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HARVARD BUSINESS SCHOOL PUBLISHING | ONLINE SIMULATIONS 1 O N L I N E S I M U L A T I O N S C E N A R I O I N T R O D U C T I O N Change Management: Power and Influence Scenario 4: CEO You are the CEO and founder of Spectrum Sunglass Company. As Spectrum enters its second decade of operations, its immediate future is looking bright. Externally, the consumer sunglass market is growing again, and competitive pricing pressures have subsided. Spectrum recently rehired some of the workers laid off during the last recession, and many departmental budgets have been restored to well-funded, pre-recession levels. A potential new product design has received positive focus group feedback after the first phase of development; furthermore, some exciting branding deals with Hollywood celebrities are under negotiation.

Everyone at Spectrum is looking forward to growth and enhanced earnings. While you generally feel good about the state of the business, you just turned 60 years old, and are beginning to think about your legacy. You are reading more and more professional articles emphasizing the importance of sustainable development for business and linking the themes of sustainability and innovation, such as “Why Sustainability Is Now the Key Driver of Innovation.†At work, you are frustrated that you don’t have any new sunglass products to offer to the vocal customers who increasingly express concerns about Spectrum’s environmental impact. Not only does sustainable development make sense to you personally, from both a moral and an economic standpoint, but you also see this as an opportunity to differentiate Spectrum’s products and overall company from your competitors, who focus primarily on price and design.

Fortunately, something happens at a trade show that enables you to act. At a Spectrum executive strategy retreat in October, you ask for a special, unplanned session to discuss the conversations you recently had with the company’s largest retail customer, BigMart, which has more than 1,000 locations across the continental United States. Sales to BigMart constitute 30% of Spectrum’s annual revenues, representing the company’s top account. Recently, at the annual sunglass-industry trade show in Las Vegas, a BigMart vice president approached Spectrum’s booth. The executive explained that he was now in charge of national sunglass procurement for BigMart and that BigMart Online Simulation Foreground Reading—Change Management Simulation: Power and Influence 2 ONLINE SIMULATIONS | HARVARD BUSINESS SCHOOL PUBLISHING recently started an in-house labeling program whereby products that received a "Green Stamp" manufacturing certification for environmental friendliness would get special promotion.

BigMart’s in- house market research revealed that even its most price-sensitive consumers were starting to prefer green products within their price range. The VP explained that BigMart was now considering recommending that all its suppliers go through the Green Stamp certification process. As your colleagues at the Spectrum retreat listen to your presentation, they become increasingly agitated. To the CFO’s question of what BigMart’s specific terms are, you reply that Big Mart wants Spectrum to reduce its dependence on petrochemical raw materials (such as polycarbonate plastics) in the sunglass manufacturing process from 90% to 50% within two years. The company has also given Spectrum a quantitative target and deadline to meet.

Furthermore, BigMart’s VP not-so-subtly threatened that if Spectrum doesn’t respond within three months with a detailed implementation plan of how it is going to reduce its manufacturing dependence on petroleum, then BigMart will consider cancelling its contracts with Spectrum and shift business to a competitor that has indicated its willingness to comply with these demands. After you lay out the demands from BigMart, you state that while the timing is unexpected, you think this is a positive growth opportunity for Spectrum to develop a unique product line for a mass-market customer base and that you think Spectrum is up to the challenge. At this point, Spectrum’s Sales and Marketing VP, Leslie Harris, enthusiastically chimes in, agreeing with your perspective.

She says that a sustainability feature will help distinguish the company in the long term and that this marketing angle may open up new consumer markets for Spectrum’s products (such as exporting to more environmentally conscious countries in Europe), as well as strengthen its brand among U.S. consumers. However, Paul D’Arcy, the CFO, cuts short Leslie Harris’ explanation, angrily commenting that Spectrum can’t afford to start a sustainability project just because BigMart demands it. Because Spectrum is highly levered, a drop in profitability might put at risk the company’s ability to meet its debt covenants. The CFO thinks that any green raw material substitutes for petroleum would likely be too expensive for Spectrum’s manufacturing process, and with no pricing flexibility it would negatively impact Spectrum’s profit margins.

Just when you start to think up counter-arguments to the CFO, you get a double whammy in the form of Luke Filer, VP of Operations, who says that there is no way that the production operation will support another major change in raw material inputs. The Spectrum plant has just spent the past 12 months undergoing a grueling Six Sigma quality certification process, and the Spectrum Production HARVARD BUSINESS SCHOOL PUBLISHING | ONLINE SIMULATIONS 3 Manager is extremely reluctant to retrain, retool and retest to accommodate the use of "unproven" environmentally friendly raw material substitutes. Adding fuel to the fire, Louise Orysh, the Benefits Administrator, comments that Spectrum is still recovering from the recession and has only recently begun hiring back workers and therefore a dramatic shift to focus on sustainability may be premature.

Breaking the impasse, Mary Gopinath, the VP of Human Resources, suggests that Spectrum needs to give the BigMart request serious thought and proposes that you, the CEO, head a cross-functional task force to come to a compromise solution. You agree, suggesting the following plan for the team’s work: (1) that the four additional members come from Marketing, R&D, Finance, and Production; (2) that they devote at least 75% of their time to developing a proposal for BigMart that is acceptable to all four departments; (3) that you will devote 50% of your time to the task force, while juggling your responsibilities as CEO; and (4) that the task force will present Spectrum’s senior management team with a financially acceptable plan to use petrochemical alternatives within three months.

The management team at the retreat concurs with your task force proposal. As the retreat ends and everyone heads to dinner, you start pondering the numerous issues and obstacles to overcome in developing an acceptable plan for BigMart within three months. Your central challenge is to convince your team that a dramatic change in the organization’s strategy and products is necessary and that environmental sustainability is critical to the firm’s future – no small task in a relatively short period of time. However, when BigMart tells Spectrum to jump, the usual response is to ask, "How high?" Fortunately, you also have the formal authority and widespread respect throughout the organization to tackle this challenge in a meaningful way.

Online Simulation Foreground Reading—Change Management Simulation: Power and Influence 4 ONLINE SIMULATIONS | HARVARD BUSINESS SCHOOL PUBLISHING Scenario 4: Organizational Structure for Spectrum Sunglass YOU Chief Executive Officer Paul D'Arcy Chief Financial Officer Bob Ingram Corporate Controller Walt James Director, Information Systems Deborah Edge VP, R & D Nancy Kerr Director, Product Innovation Yao Li Director, Process Innovation Luke Filer VP, Operations Diane McNatt Plant Manager Mark Roberto Foreman Paul Schenian Foreman Mary Gopinath VP, Human Resources Ian Newman Director, Health & Safety Louise Orysh Director, Benefits Administration Leslie Harris VP , Sales & Marketing Sam Puffer Director, Marketing Regina Quinn Director, Sales Anne Thompson Manager, Customer Relations Michelle Barth Administrative Assistant Andrew Chen General Counsel HARVARD BUSINESS SCHOOL PUBLISHING | ONLINE SIMULATIONS 1 O N L I N E S I M U L A T I O N S C E N A R I O I N T R O D U C T I O N Change Management: Power and Influence Scenario 1: Director of Product Innovation You are Director of Product Innovation within the Research & Development unit of Spectrum Sunglass Company.

Spectrum’s immediate future looks bright as the company enters its second decade of operations. Externally, the consumer sunglass market is growing again, and competitive-pricing pressures have subsided. The company recently rehired some of the workers laid off during the last recession, and many departmental budgets have been restored to well-funded, pre-recession levels. You are especially proud that one potential new product design has received positive focus group feedback after the first phase of development, and some exciting branding deals with Hollywood celebrities are under negotiation. Everyone at Spectrum Sunglass is looking forward to growth and enhanced earnings.

While you generally feel very positive regarding the situation at Spectrum, you have noticed that the topic of sustainable economic development and the link between sustainability and innovation is featured in many of the professional articles you read, such as “Why Sustainability Is Now the Key Driver of Innovation.†You are frustrated that you don’t have any new sunglass products to offer to the vocal customers who increasingly express concerns about Spectrum’s environmental impact. Not only does sustainable development make sense to you personally, from both a moral and an economic standpoint, but you also see this as an opportunity to differentiate Spectrum’s products from your competitors, which focus exclusively on design and price.

During Spectrum Sunglass Company’s annual strategy retreat, you decide to pitch the idea of forming a task force to make the company and its products more environmentally sustainable. Your vision for Spectrum consists of three specific goals: (1) Eliminate 25% of waste by redesigning the manufacturing process; (2) reduce the current level of greenhouse gas emissions by 15%; and (3) create a new product line based entirely on environmentally benign materials. You argue that these goals, while aggressive, are achievable within the next two years. You also add that based on your current understanding, the task force will need to pursue the following activities: (1) Conduct energy audits and set aggressive milestones Online Simulation Scenario 1 Introduction—Change Management Simulation: Power and Influence 2 ONLINE SIMULATIONS | HARVARD BUSINESS SCHOOL PUBLISHING for improvement on the three goals; (2) redesign processes and products to be more environmentally sustainable (and scale up successful experiments quickly); (3) analyze environmental life cycles throughout the entire value chain inside the firm and with its suppliers; (4) seek to replace fossil-fuel energy sources with renewable energy sources; and (5) seek to replace petroleum-based materials with biodegradable materials.

After politely listening to your proposal, Andrew Chen, the General Counsel, interjects that in his professional opinion, the sustainability project opens up the company to unnecessary legal risks. If the company does go ahead, he advises that only one of the three goals be pursued and that it not be publicly announced or promised until after a careful internal due diligence process. Then the CFO, Paul D’Arcy, speaks up, adding that instead of focusing on a pie-in-the-sky sustainability project, the task force’s time and money would be better spent on finding innovative ways for Spectrum to reduce raw material costs and counteract the seasonality of its business. Just when you are about to inject a counterargument to this increasingly negative reception, Luke Filer, the VP of Operations, states that he is concerned about a product and process change that is likely to increase raw material costs and disrupt existing production flows.

Breaking the impasse, Leslie Harris, Spectrum’s VP of Sales and Marketing, argues that this idea has considerable promise and that it would be foolish to reject it prematurely. After an hour-long discussion, during which some members of the top management team voice support for the initiative while others express skepticism, Henry Adams, the CEO and the rest of the management team agree to support your proposal, with the condition that the measure of success be your team’s ability to achieve the proposed three goals within the next two years. The CEO agrees to allow you and your task force members to spend 75% of your time on this change initiative over the next two years. You agree to this arrangement, and you recommend that the task force report directly to the CEO in order to signal its importance to the rest of the organization and to facilitate direct communication on key issues as they come up.

As the retreat ends and everyone heads to dinner, you start pondering the numerous issues and obstacles you’ll need to overcome in order to implement your sustainability vision. Your central challenge is to convince your colleagues that a dramatic change in the organization’s strategy and products is necessary and that environmental sustainability is one of the keys to the firm’s future. This challenge is somewhat complicated by the fact that you must influence the rest of the organization without the formal authority to command employees’ attention, and there is no generally HARVARD BUSINESS SCHOOL PUBLISHING | ONLINE SIMULATIONS 3 perceived need to change at this moment because of the firm’s return to normal profitability.

However, you do have a reputation for being competent and trustworthy, and this reputational capital will be invaluable to you as you take on this new challenge. Online Simulation Scenario 1 Introduction—Change Management Simulation: Power and Influence 4 ONLINE SIMULATIONS | HARVARD BUSINESS SCHOOL PUBLISHING Scenario 1: Organizational Structure for Spectrum Sunglass Henry Adams Chief Executive Officer Paul D'Arcy Chief Financial Officer Bob Ingram Corporate Controller Walt James Director, Information Systems Deborah Edge VP, R & D YOU Director, Product Innovation Yao Li Director, Process Innovation Luke Filer VP, Operations Diane McNatt Plant Manager Mark Roberto Foreman Paul Schenian Foreman Mary Gopinath VP, Human Resources Ian Newman Director, Health & Safety Louise Orysh Director, Benefits Administration Leslie Harris VP , Sales & Marketing Sam Puffer Director, Marketing Regina Quinn Director, Sales Anne Thompson Manager, Customer Relations Michelle Barth Executive Assistant Andrew Chen General Counsel

Paper for above instructions

Change Management at Spectrum Sunglass Company: A Strategic Approach to Sustainability

Introduction

Change is the only constant in today's fast-paced business environment where organizations constantly face new challenges and opportunities. Spectrum Sunglass Company, having recently emerged from economic downturns, now stands at a crucial crossroads. The organization must respond innovatively to the sustainability challenges posed by a significant client, BigMart, while harmonizing internal interests that vary widely among departments. This paper outlines a strategic approach for implementing change at Spectrum, emphasizing sustainable practices in manufacturing and marketing.

Understanding the Need for Change

As the CEO and founder of Spectrum, the immediate imperative is to address BigMart's request for a "Green Stamp" certification, which hinges on a substantial reduction of petrochemical reliance (from 90% to 50% of raw material usage) within two years. This demand reflects a broader market trend where consumers prioritize environmentally friendly products, making it essential for companies to adapt (Porter & Kramer, 2006). Ignoring this shift not only jeopardizes crucial contracts but also risks alienating a growing base of environmentally conscious consumers.
The company's positive trajectory, supported by restored budgets and positive market feedback for new products, provides fertile ground for this shift. The internal consensus seems divided; key players express skepticism primarily due to cost concerns and operational challenges. For instance, the CFO fears a drop in profitability, while the VP of Operations cites the recent Six Sigma quality certification process as a major undertaking that complicates further changes (Kotter, 1996).

Developing a Strategic Response: Forming a Task Force

To address both internal and external challenges, a cross-functional task force is proposed. It will be composed of representatives from Marketing, R&D, Finance, and Production, tasked with drafting a detailed and financially sound proposal for the sustainability shift within three months. This task force structure ensures that diverse perspectives are considered and encourages inclusivity, fostering a collaborative environment (Buchanan & Badham, 2008).
During the formation, it’s critical to articulate a vision that addresses the three key sustainability goals:
1. Eliminate 25% of waste through the redesign of manufacturing processes.
2. Reduce greenhouse gas emissions by 15%.
3. Create a new product line using environmentally friendly materials.
These objectives serve not just as targets but as guiding principles for every member, ensuring that every department aligns with the sustainability vision (Laszlo & Zhexembayeva, 2017).

Engaging Stakeholders: The Power of Influence

As acknowledged, despite the potential benefits of sustainability practices, internal resistance is significant and must be navigated carefully. For instance, the CFO's economic concerns around profitability must be addressed directly by leveraging data and case studies showcasing successful transitions to sustainable practices (Sullivan & Gouldson, 2017). Positively framing sustainability as a unique selling proposition can also relieve some fears; for instance, studies have shown that companies adopting green practices often experience enhanced brand loyalty and increased sales in eco-conscious markets (McKinsey, 2016).
Communication strategies should focus on transparency and inclusiveness. Given the CEO’s authority, communicating the long-term vision and immediate necessity of sustainability initiatives will be imperative in winning over skeptics (Kotter, 1996). Engaging employees at various levels in the change process is crucial, as buy-in will result in more robust support systems and decrease instances of resistance.

Navigating Challenges: Legal and Operational Considerations

Andrew Chen, General Counsel, raised potential legal risks associated with sustainability commitments. This underscores the necessity of conducting thorough due diligence and risk assessment throughout the transition period. Clear communication between departments will ensure any legal implications are adequately addressed from the onset of implementation (Buchanan & Badham, 2008).
From an operational standpoint, it's vital to explore alternative biodegradable materials with R&D that are both economically feasible and capable of seamlessly integrating into the production process. The current operational strain cited by the VP of Operations should not only be acknowledged but addressed by presenting the sustainability initiative as a future-oriented strategy that enhances long-term operational stability and reduces costs (Revell & Blackburn, 2007).

Implementing the Change: A Phased Approach

The proposed task force will require a phased approach to unfold the strategic changes systematically. The first phase will concentrate on gathering data, conducting energy audits, and engaging with suppliers regarding alternative materials. Second, processes must be redesigned based on successful prototypes that meet environmental standards. Finally, establishing a feedback loop within the organization will ensure that adjustments and iterations can be made based on performance and stakeholder feedback (Groening & Kanuri, 2015).
Regular updates to the entire organization will foster a culture of shared vision and purpose. Celebrating small victories during sustainability milestones can build momentum and anchor the company culture around its green initiatives, transforming potential resistance into advocacy (Kotter, 1996).

Conclusion

Spectrum Sunglass Company stands at a pivotal moment, poised to redefine its identity through sustainable practices. By leading from the front, forming a dedicated task force, and engaging in open communication with stakeholders, the company can successfully navigate the complexities of change management. This not only secures its contract with BigMart but also positions Spectrum as a leader in the sustainable products market. The road ahead will require resilience, adaptability, and a genuine commitment to long-term goals; however, the integration of sustainability into the company vision promises to enhance revenue potential and build a respected brand that aligns with increasingly eco-conscious consumer values.

References

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