Chapter Ten Innovation and Change

Why is there a need to change? What are the major forces influencing changes in organizations?

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 Change 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-commerce 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).

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.

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

Elements for Successful Change Ideas Need Adoption Implementation Resources

Technology Change Techniques for encouraging technology change Switching structures Creative departments Venture teams Corporate entrepreneurship

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.

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

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

Culture Change Reengineering and Horizontal Organization Total Quality Management The Learning Organization

OD Culture Change Interventions Large group intervention Team building Interdepartmental activities

Stages of Commitment to Change Preparation Initial contact Awareness Acceptance Understanding Decision to implement Commitment Installation Institutionalization

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

Techniques for Change Implementation Identify a true need for change. Find an idea that fits the need. Obtain top management support. Design the change for easy implementation (in stages/steps). Develop plans to overcome resistance. Create change teams. Foster idea champions.