Change Management and Blue Ocean strategies

Indian Institute of Management , Bangalore © Mukesh Sharma , EPGP 2009-10

Change management : A tool for Total Quality

Organization (TQO) and Blue Ocean Strategies

General Motors Technical Center , Bangalore,India

10th September 2009


Scope

• Change management

• Frame work for Total quality organization (TQO)

• Adopting Blue Ocean Strategy

• Case Study – Dashman company


• YOU must be the change

you wish to see in the

world

Mahatma Gandhi


Change Management

• What is change

• Resistance to change

• Organizational change

• Change triggers & Change drivers

• Change Agents

• Change management framework


D

e

g

r

e

e

o

f

c

h

a

n

g

e

Scope of change

Individual Group Department Division Orgn. Nation Intern.

100%

50%

25%

2.5%

1%

.001%

.000001%


Shock value of change

Intensity

of change

Shock value of

change

Time to implement

change

Low

High

LowHigh


What is change

• Newton’s first law of motion – An object at rest tends to stay at rest, and an object in motion tends to stay in motion with the same speed and in the same direction unless acted upon by an unbalanced force.

• First law of change management – Any situation, organization , culture , set of beliefs, way of life remains in the same state unless acted upon by an external change force.


• Newton’s second law of motion : The acceleration of

an object as produced by a net force is directly proportional to the magnitude of the net force, in the

same direction as the net force, and inversely proportional to the mass of the object.

• The larger the mass the larger the force F = m.a

• Second Law of change management : The more people, organization or systems have invested in the past, the more difficult it is for them to Change

into the future.


Why inertia

• Organization goals create narrow , self affirming

views that reinforce past behaviors

• Successful strategies survive because they were

successful earlier

• Political factors in organisation to run old

strategies

• Programs and procedures are outcome of

complex process therefore to change them

requires effort and reconciliation


• Newton’s third law of motion – Action is equal to reaction of equal magnitude and opposite direction

• Third law of change management – When we try to change people , they will resist with an equal and

opposite force.


Resistance to Change : Individuals

Sources of resistance

• Habit

• Security

• Economic Factors

• Fear of the Unknown


Resistance to Change: Individuals

• Habit - programmed responses helps us cope with complexities of life; when confronted with change this tendency to respond in our accustomed ways becomes a source of resistance

• Security – People with a high need for security are likely to resist change because it threatens their sense of security

• Economic Factors – Concern that changes will result in lower income; Fear that they cannot perform new tasks or routines especially when pay is closely tied to productivity

• Fear of the unknown – Change substitutes ambiguity and uncertainty for the known; You trade known for the unknown and the fear and insecurity that goes with it


Resistance to Change: Organizations

• Organizations are conservative – actively resist change through structural and group inertia

• Organizations have built-in mechanisms to produce stability – systematically select certain people and certain people out, people are hired into an organization are chosen for and then shaped and directed to behave in certain ways

• Sull’s theory of organisational resistance and failure


• Managers focus and improve one strategy, which leads to active inertia and failure. Four things occur that manifest active inertia:

Why organizations fail to respond

Strategic Frames Blinders

Processes Routines

Relationships Shackles

Values Dogmas

People Change Survivors


Dynamics of change process

Fr= Us.Mg

F = MA


What should the manager do?

1. Initiating change is an important part of the manager’s job

2. Expect resistance to change come in a number of forms

3. Prepare to undermine this resistance


How to undermine resistance

• Provide rewards for accepting change

• Communicating reasons for why change is necessary

• Including people who will be effected by the change to participate in change decisions


Emotional Reactions to Change

Time

Active

Passive

Em

oti

onal

resp

onse

Stability at the

Point of change

Inability

to act Denial

Anger

Bargaining

Depression

Acceptance

Testing


Use Participation To Reduce Resistance to Change

•A potent force for combating resistance to change

•Participation can reduce resistance, obtain commitment and increase the quality of the change decision

•Adequate time to participate

•Organizational culture support staff involvement


State of dynamic stability

Fr= Uk.Mg

F = MA

•“ State of dynamic stability “

• Incremental change


Community of followers

• Inclusivity – sense of belonging , sense of community

• Positive culture – socialization ,sense of cooperation

• Caring and trust- Sense of commitment

• Shared leadership- Sense of dependability

• Conversation – sense of open communication


Management framework for

total quality organization (TQO)

• Leadership and team work

• Highly motivated employees – community of followers

• Never ending improvement – dynamic stability

• Identify change triggers

• Identify change drivers

• Deploy change agents


Change triggers & drivers

• Globalization of industries and markets – All

companies going for “multinational character”

• Leapfrogging technology – constant innovation ,

new products , new processes

• Industry transformation – collapse , mergers ,

acquisitions

• Socio demographic shifts – stagnant population

growth , per capita income

• Political revisions


Change agents – 5C’s

• Connect

• Communicate

• Collaborate

• Create

• Cultivate


Case –General Electric

• "The idea flow from the human spirit is absolutely unlimited. All you have to do is tap into that well." - Jack Welch

• Jack welch stripped down 350 SBU’s to 13 in mid eighties.

• By the mid-1990s GE had become the strongest company in

the United States and the most valuable company in the

world, as measured in market capitalization

• Jack Welch wrote in a letter to shareholders: "If you want to get the benefit of everything employees have, you've got to

free them – make every body participant

• Everybody has to know everything, so they can make the right decisions by themselves.


General Electric

• Improving Connectivity: Creating a Seamless Link between

Strategy, Management, and Employees

• Harnessed the collective power of GE employees

• Encourage free flow of ideas – town hall meetings

• Redefined relationships between boss and subordinates

• Cross pollination of ideas

• In the Welch-led GE culture , traditional barriers dividing employees, co-workers, and management give way to tethers

of interdisciplinary and interdepartmental cooperation

• Change Acceleration Program (CAP), was implemented by Jack Welch to help drive change throughout the organization.


General Electric

• Welch says , "If the rate of change inside an organization is less that the rate of change outside... their end is in sight".

• Reassessing Performance and Benchmarking Employees Continuously

• Proactive change management and constant reassessment

• Annual review – 70-20-10


change management framework

•A systematic step by step approach

•Skipping any step is

suicidal


Self Orientation

• Establish rapport with the important nodes of an organization

• Important to buy mind share before you sell them an idea


Understanding best practices

• Allow people to express their strengths and weakness

• Calibrate your scale based on their input

• Interpolate and extrapolate the degree of change


Establish a Sense of Urgency

• Examine external realities

• Identify and discuss crises, potential crises, or major opportunities

• Communicate the concern


Establishing a shared commitment

• Concern and sense of urgency

• Assemble a group with enough power to lead the change effort

• Encourage the group to work as a team


Participative decision making -

Create a Vision

• Create a vision to help direct the change effort

• Develop strategies for achieving that vision

• PDM decreases the resistance to change


Wide communication Strategy

• Use everything possible to communicate the new vision and strategies

• Teach new behaviors by the example of the guiding coalition


Empowering team members to Act on the Vision

• Get rid of obstacles to change • Empower people to lead and stabilize

change• Change systems or structures that

seriously undermine the vision • Encourage risk taking and nontraditional

ideas, activities, and actions


Reward establishment of

change

• Plan for and Create Short-Term Wins

• Plan for visible performance improvements

• Create those improvements

• Recognize and reward employees involved in the improvements


Consolidate change and

Produce Still More Change

• Keep the purpose dynamic

• Reinvigorate the process with new projects, themes, and change agents

• Hire, promote, and develop employees who can implement the vision


Institutionalize and Internalize

change• Articulate the connections between the new behaviors and organizational success

• Develop the means to ensure leadership development and succession


Elements of successful

change

StrategyVision

Operations•Resources

•Action plan

CulturePeople

Rewards•Incentives

•Motivation

Successful

change


•Action plan

CulturePeople


•Motivation

Confusion

StrategyVision


•Action plan


•Motivation

Anxiety &

Resistance

StrategyVision


•Action plan

CulturePeople

Gradual

Change

StrategyVision

CulturePeople


•Motivation

Frustration

S

OR

C


Blue ocean strategies

• Do Strategies have color

• Red ocean strategies – conventional

• Blue ocean – uncontestable

• Creating wealth rather than redistribution

• Value innovation – cornerstone of blue ocean strategy


Value innovation

Cost

Buyer value

Value

innovation

Eliminate

Raise

Reduce

Create


Red ocean vs Blue ocean

Align firm’s strategy to Differentiation AND low cost

Align firm’s strategy to Differentiation OR low cost

Break the value cost trade offMake the value cost trade off

Create and capture new demandExploit existing demand

Make the competition irrelevantBeat the competition

Create uncontested market spaceCompete in existing market space

Blue OceanRed Ocean


Cirque du Soleil

•A group formed by street performers

of Canada in 1984

•Declining circus industry

-Supplier power was strong due to star

power

-Buyer power was high

- highly competitive industry – red in color

- readily available means of entertainment

like play stations , video games , TV etc

-Children no more audience for circus

- dead industry


Blue ocean strategy of CDS

• Did not try to capture declining customers of circus

• Created another market with high art and popular art mix

• Appealed to intellectual and sophisticated adult audiences

• Reinvented the circus

• The only way to beat the competition is to stop trying to beat the competition

• Market always tries to move towards state of blood red perfect competition

• Blue ocean strategies moves you away from perfect competition


• Red ocean – industry boundaries are defined and accepted by companies, rules of the game are known

• Blue ocean – new industry boundaries are created within red ocean , rules of the game are still to be written

Blue ocean strategy of CDS


Cricket After IPL

0

20

40

60

80

100

120

Spectator time Classic technique value of team

reputation

Entertainment Speed of game Definite results City loyalty

20-20

one day

test cricket

xx

c


Trajectories of industry change

Progressive

change

Intermediate

change

Not Threatened

Creative

change -

Radical

change

Threatened

CORE

ASSETS

Not threatenedThreatened

CORE ACTIVTIES


Case – Dashman Company

• What happened to plants – why there was no communication

• What mistakes Mr. Post committed.

• How he should have brought the change


Thank you for your patience

Documents

Change Management and Blue Ocean strategies