Transcript Blue Ocean Strategy Chapter 8: Build Execution into Strategy

Gerald, Brett, Courtney, Ryan, Scott, Brandon,
William, Kara
Preview of Main Points
 Build Execution into a Strategy
 Poor Process Can Ruin Strategy Execution
 The Power of Fair Process
 The Three E Principles of Fair Process
 A Tale of Two Plants
 Why Does Fair Process Matter?
 Intellectual and Emotional Recognition Theory
 Fair Process and Blue Ocean Strategy
 Conclusion
Build Execution into Strategy
 A company equals everyone from the top to the
front lines.
 Everyone in an organization must support and be
aligned with strategy
 Create a culture of trust and commitment
 This allows people to embrace new strategy willingly
 Involve front lines in creation of strategy
 Front line employees are the ones who must execute
strategy day in and day out.
Build Execution into Strategy
 To build trust and commitment and to inspire
voluntary cooperation
 Build execution into strategy from the start
 Reach to fair process in making and executing of
strategy
Poor Process can Ruin Strategy Execution
 Strategy 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 Process
Originated by John W. Thibaut and Laurens Walker in
the mid-1970s
psychology
of justice
study of
process
procedural
justice
 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
Fair Process in the Strategy Making Process
 Employees 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 Process
Figure 8-1 pg.174
Strategy Formulation
Process
Attitudes
Fair Process
Engagement
Explanation
Expectation clarity
Trust and Commitment
“I feel my opinions count.”
Behavior
Voluntary Cooperation
“I’ll go beyond the call of
duty.”
Strategy Execution
Exceed Expectations
Self-initiated
The Three E Principles of Fair Process

All three principles collectively lead to the judgment
of fair process
1.
2.
3.
Engagement
Explanation
Clarity of expectation
Engagement
 Involving individuals in the strategic decisions that
affect them
 Ask for input
 Allow employees to question the ideas or assumptions of
others
 Communicates management’s respect for
individuals and their ideas
 Creates better strategic decisions from
management and greater commitment from
everyone involved
Explanation
 Everyone 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 Plants
 Three 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 Plants
 Principle 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 occurred
 Management 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 Park
 Failed to Engage Employees
 Consulting firm ordered not
to disturb employees
 Failed to Explain
 Employees were not
explained why new system
was being implemented
 Failed to clarify Expectations
 Did 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
Results
 Chester 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
recognition
 Intellectually
 Individuals seek recognition that their ideas are sought
after and given thoughtful reflection
 Emotionally
 Individuals seek recognition of their value
Intellectual and Emotional
Recognition Theory
 When 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 competition
 Companywide 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 capital
 Commitment
 Trust
 Voluntary cooperation
*Willing to put self
interest
aside, for the good of the
company
Intangible capital
 Companies 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 Capital
What not to do:
 Money and Power?
 This will simply fall short of
inspiring human behavior
beyond self interest.
 Don’t separate strategy
formulation from execution
 This is a hallmark of
questionable
implementation and
mechanical flow through at
best!
What to do:
 Implement Fair process
 Build 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
Conclusion
 Build Execution into a Strategy
 A company means everyone
 Culture of trust and commitment
 Use frontline employees in strategy creation
 Poor Process Can Ruin Strategy Execution
 Poor process = poor decisions
 The Power of Fair Process
 Employees trust everyone has a say
 Inspires everyone to cooperate voluntarily
Conclusion
 The Three E Principles of Fair Process
 Engagement
 Explanation
 Clarity of expectataion
 A Tale of Two Plants
 Chester Plant vs High Park Plant
 Why Does Fair Process Matter?
 Intellectual and Emotional recognition
 Intellectual and Emotional Recognition Theory
 Fair Process and Blue Ocean Strategy
 Intangible Capital