1. Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 13-1 Managing Strategic Change: Building Learning Organizations by Robert Pitts & David Lei Slides prepared by John P. Orr Cameron University Chapter 13

2. Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 13-2 What you will learn… Why companies need to think about change The concept of a learning organization The key practices found in learning organizations Slide 1 of 2

3. Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 13-3 What you will learn… Why static organizations have difficulty in responding to change The steps senior managers use in dealing with resistance to change Slide 2 of 2

4. Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 13-4 Learning at Sony Resource allocation Extensive decentralization Bias against specialists Frequent rotation of staff Multiple experiments Balance of psychological and monetary rewards

5. Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 13-5 Change and Learning Learning Organizations Firms that view change as a positive opportunity to learn and create new sources of competitive advantage Static Organizations Firms that have adapted extremely well to a particular environment but lack the ability to respond quickly to change

6. Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 13-6 Characteristics of the Learning Organization Frequent rotation of managers Continual training of personnel Decentralization of decision making Encouragement of multiple experiments High tolerance for failure Openness and diversity of viewpoints

7. Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 13-7 Ex. 13-1. Management Practices of Learning Organizations Learning Organization Learning Organization Continual Training Continual Training High Tolerance of Failure High Tolerance of Failure Decentralization Openness & Diversity of Ideas Openness & Diversity of Ideas Frequent Rotation of Managers Frequent Rotation of Managers Multiple Experiments Multiple Experiments

8. Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 13-8 Implementing Change in Static Organizations Resistance to change in static organizations Change steps From static to learning organization

9. Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 13-9 Ex. 13-3. Common Reasons for Organizational Resistance to Change Lack of awareness of need to change Lack of interest in opportunity for change Incompatibility of change with existing views or interests Fear of cannibalization Fear of personal loss

10. Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 13-10 Ex. 13-4. Key Steps to Implement Strategic Change Sense the need for strategic change Build awareness of the need to change and learn Foster debate Create consensus Assign responsibility Allocate resources Act quickly

11. Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 13-11 Static to Learning Boundaryless Organization An organization design in which people can easily share information, resources, and skills across departments and divisions. SBU 2 SBU 3 Sales

12. Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 13-12 Ex. 13-5. Corporate Transformations: Making General Electric Boundaryless Slide 1 of 2 GE vulnerable to change Slow growth Average earnings High divisional walls Lots of protected turf Resistance to change Reduce number of peripheral businesses Sell nonperforming assets Break down strong SBU lines Delayer management hierarchies Adopt new rewards system 19801986

13. Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 13-13 Ex. 13-5. Corporate Transformations: Making General Electric Boundaryless Slide 2 of 2 Form strategic alliances “Work Out” Team with suppliers/ customers Share knowledge and skills across GE’s SBUs Promote those who take risks Invest in streamlines product development Reduce SBU walls even more Invest in Asia/Europe Foster continual training and development Encourage best practices and benchmarking Promote common vision Hire people with entrepreneurial tendencies “Six Sigma” 1988-19921994

14. Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 13-14 Ethical Dimension Diversity and Knowledge Base Operations increase in global scope Corporations search world for cutting- edge skills Ways to increase interchange –Use Internet pathways –Tap ideas of people from multiple cultures

15. Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 13-15 Tapping Worldwide Talent AT&T Hewlett-Packard Intel Microsoft Sun Microsystems Texas Instruments

16. Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 13-16 Ethical Dimension Helping Employees Cope with Change Change often most difficult for senior employees Options for AT&T top management –Fire obsolete employees, risk damaging morale –Retrain senior employees, despite expense