Chapter 13: Organizational Innovation and Change The primary purpose of this chapter is to help you understand how organizations can use innovation and change to survive, and even thrive, in a changing world. “The Firm” David Kopp Erin Alvey Thomas Lafferty

Innovation Innovation is simply the process of creating and implementing a new idea or ideas. Three main types of innovation exist: 1) Process Innovation 2) Technical Innovation 3) Administrative Innovation

Process Innovation Process innovation is achieved through the creation of a new means of producing, selling, and/or distributing an existing product or service. Some examples are: - Online Banking, etc. - E-commerce

Technical Innovation Technical innovation is simply the creation of a new product or service. Some examples: - A new line of automobiles - The introduction of cellular telephones

Administrative Innovation Administrative innovation is the creation of a new organization design which better supports the creation, production and delivery of services or products. An example is: - Virtual Teams: any task-focused group that meets w/out all members being in the same room or even working at the same time.

Learning Organizations Involve all of the employees in the process of identifying and solving problems. This enables the organization to continuously experiment, improve and increase its capacity to deliver its customers new and improved products and services. A learning organization, through continuous innovation and change, creates sustainable competitive advantage in its industry.

Characteristics of a Learning Organization 13.2 Characteristics of a Learning Organization Shared Leadership The Learning Organization Culture Empowerment Continuous learning Sense of community Strategy Customer-focused Long-term perspective Internal alignment Organization Design Team-based Strategic alliance network Boundaryless Use of Information Extensive scanning Measurement-oriented Shared problems and solutions Adapted from Figure 13.1

The Five Building Blocks of a Learning Organization 1) Shared Leadership: All employees share at least some leadership responsibilities. Everyone is encouraged to find ways to improve products and services and to experiment with new methods to better serve the organization. This sharing of decision-making and leadership creates a culture that supports the efforts and goals of the organization.

2) Culture The learning organization encourages these empowered employees to identify and experiment with new methods and approaches. Empowerment provides a way to integrate tasks and allows the employees to buy into an organization’s goals.

3) Strategy This aspect addresses three key issues: 1) Customer Focus: reflects a clear understanding of how important customers are to success. 2) Long-term Perspectives: the process of learning and change simply take time. 3) Internal Alignment: the business strategy drives the design of all systems within the organization.

4) Organization Design In a learning organization, this emphasizes the use of teams and strategic alliances. - Teams: Team members take responsibility of aspects such as training, purchases, safety and scheduling. - Strategic Alliances: suppliers, competitors and customers collaborate and communicate as a method of learning.

5) Use of Information This is the “lifeblood” of a learning organization. There are three main aspects involving the use of information in a learning organization. - Extensive scanning - Measurement Oriented - Shared problems and solutions

The Process of Organizational Change 13.3 The Process of Organizational Change Diagnose organizational problems Assess environment Determine performance gap Start Reduce resistance Identify sources of resistance Set goals Search for approaches to change Implement the changes Follow up the change Adapted from Figure 13.2

Reasons for Organizational Change New innovations Adjusting to changing environment and keeping up with competitors Unsatisfactory performance Concerns of external stakeholders * Def: Any transformation in the design or functioning of an organization.

Assess the Environment Organizations should be aware of the need to scan the environment for info that may signal the need for change/s. Factors: Technology Customers Competitors The workforce Unions Gov’t regulations Globalization Shareholders

Determine the Performance Gap The difference between what the organization wants to do and what it is actually doing. Where you are performing/Where you want to be.

Diagnose Organizational Problems Identify the nature and extent of problems before taking action. Don’t process change prematurely - Organizations often hire outside consultants to assist with problem diagnosis.

Identify Source of Resistance Experienced managers understand why people resist change and what can be done to overcome resistance. Change resist can be due to the following: Vested Interests Fear Misunderstandings Different Assessments of Situation Interorganizational Agreements

Reduce Resistance Resistance to change will never disappear completely, but it can be managed through: Education Participation Negotiation Co-optation - bringing new stakeholders representatives into the strategic decision making process as a means of averting threats to an organization’s stability/existence

Set Goals For change to be effective, goals should be set: based on realistic objectives stated in clear and measurable terms consistent with the organization’s overall goals and policies attainable Positive reinforcement for goals obtained. (Rewards)

Implement the Change Select and implement a practical approach to achieve the change. Areas for change: technology design task people

Follow Up Change Managers need to monitor results to ensure that the change process has been successful. Based on: Employee satisfaction Productivity New-product development Market share Results take time, don’t judge to soon.

Four Approaches to Organizational Change -Technology based approach -Redesign approach -Task based approach -People-oriented approach

Approaches to Organizational Change 13.9 Approaches to Organizational Change Technology-based Sociotechnical systems Information technology Redesign Reengineering Restructuring Organizational Change Task-based Job specialization Job enrichment People-oriented OD HRM systems Adapted from Figure 13.3

Technology Based Approach Goal is to increase organizational efficiency Sociotechnical Systems - works toward satisfying employee needs while simultaneously producing goods efficiently Information Technology - networking of computers, telecommunications systems, and remote-controlled devices used to link organizations to its suppliers and its customers

Redesign Approach Redesign approach involves internal structural changes Reengineering - creating new ways to get work done Restructuring - making changes in the distribution of authority, responsibility, and control in the organization

Task Based Approach Task Based Approach - changing employee responsibilities and tasks Job simplification - discovery of procedures that produce maximum output for the minimum input fast food restaurants Job enrichment - changing job specifications to add challenge to the tasks required in order to increase productivity

People Oriented Approach People Oriented includes activities intended to improve individual competencies and performance levels Organizational Development planned long range behavioral science approach for understanding, changing, and developing an organization’s workforce to improve its effectiveness individual growth, group growth, organizational growth Survey Feedback