Blue Oceans Strategy Ch.8Build Execution into Strategy

Chase WardZach Hancher

Nathan LeclearSarita Fields

Cameron CoffeyPaul Boeker

“To build people’s trust and commitment deep in the ranks and inspire their voluntary cooperation, companies need to build execution into strategy from the start.”◦ Attitudes and Behavior◦ Must appeal to employees “Hearts and Minds” for

strategy to hold.◦ Risk: Distrust, Noncooperation, Sabotage

6th Principle

Main idea:◦ Management must include employees in

execution from the start and allowing them to help (create/build) the strategy so they will follow it with their “Hearts & Minds”.

◦ What Fair Process is and its importance.◦ The Effects of Poor Process.◦ Incorporating it into Blue Oceans Strategy.

Overview

Poor Process Can Ruin Strategy Execution

Catch 22 of Value Innovation

Increase in Customer Value Decrease in Complexity Decrease in Cost Employee

How does implementing fair process allow for building execution into strategy?

Based on the principles of procedural justice as explored in psychology. ◦ Term that explains the phenomenon where the strict

adherence to an outcome determining system is considered equally as important as the quality of the ruling reached through said system. Satisfaction and commitment to the ruling increases when procedural justice was followed.

Creates confidence and builds people’s trust. Which principles provide for this?

Fair Process

These elements must be present for fair process to emerge. Any combination not including all three is insufficient.

Engagement- Involving low level employees in the strategic development process. Allows for the refinement of strategies and invests the strategy executors into the strategy itself.

Explanation- Explaining why certain strategic decisions were made to those involved. Creates confidence in the strategy by increasing people’s understanding of it and builds trust in management.

Expectation (clarity)- Setting clear objectives and milestones, as well as creating a system of evaluation for strategy executors. The clarity of the objectives here is more important than their subjective fairness.

Three E Principles

In the late 1980s, sales in the elevator industry declined.

Elco set out to offer buyers a leap in value while lowering its

In its quest to create and execute a blue ocean strategy, the company realized that it needed to replace its batch-manufacturing system with a cellular approach that would allow self-directed teams to achieve superior performance.

Elco

1. It would first install the new system at Elco’s Chester plant.

2. Elco would roll out the process to its plant in High Park, where a strong union was expected to resist that, or any other, change.

Steps taken by Elco

The introduction of the new manufacturing process at the Chester plant quickly led to disorder and rebellion.

Within few months, both cost and quality performance were in free fall.

The new cell design offered tremendous benefits to employees.◦ Yet employees could see only its negative side.◦ began taking out their fear and anger on one another◦ Fights erupted on the plant floor as employees refused to

help Managers.

Chester Plant

High Park plant abided by all three principles of fair process when introducing the strategic shift.

Managers concluded that the change to cellular manufacturing had been a necessary, worthwhile, and positive experience.

By violating fair process in making and rolling out strategies, managers can turn their best employees into their worst, earning their distrust of and resistance to the very strategy they depend on them to execute.

High Park Plant

Why Does Fair Process Matter?

-It all comes down to Intellectual and Emotional recognition

Intellectual Recognition-Recognizing individuals ideas that are sought

after and given thoughtful reflection.

-When individuals feel recognized for their intellectual worth, they are willing to share their knowledge.

Emotional Recognition-Treating individuals with full respect and

dignity and appreciating them for their work

-When individuals are treated with emotional recognition they feel emotionally tied to the strategy and inspired to give their all.

Violation of Fair Process-If individuals are NOT treated as though their

knowledge is value, they will feel intellectual indignation and will NOT share their ideas and expertise.

-They will reject others intellectual worth and work as well.

-If emotional worth is not recognized will feel angry and not invest their energy into their actions.

-They will drag their feet and apply counter-efforts, like sabotage, as in Elco’s Chesters plant.

Blue Ocean Strategy◦ Commitment, Trust, and Voluntary cooperation

Why companies have been successful in Blue ocean industries and why companies have failed

Fair Process◦ How do we create Commitment, trust and

voluntary cooperation?◦ People tend to be committed to the strategy even

when the outcome is not certain

Fair Process and Blue Ocean Strategy