Change Management Simulation: Power and Influence Foreground Reading Overview You operate within Spectrum Sunglass Company, a 10-year-old, privately held company that designs, manufactures, and sells sunglasses. Spectrum is headquartered in Tremont, California, and all design and production capabilities are in southern California. A few years ago, a relatively short, mild recession caused revenues to fall nearly seven percent, to $91 million, and profitability to fall to essentially breakeven. As a result, the company initiated significant cost cutting. Last year, sales rose to $101 million after the economy emerged from the recession, and the company returned to normal profitability. The company currently employs 580 employees. Eight people are members of the top management team, and 20 individuals help lead the overall organization. The organizational chart for Spectrum is depicted in the Prepare tab of the simulation. In recent years, the retail value of the domestic sunglass industry has been approximately $3.4 billion. Analysts normally divide the US market for nonprescription sunglasses into three price segments: lowend, moderate, and high-end. Low-end sunglasses are priced at less than $25 retail, and sold primarily through mass merchandisers, drugstores, grocery stores, and department stores. This segment represents roughly 50% of the industry dollars and 85% of the industry units sold. Moderately priced sunglasses range between $25 and $100 per pair. These glasses are sold through warehouses and sporting-goods stores, but they represent only eight percent of the industry dollars and five percent of the industry units sold. High-end sunglasses are priced above $100 per pair. These are sold through sunglass specialty outlets and optical stores. These glasses represent 42% of industry dollars and 11% of industry units. Sunglasses address two basic functions in the marketplace. The first function is to protect the wearer's eyes from harmful ultraviolet light. This is particularly important because of the earth's thinning ozone layer, and it requires special expertise in eyewear manufacturing and sales. The second function focuses on fashion and aesthetics, and design expertise and celebrity endorsements help drive industry sales. Spectrum offers a moderately priced brand of prescription and nonprescription sunglasses that are sold primarily in the United States. Originally targeted to swimmers and surfers, its products are This text was written by Old Dominion University Professor William Q. Judge and Harvard Business Professor Linda A. Hill for Change Management Simulation: Power and Influence V3 (HPB No. 7611) for the sole purpose of aiding classroom instructors in the use of the simulation. expanding into other outdoor users. All sets of sunglasses feature UV-ray blocking scratch- resistant polarized lenses and lightweight frames, and all lines are marketed with an oceanic, sporty theme. Retail price points for its nonprescription products range from $59 to $99 per pair, both online and in sporting goods stores. Prescription sunglasses are sold through optical stores for $75 to $100 per pair. Spectrum's polycarbonate lenses require highly specialized resins, and the company has only one vendor that has been able to consistently deliver to its manufacturing specifications. As a result, the vendor has been able to pass through 100% of the incremental costs associated with rising oil prices. The rising oil prices, combined with Spectrum's inability to effectively hedge against the resulting increases in raw material costs, accounted for approximately 3.25% of the erosion in its earnings before interest and taxes (EBIT) margin1 in the past fiscal year. This year, as oil prices have moderated, the company's margins have rebounded. The recent volatility in Spectrum profitability resulting from softening demand has alarmed both management and the company's bank. Spectrum has a $10 million term loan and a revolving credit facility available for working capital with a maximum draw equal to another $10 million. Loan covenants associated with the borrowings require the company to maintain an interest coverage ratio of 3x.b In the event that Spectrum is out of covenant for more than two consecutive quarters, the bank can require the firm either to pay down the loan immediately or raise additional equity capital. The company's business is very seasonal, with peaks occurring in late May and December. During both of those periods in the past fiscal year, Spectrum was at risk of being out of covenant with its loan agreements. 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. Scenario 1:

Influence Without Authority, Low Urgency You are the director of product innovation within the research & development (R&D) unit of Spectrum Sunglass Company. You have recently noticed that 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." While you generally feel very positive about Spectrum, 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, 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 percent of waste by redesigning the manufacturing process. (2) Reduce the current level of greenhouse gas emissions by 15 percent. (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. Based on your current understanding, the task force will need to pursue the following activities: (1) Conduct energy audits and set aggressive milestones 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) Replace fossil-fuel energy sources with renewable energy sources. (5) Replace petroleum-based materials with biodegradable materials. After politely listening to your proposal, the team present begins to respond. Andrew Chen (general counsel): In my professional opinion, the sustainability project opens up the company to unnecessary legal risks. If we go ahead with this, I would advise we pursue only one of the three goals, and that we not publicly announce or promise it until after a careful internal due diligence process. Paul Diaz(CFO): 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. Daisha Farook (VP of operations): I'm concerned about a product and process change that is likely to increase raw material costs and disrupt existing production flows. Leslie Harris (VP of sales and marketing): This idea has considerable promise and it would be foolish to reject it prematurely. After an hour-long discussion, Hasan Ashraf, 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 to spend 75 percent of your time on this change initiative over the next two years. 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 company'sfuture. 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 perceived need to change at this moment because of the company's return to normal profitability. You do have a reputation for being competent and trustworthy, however, and this reputational capital will be invaluable to you as you take on this new challenge Scenario 3:

Influence Without Authority, High Urgency You are the director of product innovation within the research and development (R&D) unit of Spectrum Sunglass Company. While you generally feel very positive regarding the situation at Spectrum Sunglass, you have noticed that 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, you also see this as an opportunity to differentiate Spectrum's products from your competitors, which focus exclusively on design and price. At a Spectrum's annual executive strategy retreat, 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 comprises 30% of Spectrum's annual revenues with over 1,000 retail outlets across the United States. The VP explained he was now in charge of national sunglass procurement for BigMart, and that they had recently created a policy to promote all products which bear a Green Stamp manufacturing certification for environmental friendliness. He added that, notably, BigMart's 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. Hasan Ashraf (CEO): What exactly are BigMart's terms? You: They want us to reduce petrochemical raw materials, such as polycarbonate plastics, in the manufacturing process from 90 percent to 50 percent within two years. The VP not-so-subtly threatened that, if we don't respond within three months with a detailed implementation plan, BigMart will consider canceling all our contracts with them and shift to a competitor who will. While unexpected, this could be an opportunity to develop a unique product line for a mass market base, and I think we're up to the challenge! Leslie Harris (VP of sales and marketing): A sustainability feature will help distinguish us in the long term, and this marketing angle may open up new consumer markets, such as exporting to more environmentally conscious countries in Europe. Paul Diaz (CFO): We can't afford to start a sustainability project just because BigMart demands it! Green material substitutes for petroleum are probably expensive. We're highly levered as it is, so a drop in profitability might put our ability to meet our debt covenants at risk. Daisha Farook (VP of operations): We just spent 12 months undergoing a grueling Six Sigma quality certification process. Our plant managers will probably resist another major change in material inputs. Mary Gopinath (VP of human resources): But we need to give this serious thought, there's a lot at stake at ignoring this. Why don't you form a cross-functional task force to come up with a compromise solution? Hasan Ashraf (CEO): You're right, we can't ignore this. I agree with Mary's task force idea. You should create the task force from marketing, R&D, finance, and production, and they should all dedicate 75 percent of their time to coming up with a proposal for BigMart which is acceptable to all members. You have three months. The management team at the retreat concurs with the CEO's 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 colleagues that a dramatic change in the organization's strategy and products is necessary and that environmental sustainability is critical to the company's futureno small task in a relatively short period of time. 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. However, when BigMart tells Spectrum to jump, the usual response is to ask, "How high?" Furthermore, you have a reputation for being competent and trustworthy within Spectrum, and this reputational capital will be invaluable to you as you take on this new challenge

give me blow questions answer regarding two scenario

1. In 2-3 paragraphs, thoroughly explain the difference you found in the 2 scenarios (beyond what the Simulation tells you). You should find at least 3 ways the scenarios differed in terms of your role and the objective and how you used (or should have used) that information to influence your decisions/levers

1. In 2-3 paragraphs explain how you feel this Simulation helped to understand managing change in a Project? Make a minimum of 3 connections. Make sure to connect to course content, the Simulation and possibly any project work you have done.

Specifying a word count, page count, or formatting requirements may indicate that you intend to submit a tutor's work as your own.