1. Managing Change and Innovation Chapter 11

2. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 2 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

3. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 3 Managing Change and Innovation 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 Topics Chapter 11

4. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 4 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

5. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 5 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

6. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 6 Model of Change Sequence of Events Environmental Forces Internal Forces Need for change Initiate change Implement change Monitor global competition, and other factors Consider plans, goals, company problems, and needs 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

7. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 7 Forces for Change Environmental Forces – Customers – Competitors – Technology – Economic – International arena Internal Forces – activities and decisions

8. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 8 Need for Change Performance gap = disparity between existing and desired performance levels. ● Current procedures are not up to standard ● New idea or technology could improve current performance Based on external or internal forces

9. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 9 Initiating Change 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 Critical phase of change management Experiential Exercise: Is Your Company Creative?

10. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 10 Characteristics of Creative People  Conceptual fluency  Open-minded  Originality  Less authority  Independence Self-confidence  Playfulness  Undisciplined exploration  Curiosity  Persistence  Commitment - Focused approach

11. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 11 Idea Champion A person who sees the need for and Champions productive change within the organization Change does not occur by itself

12. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 12 Four Roles in Organizational Change Inventor ·Develops and understands technical aspects of ideas ·Does not know how to win support for the idea or make a business of it 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. Champion ·Believes in idea ·Visualizes benefits ·Confronts organization realities of cost, benefits ·Obtains financial & political support ·Overcomes obstacles Championing an idea successfully requires roles in organizations

13. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 13 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

14. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 14 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

15. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 15 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

16. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 16 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.

17. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 17 Force-Field Analysis The process of determining which forces drive and which resist a proposed change Restraining Forces (Barriers) Lack of resources Resistance from middle managers Inadequate employee skills Driving Forces Thought of as problems or opportunities that provide motivation for change Kurt Lewin

18. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 18 Traditional to Just-In-Time Inventory Systems

19. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 19 Tactics for Overcoming Resistance to Change 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 ApproachWhen to Use

20. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 20 Tactics for Overcoming Resistance to Change 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 Approach When to use

21. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 21 Types of Organizational Change Culture/People Strategy Structure Technology Products 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.

22. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 22 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

23. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 23 Horizontal Linkage Model For New Product Innovation Research Department Marketing Department Manufacturing Department New Technology Customers Market Conditions Organization

24. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 24 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

25. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 25 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

26. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 26 Organization Development Decline/revitalization Mergers/acquisitions Conflict management Problems OD Can Address 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

27. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 27 OD Activities Survey feedback Team building Large group intervention

28. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 28 OD Approaches to Culture Change Traditional Organizational Development Model Large-Group Intervention Model Change Process: Incremental ChangeRapid transformation 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 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.

29. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 29 Three Stages for Achieving Behavioral and Attitudinal Change  Unfreezing  Changing  Refreezing