Chapter Eleven Innovation and Change Thomson Learning © 2004

Forces Driving the Need for Major Organizational Change Global Changes, Competition and Markets Technological Change International Economic Integration Maturation of Markets in Developed Countries Fall of Communist and Socialist Regimes More Threats More domestic competition Increased Speed International competition More Opportunities Bigger markets Fewer barriers More international markets More Large-Scale Changes in Organizations Structure change Mergers, joint ventures, consortia Strategic change Horizontal organizing, teams, networks Culture change New technologies, products Knowledge management, enterprise New business processes resource planning E-business Quality programs Learning organizations Source: Based on John P. Kotter, The New Rules: How to Succeed in Today’s Post-Corporate World (New York: The Free Press, 1995). Thomson Learning © 2004

Incremental vs. Radical Change Incremental Change Radical Change Continuous progression Paradigm-breaking burst Affect organizational part Transform entire organization Through normal structure and management processes Create new structure and management Technology improvements Breakthrough technology Product improvement New products, new markets Sources: Based on Alan D. Meyer, James B. Goes, and Geoffrey R. Brooks, “Organizations in Disequilibrium: Environmental Jolts and Industry Revolutions,” in George Huber and William H. Glick, eds., Organizational Change and Redesign (New York: Oxford University Press, 1992), 66-111; and Harry S. Dent, Jr., “Growth through New Product Development,” Small Business Reports (November 1990): 30-40. Thomson Learning © 2004

Four Types of Change Technology Products and Services Changes in production process Products and Services Changes in outputs Strategy and Structure Administrative changes Culture Changes in values, attitudes, behaviors Thomson Learning © 2004

Sequence of Elements for Successful Change Environment Internal Creativity and Inventions Suppliers Professional Associations Consultants Research literature Organization 1. Ideas 3. Adoption 4.Implementation 2. Needs Customers Competition Legislation Regulation Labor force 5. Resources Perceived Problems or Opportunities Thomson Learning © 2004

Division of Labor Between Departments to Achieve Changes in Technology General Manager Creative Department (Organic Structure) Using Department (Mechanistic Structure) Thomson Learning © 2004

Probability of New Product Success Technical completion (technical objectives achieved) .57 Commercialization (full-scale marketing) .31 Market Success (earns economic returns) .12 Source: Based on Edwin Mansfield, J. Rapaport, J. Schnee, S. Wagner, and M. Hamburger, Research and Innovation in Modern Corporations (New York: Norton, 1971), 57. Thomson Learning © 2004

Horizontal Linkage Model for New Product Innovations Environment Organization Environment General Manager Technical Developments Customer Needs Linkage R&D Department Linkage Marketing Department Linkage Linkage Linkage Production Department Thomson Learning © 2004

Dual-Core Approach to Organization Change Type of Innovation Desired Administrative Structure Technology Administrative Core Technical Core Direction of Change: Top-Down Bottom-Up Examples of Change: Strategy Production Downsizing techniques Structure Workflow Best Organizational Design for Change: Mechanistic Organic Thomson Learning © 2004

Culture Change Reengineering and Horizontal Organization Diversity The Learning Organization Thomson Learning © 2004

OD Culture Change Interventions Large Group Intervention Team Building Interdepartmental Activities Thomson Learning © 2004

Stages of Commitment to Change Preparation Initial contact Awareness Acceptance Understanding Decision to implement Commitment Installation Institutionalization Thomson Learning © 2004

Barriers to Change Excessive focus on costs Failure to perceive benefits Lack of coordination and cooperation Uncertainty avoidance Fear of loss Thomson Learning © 2004

Techniques for Change Implementation Establish a sense of urgency for change. Establish a coalition to guide the change. Create a vision and strategy for change. Find an idea that fits the need. Develop plans to overcome resistance. Create change teams. Foster idea champions. Thomson Learning © 2004

Innovation Measures A B C Measure Your Organization Other Organization Workbook Activity Innovation Measures Measure A Your Organization B Other Organization C Your Ideal 1. Creativity encouraged 2. Diverse problem-solving 3. Time for creative ideas 4. Rewards for innovation 5. Flexible, open to change 6. Follow orders from top 7. Think and act like others 8. Concern for status quo 9. Don’t rock the boat 10. New ideas not funded Thomson Learning © 2004