1. Thomson Learning © 200411-1 Chapter Eleven Innovation and Change

2. Thomson Learning © 2004 11-2 Forces Driving the Need for Major Organizational Change 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 More Threats More domestic competition Increased Speed International competition Global Changes, Competition and Markets T echnological Change International Economic Integration Maturation of Markets in Developed Countries Fall of Communist and Socialist Regimes More Opportunities Bigger markets Fewer barriers More international markets Source: Based on John P. Kotter, The New Rules: How to Succeed in Today’s Post-Corporate World (New York: The Free Press, 1995).

3. Thomson Learning © 2004 11-3 Incremental vs. Radical Change Continuous progression Paradigm-breaking burst Through normal structure and management processes Transform entire organization Affect organizational part 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. Incremental ChangeRadical Change

4. Thomson Learning © 2004 11-4 Four Types of Change Technology Changes in production process Products and Services Changes in outputs Strategy and Structure Administrative changes Culture Changes in values, attitudes, behaviors

5. Thomson Learning © 2004 11-5 Sequence of Elements for Successful Change Environment Suppliers Professional Associations Consultants Research literature Customers Competition Legislation Regulation Labor force 1. Ideas 2. Needs 3. Adoption4.Implementation 5. Resources Internal Creativity and Inventions Perceived Problems or Opportunities Organization

6. Thomson Learning © 2004 11-6 Division of Labor Between Departments to Achieve Changes in Technology General Manager Creative Department (Organic Structure) Using Department (Mechanistic Structure)

7. Thomson Learning © 2004 11-7 Probability of New Product Success PROBABILITY 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.

8. Thomson Learning © 2004 11-8 Horizontal Linkage Model for New Product Innovations Environment Technical Developments Environment Customer Needs Organization General Manager R&D Department Marketing Department Production Department Linkage

9. Thomson Learning © 2004 11-9 Dual-Core Approach to Organization Change Type of Innovation Desired Administrative Structure Technology Direction of Change: Top-Down Bottom-Up Examples of Change: Strategy Production Downsizing techniques Structure Workflow Best Organizational Design for Change: Mechanistic Organic Administrative Core Technical Core

10. Thomson Learning © 2004 11-10 Culture Change Reengineering and Horizontal Organization Diversity The Learning Organization

11. Thomson Learning © 2004 11-11 OD Culture Change Interventions Large Group Intervention Team Building Interdepartmental Activities

12. Thomson Learning © 2004 11-12 Stages of Commitment to Change Preparation Initial contact Awareness Acceptance Understanding Decision to implement Commitment Installation Institutionalization

13. Thomson Learning © 2004 11-13 Barriers to Change Excessive focus on costs Failure to perceive benefits Lack of coordination and cooperation Uncertainty avoidance Fear of loss

14. Thomson Learning © 2004 11-14 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.

15. Thomson Learning © 2004 11-15 Innovation Measures Measure A Your Organization B Other Organization C Your Ideal 1. Creativity encouraged 2. Diverse problem-solving 3. Time for creative ideas 4. Rewards for innovation 5. Flexible, open to change 6. Follow orders from top 7. Think and act like others 8. Concern for status quo 9. Don’t rock the boat 10. New ideas not funded Workbook Activity