BLUE OCEAN STRATEGY CH 8: Build Execution Into Strategy Team 3: Taylor Carroll, Andrew Stack, Andrea Lapotaire, Andrew West, Jessica Sharpless

Strategy Execution Create a culture of trust and commitment Does Wal-Mart's employees trust management? Must align hearts and minds Require people to step outside of comfort zone Do employees think outside of the norm Inspire voluntary cooperation Quick to grasp new strategy? Strategy must be forced onto them?

Strategic Execution (cont.) Best planned strategies often fail Implementation must be programed into the strategy to minimize risk of failure http://www.youtube.com/watch?v=InIS4icfpVw

Poor Process Can Ruin Strategy Execution Failure to explain a strategy can halt the execution Trust must be built with employees to begin to accept the new strategy

Lubber Example Lubber: water-based liquid coolant for the metalworking industry Several types of coolants to choose from Must be tested to determine right one Machine downtime and sampling costs Expensive for customers and Lubber New strategy created that would eliminate complexity and costs of trial phase Cut down failure rate of selecting coolants from 50% to less than 10%

Lubber Example Cont: Excellent strategy doomed from the start Sales red saw it as a direct threat to their most valuable contribution Expressed doubts about effectiveness to customers Directly effected sales Management forced to pull the system

What could be learned? Using the proper process could have prevented the demise of the expert system Make sure that the new strategy was properly explained to all the employees Train on how to use Explain the benefits and effectiveness Make sure employees know that their job is safe and the new strategy is simply put in place to enhance efficiency Work manager-employee trust If employees would have trusted management, they would have known that the new strategy was put in place to better the company and would have known that their jobs were safe

The Power of Fair Process What is fair process? Engagement Explanation Expectation clarity How does it allow companies to build execution into strategy?

Fairness/Justice Social scientists John W. Thibaut and Laurens Walker combined interest of psychology of justice with the study of process Created: Procedural Justice What makes people comply with laws without being made to do so http://www.youtube.com/watch?v=BpRsZjBw1TI People care as much about the justice of the process as they do about the actual outcome Satisfaction of outcome increases if it is believed that procedural justice is exercised

Fairness/Justice Cont. When fair process is exercised, it is believed that a level playing field exists Inspires employees to voluntarily cooperate in executing the new strategy Involves going beyond the call of duty

Walmart’s Treatment of Employees Wal-Mart has taken many hits on treatment of employees Unpaid overtime Sexual discrimination Poor health plan Anti-union activities Unfair process and justice Could this be causing poor performance? *Wal-mart has since been working to better employee satisfaction

Google Google is famous for treating employees well Leisure facilities on campus Excellent health plan Equal employment What is the outcome of Google’s fair process? Excellent performance New innovations happen frequently Very successful

The Three E Principles of Fair Process Engagement- Involving individuals in the strategic decisions that affect them by asking for their input. Communicates management’s respect Better strategic decisions Greater commitment from those involved Explanation- Making sure everyone involved and affected should understand why final strategic decisions are made. Establish confidence in managers Allows employees to trust managers Powerful feedback loop Expectation clarity- Stating clearly the new rules of the game after a strategy is set. Understood standards to be held by Strategy can be executed rapidly WALMART

A Tale of Two Plants

Why Does Fair Process Matter? Intellectually Recognition and reflection of individual’s ideas Emotionally Individual recognition of value “It all comes down to intellectual and emotional recognition.” –Pg. 181

Intellectual and Emotional Recognition Theory Individuals share knowledge, when intellectual worth is recognized. Fair process=voluntary cooperation.

Overcoming Fair Process Adversities Employees reject opposing ideas. If individual ideas are not fostered, they will refrain from sharing them. Lack of trust in strategy-making process= lack of trust in implemented strategy Employees may resist strategies, no matter how efficient it may be.

Wal-Mart and Fair Process Systematic operation Micromanagement Adherence to protocol

Fair Process and Blue Ocean Strategy Commitment, trust, and voluntary cooperation are intangible capital Allows companies to stand apart in the speed, quality, and consistency of their execution and to implement strategic shifts fast at low cost When people have trust, they have heightened confidence in others intentions and actions When people have commitment, they are willing to override personal self-interest in the interests of the company

Fair Process and Blue Ocean Strategy (Continued) Intangible Capital is directly related to success or failure in executing blue ocean strategies How do companies create trust, commitment, and voluntary cooperation? Incentives of money and power Exercise of fair process

Fair Process and Blue Ocean Strategy (Continued) By organizing the strategy formulation process around the principles of fair process, you can build execution into strategy making from the start Compromises and sacrifices are necessary in building a strong company

http://www.youtube.com/watch?v=wPOgvzVOQig

Wal-Mart's Commitments Wal-Mart is committed to purchasing food from local growers for distribution to stores in their areas. This commitment reflects their ever-important goal to provide consumers with quality, affordable, home-grown agricultural selections.