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Chapter Eleven Innovation and Change Thomson Learning © 2004
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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
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Change: Content vs. Process
Content compares what is different about the organization before and after the change ex: new technology, new CEO, fewer workers, new product the WHAT of change Process concerns the way the change occurs or is carried out ex: speed, sequence of activities, top-down or bottom-up, incremental or radical the HOW of change Thomson Learning © 2004
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Four Types of Change Content
Technology Changes in production process Products and Services Changes in outputs Strategy and Structure Administrative changes Culture Changes in values, attitudes, behaviors Thomson Learning © 2004
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Sequence of Elements for Successful Change Process
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
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Organizational Response to Environmental Change
A – Change in environment B – Incremental adjustment C – Radical adjustment A C B Thomson Learning © 2004
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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), ; and Harry S. Dent, Jr., “Growth through New Product Development,” Small Business Reports (November 1990): Thomson Learning © 2004
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Type of Innovation Desired
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
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Dunphy & Stace Model Incremental Change Strategies Transformative
Collaborative Models Type 1 Participative Evolution Type 2 Charismatic Transformation Coercive Models Type 3 Forced Evolution Type 4 Dictatorial Transformation Thomson Learning © 2004
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Exploitation vs. Exploration
Exploitation: Ongoing execution of learned successful behaviors – business as usual Exploration: Search for new ideas and behaviors to revitalize business Thomson Learning © 2004
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Barriers to Innovation in Large Organizations
Top Management Isolation Unfamiliar with latest technology / out of touch with markets More likely to try to acquire innovation (finance issues) than develop internally Thomson Learning © 2004
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Barriers to Innovation in Large Organizations
Intolerance of Diversity Typical entrepreneurial personality is not a team-player Impatient; dislikes rules, procedures Poor fit with culture Thomson Learning © 2004
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Barriers to Innovation in Large Organizations
Short Time Horizons Focus on quarterly performance results Projects under pressure to show results Incompatible with time frame for major innovations 5-7 years Thomson Learning © 2004
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Barriers to Innovation in Large Organizations
Excessive Bureaucracy Having to go through channels, paperwork, capital appropriations, etc. etc…. Loss of spontaneity Loss of momentum Thomson Learning © 2004
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Barriers to Innovation in Large Organizations
Inappropriate Incentives Reward stable performance instead of risk taking behavior Don’t penalize missed opportunities Inability to adequately compensate Thomson Learning © 2004
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Barriers to Innovation in Large Organizations
Excessive Rationality Management is primarily about control / order Innovation is chaotic Upsets plans Difficult to forecast Variation reducing Thomson Learning © 2004
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Division of Labor Between Departments to Achieve Changes in Technology
General Manager Creative Department (Organic Structure) Using Department (Mechanistic Structure) Thomson Learning © 2004
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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
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Burgelman’s Model Thomson Learning © 2004
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Autonomous Strategic Behaviors
“I say unto you: one must still have chaos in oneself to be able to give birth to a dancing star.” (Nietzsche, Thus Spoke Zarathustra) Thomson Learning © 2004
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The Structural Context
Various administrative mechanisms: market research, hurdle rates Object: evaluate fit of new induced ideas to existing strategy Weak feedback to change strategy: echo Thomson Learning © 2004
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Strategic Context Separate evaluation system from structural context
More open-ended in terms of results & payback Longer time frame Strong influence Thomson Learning © 2004
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Barriers to Change Excessive focus on costs
Failure to perceive benefits Lack of coordination and cooperation Uncertainty avoidance Fear of loss Thomson Learning © 2004
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Daft’s 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
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Kotter’s Eight Steps Establishing a Sense of Urgency
Forming a Powerful Guiding Coalition Creating a Vision Communicating the Vision Empowering Others to Act on the Vision Planning for and Creating Short-term Wins Consolidating Improvements and Producing Still More Change Institutionalizing New Approaches Thomson Learning © 2004
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