned by third parties, Sam Adams faced Potential disruptions at breweries including labor issues, governmental actions, quality issues, contractual disputes, machinery failures or operational shut downs.

• Samuel Adams has changed its strategy and made it clear that all brewing will be done in Sam Adams owned Breweries.

The Power of Fair ProcessOriginated by John W. Thibaut and Laurens

Walker in the mid-1970s

With their focus on legal settings, they found that people care just as much about the process of a strategy as they do about the outcome

Fair process is the managerial expression of the procedural justice theory

procedural justice

psychology of justice

study of process

Fair Process in the Strategy Making ProcessEmployees trust that everyone has an input

in the process

Inspires people to cooperate voluntarily in the execution of strategies

Voluntary Cooperation > Mechanical Execution

Attitudes and Behaviors toward Fair ProcessFigure 8-1 pg.174

Strategy Formulation Process

Attitudes

Behavior

Strategy Execution

Exceed Expectations

Self-initiated

Fair Process

EngagementExplanation

Expectation clarity

Trust and Commitment

“I feel my opinions count.”

Voluntary Cooperation

“I’ll go beyond the call of duty.”

The Three E Principles of Fair Process

All three principles collectively lead to the judgment of fair process

1. Engagement 2. Explanation3. Clarity of expectation

EngagementInvolving individuals in the strategic

decisions that affect themAsk for inputAllow employees to question the ideas or

assumptions of othersCommunicates management’s respect for

individuals and their ideas Creates better strategic decisions from

management and greater commitment from everyone involved

ExplanationEveryone involved should understand why

the final strategic decisions are made

People are confident that managers have considered all opinions and made decisions based on the overall interest of the company

Employees can trust managers intentions Managers can receive feedback from

employees allowing for enhanced learning of the decision

Expectation Clarity Once the strategy has been set into action,

managers must clearly communicate the new rules and procedures

Employees should know what standards they will be judged on and what penalties they will receive for failure

Are the new goals, targets, and responsibilities for our employees clearly understood?

The Tale of Two PlantsThree E’s of fair process in a real life example:

Elco elevator company needs to implement new manufacturing system to cut costs.

The Tale of Two PlantsPrinciple Strategy

Begin implementing change at Chester, then roll over to High Park.

Chester had ideal employees and no union, unlike High Park

Expected Chester’s success to provide momentum for change at High Park

However the opposite occurredManagement at Chester violated the three

E’s, unlike High Park

High Park is more successful than Chester

Chester Plant vs. High Park plant

Chester High ParkFailed to Engage Employees

Consulting firm ordered not to disturb employees

Failed to ExplainEmployees were not

explained why new system was being implemented

Failed to clarify ExpectationsDid not elaborate on how

new system worked, and what employees jobs were

Engaged Employees Introduced consultants

to employees, held company meetings.

Explained why new process was being implemented

Clearly stated employee Expectations in new system

ResultsChester plant employees lose trust in

management and is met with resistance to the new strategy

High Park strategy is implemented, Employees gain trust in management and shift from being the worst employees to the best.

Why Does Fair Process Matter?It all comes down to intellectual and

emotional recognitionIntellectually

Individuals seek recognition that their ideas are sought after and given thoughtful reflection

EmotionallyIndividuals seek recognition of their value

Intellectual and Emotional Recognition TheoryWhen individuals feel recognized for their

intellectual worth, they are willing to share their knowledge

By using fair process employees will be to engage in voluntary cooperation

If individuals are not treated as though there knowledge is valued they may not share their ideas and best thinking

Employees may also begin to reject other’s intellect as well

Ultimately employees can push for changing back strategies even if they are good ones

Lacking trust in the strategy-making process, people lack trust in the resulting strategies.

Sam Adams Homebrew competitionCompanywide events help bring

together employees in a family environment

Homebrew competition lets employees brew their own beer as they begin to grow a passion for beer

Sam Adams promotes a relaxed environment that encourages new ideas from all levels of employees

Fair Process and Blue Ocean Strategy

Intangible capitalCommitmentTrustVoluntary

cooperation

*Willing to put self interest

aside, for the good of the

company

Intangible capitalCompanies who have created blue oceans are

quick to praise their employees who show commitment, trust and voluntary cooperation.

Companies who have this intangible capital stand apart in speed, quality and consistency of their execution and to implement strategic shifts at low cost.

Obtaining Intangible CapitalWhat not to do: What to do:

Money and Power?This will simply fall short

of inspiring human behavior beyond self interest.

Don’t separate strategy formulation from executionThis is a hallmark of

questionable implementation and mechanical flow through at best!

Implement Fair processBuild execution into

strategy making from the start

People tend to be committed to support the resulting strategy even when it is viewed as not favorable or at odd with their unit

People realize that small self sacrifices are essential in building a strong company

ConclusionBuild Execution into a Strategy

A company means everyone Culture of trust and commitment Use frontline employees in strategy creation

Poor Process Can Ruin Strategy ExecutionPoor process = poor decisions

The Power of Fair ProcessEmployees trust everyone has a sayInspires everyone to cooperate voluntarily

ConclusionThe Three E Principles of Fair Process

EngagementExplanationClarity of expectataion

A Tale of Two PlantsChester Plant vs High Park Plant

Why Does Fair Process Matter?Intellectual and Emotional recognition

Intellectual and Emotional Recognition TheoryFair Process and Blue Ocean Strategy

Intangible Capital