Change management simulation

HARVARD BUSINESS SCHOOL PUBLISHING | ONLINE SIMULATIONS 1

ONLINE SIMULATION SCENARIO INTRODUCTIO N

Change Management: Power and Influence

Scenario 3: Director of Product Innovation

You are the Director of Product Innovation within the Research & Development unit of Spectrum

Sunglass Company. You have noticed that the topic of sustainable economic development and the link

between sustainability and innovation is featured in more professional articles, 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. Sustainable development makes sense to you personally, from both a moral and

an economic standpoint, and you also see this as an exciting opportunity to differentiate Spectrum’s

products and the overall company from your competitors, which focus primarily on price and design.

At a Spectrum executive strategy retreat in October, you decide to ask for a special, unplanned session to

discuss the conversations you recently had with a vice president at Spectrum Sunglass Company’s largest

retail customer, BigMart, which has more than 1,000 retail outlets across the continental United States.

Sales to BigMart constitute 30% of Spectrum’s annual revenues, representing the company’s top account.

Just a few days ago, at the annual sunglass-industry trade show in Las Vegas, a BigMart executive

approached Spectrum’s booth. The VP explained that he was now in charge of national sunglass

procurement for BigMart and that BigMart recently started an in-house labeling program whereby

products that receive a "Green Stamp" manufacturing certification for environmental friendliness would

get special promotion at BigMart. Notably, the retail giant’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 of its suppliers go through the Green

Stamp certification process.

As your colleagues at the Spectrum retreat listen to your presentation, they become increasingly agitated.

When Henry Adams, the CEO, asks what BigMart’s specific terms are, you reply that BigMart wants

Spectrum to reduce its dependence on petrochemical raw materials (such as polycarbonate plastics) in the

Online Simulation Scenario 3 Introduction—Change Management Simulation: Power and Influence

2 ONLINE SIMULATIONS | HARVARD BUSINESS SCHOOL PUBLISHING

sunglass manufacturing process from 90% to 50% within two years. The company has also given

Spectrum a quantitative target and a 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 all of its contracts with Spectrum and shift business to a competitor that has indicated its

willingness to comply with these demands.

You state that while the timing is unexpected, you think this is a positive (if urgent) growth opportunity

for Spectrum’s R&D department to develop a unique product line for a mass-market customer base and

you think Spectrum is up to the challenge. At this point, Spectrum’s VP of Sales and Marketing, 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.

Paul D’Arcy, the CFO, cuts short Leslie Harris’ support, 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 would negatively impact the company’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, the VP of

Operations, who says that there is no way that the plant managers 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 he is extremely reluctant to retrain, retool, and retest to

accommodate the use of "unproven," environmentally friendly raw material substitutes.

Breaking the impasse, the VP of Human Resources, Mary Gopinath, suggests that Spectrum needs to give

the BigMart request serious thought because of the significant size of the account and proposes that you

head a cross-functional task force to come to a compromise solution. The CEO agrees, imposing the

following conditions: (1) that the additional four members come from Marketing, R&D, Finance, and

Production; (2) that everyone on the task force devote at least 75% of their time to developing a proposal

for BigMart that is acceptable to all four departments; and (3) that the task force present him with a