Managing Change and Innovation Chapter 11

Turbulent Times The Changing Work Place Today’s organizations need to continuously adapt to new situations if they are to survive and prosper One of the most dramatic elements is the shift to a technology- driven workplace Ideas, information, and relationships are becoming critically important Manager’s Challenge: Cowley manufacturing plant

Managing Change and Innovation Topics Chapter 11 How organizations respond to the environment through internal change and development Basic forces for Organizational Change How managers facilitate two change requirements Four major types of change How organizations can be designed to facilitate each

Organizational Change The adoption of a new idea of behavior by an organization New trends require profound changes in the organization E-business Supply chain integration Knowledge management

Organizational Change Today’s successful organizations simultaneously embrace two types of planned change Incremental change = efforts to gradually improve basic operational and work processes in different parts of the company Transformational change = redesigning and renewing the entire organization

Model of Change Sequence of Events Environmental Forces Monitor global competition, and other factors Need for change Initiate change Implement change Evaluate problems and opportunities, define needed changes in technology products, structure, and culture Facilitate search, creativity, idea champions, venture teams, skunk works and idea incubators Use force field analysis, tactics for overcoming resistance Internal Forces Consider plans, goals, company problems, and needs

Forces for Change Environmental Forces Customers Competitors Technology Economic International arena Internal Forces – activities and decisions

Need for Change Based on external or internal forces Performance gap = disparity between existing and desired performance levels. Current procedures are not up to standard New idea or technology could improve current performance

Initiating Change Critical phase of change management Stage where the ideas that solve perceived needs are developed Search = process of learning about current developments inside or outside the organization that can be used to meet the perceived need for change Creativity = generation of novel ideas that might meet perceived needs or offer opportunities for the organization Experiential Exercise: Is Your Company Creative?

Characteristics of Creative People Conceptual fluency Open-minded Originality Less authority Independence Self-confidence Playfulness Undisciplined exploration Curiosity Persistence Commitment - Focused approach

Idea Champion A person who sees the need for and Change does not occur by itself A person who sees the need for and Champions productive change within the organization

Four Roles in Organizational Change Championing an idea successfully requires roles in organizations Inventor Develops and understands technical aspects of ideas Does not know how to win support for the idea or make a business of it Champion Believes in idea Visualizes benefits Confronts organization realities of cost, benefits Obtains financial & political support Overcomes obstacles Sponsor High-level manager who removes organizational barriers Approves and protects idea within organization Critic Provides reality test Looks for short- comings Defines hard-nosed criteria that idea must pass Sources: Based on Harold L. Angle and Andrew H. Van de Ven, “Suggestions for Managing the Innovation Journey,” in Research in the Management of Innovation: The Minnesota Studies, ed. A. H. Van de Ven, H. L. Angle, and Marshall Scott Poole (Cambridge, Mass.: Ballinger/Harper & Row, 1989); and Jay R. Galgraith, “Designing the Innovating Organization,” Organizational Dynamics (winter 1982) 5-25.

New Venture Teams New Venture Team = Unit separate from the mainstream of the organization that is responsible for developing and initiating innovations Skunkworks = separate small, informal, highly autonomous, and often secretive group that focuses on breakthrough ideas for the business

New Venture Fund Fund providing resources from which individuals and groups can draw to develop new ideas, products, or businesses Idea Incubator = in-house program that provides a safe harbor where ideas from employees throughout the organization can be developed without interference from company bureaucracy or politics

Open Innovation Extending the search for and commercialization of new ideas beyond the boundaries of the organization The boundaries between an organization and its environment are becoming porous so that ideas flow back and forth among different companies that engage in partnerships, joint ventures, licensing agreements, and other alliances

Resistance to Change Self-Interest: fear of personal loss is perhaps the biggest obstacle to organizational change Lack of Understanding and Trust: do not understand the intended purpose of a change or distrust the intentions Uncertainty: lack of information about future events Different Assessments and Goals: people who will be affected by innovation may assess the situation differently.

Force-Field Analysis Kurt Lewin The process of determining which forces drive and which resist a proposed change Driving Forces Thought of as problems or opportunities that provide motivation for change Restraining Forces (Barriers) Lack of resources Resistance from middle managers Inadequate employee skills

Traditional to Just-In-Time Inventory Systems

Tactics for Overcoming Resistance to Change Approach When to Use Communication education Participation Change is technical; users need accurate information & analysis Users need to feel involved; design requires information from others; have power to resist

Tactics for Overcoming Resistance to Change Approach When to use Negotiation Coercion Top management support Group has power over implementation; will lose out in the change Crisis exists; initiators clearly have power; other techniques have failed Involves multiple departments or reallocation of resources; users doubt legitimacy of change

Types of Organizational Change Structure Technology Strategy Products Culture/People SOURCE: Based on Harold J. Leavitt, “Applied Organizational Change in Industry: Structural, Technical, and Human Approaches,” In New Perspectives in Organization Research, ed.W.W. Cooper, H.J. Leavitt, and Shelly II (New York: Wiley, 1964), 55-74.

Organizational Change Technology: General rule = change is bottom up New product: Horizontal linkage model emphasizes shared development of innovations among several departments Time-based competition is based on the ability to deliver products and services faster than competitors Structure: Successful change = through a top-down approach Culture/people: Training is the most frequently used tool for changing the organization’s mind-set

Horizontal Linkage Model For New Product Innovation Organization Manufacturing Department Customers Market Conditions New Technology Research Department Marketing Department

Structural Changes Any change in the way in which the organization is designed and managed Hierarchy of authority Goals Structural characteristics Administrative procedures Management systems Ethical Dilemma: Research for Sale

Culture-People Changes Changes in structure, technologies, and products or services do not happen on their own Changes in any of these areas require changes in people

Organization Development Problems OD Can Address Mergers/acquisitions Decline/revitalization Conflict management Application of behavioral science techniques to improve an organization’s health and effectiveness through its ability to cope with environmental changes, improve internal relationships, and increase learning and problem-solving capabilities

Large group intervention OD Activities Team building Survey feedback Large group intervention

OD Approaches to Culture Change Traditional Organizational Development Model Large-Group Intervention Model Focus for action: Information Source: Distribution: Time frame: Learning: Specific problem or group Organization Limited Gradual Individual, small group Entire system Organization & environment Widely shared Fast Whole organization Change Process: Incremental Change Rapid transformation SOURCE: Adapted from Barbara Benedict Bunker and Billie T. Alban, “Conclusion: What Makes Large Group Interventions Effective,” The Journal of Applied Behavioral Science 28, no 4 (December 1992), 579-591.

Three Stages for Achieving Behavioral and Attitudinal Change Unfreezing Changing Refreezing