Build Execution into Strategy Blue Ocean Strategy Ch. 8 Rebecca Eggerman Alexander Johnson Miguel Lopez Hannah Stephens Carissa Tarnowski

Overview Build Execution into 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

Build Execution into Strategy A company is not only top management Strategy alignment and support – Stand apart Culture of trust and commitment – Motivate people More challenging in a BOS – Trepidation and change Build Execution into Strategy from the start – Minimize risk of distrust, noncooperation, sabotage Fair process

Whole Foods Market No secrets Kumbaya culture Power to the people Perks Workplace democracy

Poor Process Can Ruin Strategy Execution Lubber Dramatically simplified sales process Sales force fought the new strategy – Weren’t engaged in the strategy-making process – Felt threatened Forced to pull the system

Whole Foods Market Silencing online complaints High annual turnover rate

The Power of Fair Process Fair process – John W. Thibaut and Laurens Walker procedural justice – People care about process as much as outcome – Level playing field presented inspires voluntary cooperation – Goes beyond call of duty to result in strategic decisions

The Three “E” Principles of Fair Process Mutually reinforcing elements: Engagement – Involving individuals in the strategic decisions by asking input Explanation – Everyone involved should understand why final strategic decisions are made Expectation clarity – After a strategy is set managers clearly state the new rules of the game

Three “E” Principles Continued These three collectively lead to the judgment of fair process Any subset of these does not create judgment of fair process

A Tale of Two Plants Late 1980’s: sales in the elevator industry declined Vacancy rates as high as 20% with excess office space “Elco” manufacturing company wanted to offer buys a leap in value while lowering costs to stimulate new demand – Needed to replace batch manufacturing with cellular manufacturing that allowed self-directed teams to achieve superior performance

Results of different strategy implementation Chester- Seen as “The Ideal Work Force” Violated all three basic principles of fair process – Failed to engage employees in strategic decisions that directly affected them – Consultants came in and worked around employees without conversation – Manager was increasingly absent – Didn’t explain why strategic decisions were being made and what those decisions meant to employees’ careers and work methods High Park- Seen as a “Strong union resistant to change” Abided by all three principles of fair process – Employees were introduced to consultants – Engaged employees by holding plant wide meetings – Openly discussed the declining business conditions and the need for change – Announced a proaction-time policy to calm employees’ fears of layoffs

As a result Chester’s model work force began falling apart – Employees were refusing to do what they were asked – Lost trust with their plant manager – Employees rejected the transformation and refused to play their role in executing the strategy High Park accepted the strategic shift – Willingly participated because they felt they were treated fairly – Spoke of their plant manager with admiration – Concluded it was a necessary, worthwhile, and positive experience

Importance of Fair Process With the use of fair process: – Managers can turn their worst employees to their best Violation of fair process: – Managers can turn their best employees to their worst

Why does fair process matter? Emotional recognition Intellectual Recognition

Intellectual and emotional recognition theory Value of intellectual worth in a firm and motivation Frederick Herzberg’s study on motivation

Violation of fair process Denial of recognition of worth and intellectual indignation Denial of emotional worth and lack of trust

Fair Process and Blue Ocean Strategy Blue Ocean Strategy Fair Process Commitment  Willing to override personal self-interest Trust  Heightened confidence in one another’s intentions and actions Voluntary Cooperation  Willing to work Whole Foods Commitment  Make their front line people the company most important asset Trust  Open books, open doors, and open people Voluntary Cooperation  Willing to work

How to Create It? Don’t do this Have separate strategy formulation from execution – Carrots and sticks Do this Organize the strategy formulation process around the principles of fair process. – People realize that compromise and sacrifices are necessary in building a strong company

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