Change Management and Blue Ocean strategies

Change management : A
tool for Total Quality
Organization (TQO) and
Blue Ocean Strategies
General Motors Technical Center , Bangalore,India
10th September 2009

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

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


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Individual Group Department Division Orgn. Nation Intern.

Scope of change

Shock value of change

Shock value of Time to implement
change change
High Low
High
Intensity
of change
Low


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


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

Strategic Frames Blinders
Processes Routines
Relationships Shackles
Values Dogmas
People Change Survivors


Dynamics of change process

F = MA
Fr= Us.Mg


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

Stability at the
Point of change Anger
Inability Bargaining
to act Denial
Acceptance

Active
Emotional response

Testing

Depression

Passive

Time


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

F = MA
Fr= Uk.Mg

•“ 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 S
O
R
change C

Strategy Operations Culture Rewards Successful
•Resources •Incentives
Vision
•Action plan
People
•Motivation change

Operations Culture Rewards
•Resources
People
•Incentives Confusion
•Action plan •Motivation

Strategy Culture Rewards
Vision People
•Incentives Frustration
•Motivation

Strategy Operations Rewards Anxiety &
•Resources •Incentives
Vision
•Action plan •Motivation Resistance

Strategy Operations Culture Gradual
•Resources
Vision
•Action plan
People Change


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

Eliminate Reduce

Value
innovation

Raise Create

Buyer value


Red ocean vs Blue ocean
Red Ocean Blue Ocean

Compete in existing market space Create uncontested market space

Beat the competition Make the competition irrelevant

Exploit existing demand Create and capture new demand

Make the value cost trade off Break the value cost trade off

Align firm’s strategy to Align firm’s strategy to
Differentiation OR low cost Differentiation AND low cost


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


Blue ocean strategy of CDS
• 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


Cricket After IPL
120

100

80

20-20
60 one day
test cricket

40

20

0
Spectator time Classic technique value of team Entertainment Speed of game Definite results City loyalty
reputation
x c
x


Trajectories of industry change
CORE ACTIVTIES
Threatened Not threatened

Threatened Radical Creative
CORE change change -
ASSETS Not Intermediate Progressive
Threatened
change change


Case – Dashman Company
• What happened to plants – why there was
no communication
• What mistakes Mr. Post committed.
• How he should have brought the change


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