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Topic 15 X Innovation

and Change

LEARNING OUTCOMES
By the end of this topic, you should be able to:
1. Describe the importance of innovation in organisations;
2. Explain the ways to manage innovation effectively;
3. Discuss four factors that cause change and ways to manage the
changes in organisations; and
4. Examine the obstacles to changes in organisations and ways to
overcome the problems.

X INTRODUCTION
This section will begin by discussing the issues related to organisational
innovation. Organisational innovation means success in the implementation of
creative ideas in the organisation. Where do the ideas come from? Creative ideas
come from creativity, that is, the creation of ideas that are useful for the
organisation. Innovation can bring about many advantages and benefits to the
organisation but the main benefit is that it is able to create and retain the
competition advantage of the organisation.

The second part of this topic will explain the change in organisations.
Organisational change means the modification or alteration of organisations from
one structure, quality or condition into another form from time to time.
Organisations need to change due to several reasons; the most important is
environmental change. This section will explain the environmental factors that
affect organisations, how important change is to an organisation and how to
manage organisational change effectively.
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15.1 WHY IS INNOVATION IMPORTANT?


There are several matters that we need to know when discussing innovation. The
following explains matters related to innovation and from there we will be able
to know why innovation is crucial for organisations these days.

ACTIVITY 15.1
In your opinion, with the rapid development in information technology
nowadays, how far does innovation play an important role in an
organisation? Discuss this with your friends.

15.1.1 Technology Cycle


According to Williams (2000), technology refers to knowledge, tools and
equipment, and also the techniques and methods used to change inputs into
outputs. Technology cycle begins with the founding of a certain new technology
and ends when the technology achieves certain limits, becomes outdated and is
replaced with new technology that is more sophisticated. S-pattern innovation
curve is a curve that represents the life cycle of technology.

Figure 15.1: Technology life-cycle chart


Source: Williams, C. (2000). Management. SouthWestern-Thomson Learning

At the early stage of the existence of the technology (denoted by point A), there is
still a lot more to be learned from the technology in order to develop it and this
results in a slightly slow progress. From point A to point B, there is a slight curve
which indicates increase in effort (in the form of finance, research and
development) that only provides a slight increase in the performance of the
technology.
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When this technology matures (indicated by point B), researchers have identified
the methods to obtain better performance from that particular technology. The
curve from point B to point C indicates that the injection of effort in a small
quantity is already enough to increase the performance of the technology to a
stimulating level. Point C indicates that additional effort in developing the
technology will only result in a slight increase of performance. More importantly,
point C denotes that the technology had reached its maximum level. This means
that additional efforts will no longer bring any benefits or increase the
performance of that particular technology.

After the technology has achieved its maximum limit, that is, at the end of the
S-curve, increase in performance usually comes from new or the latest
technology. The second S-curve is the curve that represents the new technology
replacing the old technology.

EXERCISE 15.1
Essay Question

List the phases involved in the life cycle of technology.

15.2 MANAGING INNOVATION


Innovation must be managed properly for organisations to enjoy its benefits. If
not properly managed, it will not bring any benefit and may bring about bad
results for the organisation. The next section will explain the methods
implemented to manage innovation in organisations.

SELF-CHECK 15.1

Why must innovation that is a result of ideas and staff be managed and
administered?

15.2.1 Managing Innovation Resources


Innovation begins with creativity. Therefore, an organisation needs to establish a
creative work environment in order to generate creativity. A creative work
environment means a workplace culture where employees believe that new ideas
are evaluated, appreciated and encouraged. There are five factors that encourage
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creativity in the workplace: challenging work; encouragement from the


organisation; encouragement from supervisors; encouragement from the work
groups; and freedom (Williams, 2000).

Work will become challenging when it requires hard work, focus and attention,
and viewed as important by other people in the organisation. Challenging work
will encourage creativity since it is able to create a reward of experience in terms
of the psychology of the executor. When accepting challenging work, employee
will try to figure out the methods or ideas that can assist in performing the
particular job. The success in performing the challenging job will give satisfaction
to the employee.

A creative work environment requires three types of encouragement, namely


encouragement from the organisation, encouragement from supervisors and
encouragement from the workgroups. Encouragement from the organisation is
present when the management encourages risk-taking and new ideas, supporting
and making good evaluation towards particular ideas, grant rewards and
recognition towards creativity and encourages the sharing of new ideas among
the sections within the organisation.

Figure 15.2: Factors that encourages creativity in the work place

Encouragement from supervisors or managers is the form of encouragement


given by those who are in the chain of command of an employee. This type of
encouragement is given by the managers in order to provide clear goals to
encourage open interaction with subordinates and actively show support
towards the development of new ideas. Meanwhile, encouragement from the
workgroups exists when members of the group have diversity of experience,
education and background, and when there is openness in the contribution and
sharing of ideas.

Freedom here means providing a slight amount of power or authority to the


employee towards his work activities. The power given can provide space for the
employee to be able to make decisions. The process of decision making will
produce useful ideas that are able to assist the employee to perform his work
successfully. However, control must also be given to avoid any occurrence of
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unwanted issues, for example, the employee takes the opportunity to do


something negative as a result of the authority given.

EXERCISE 15.2
Essay Question

Based on your understanding, describe briefly the following:


(a) Innovation
(b) Technology
(c) Creative working environment

15.3 ORGANISATIONAL CHANGE


Organisations normally face two types of environments: stable and dynamic. It is
almost difficult nowadays to find a business environment that is completely
stable. Organisations nowadays face a dynamic environment where the
environmental factors, either specific or general, change rapidly. If an
organisation is not capable of handling environmental changes, it has a poor
chance of maintaining its position in its area of business. Therefore, the
organisation must always monitor and view the effect of each of the changes.
Any change may bring either opportunity or threat for the organisation. It is
because of these effects that the organisation needs to make changes. What is
meant by organisational change?

Organisational change is the need for an organisation to change from one


condition to another to take the opportunity or avoid a threat caused by
environmental changes in order to retain the survival of the organisation.

15.3.1 Forces of Change


As you already know, organisations nowadays face environments that are
dynamic and continually changing. What are the forces that demand an
organisation to change? One of the forces is the change on the conditions of the
workforce. The condition of workforce nowadays requires the organisation to be
suited to the various cultures in the environment. This is because the current
environment provides a diversity of workforce, either diversity from an obvious
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angle up to something that can hardly be detected. Therefore, the policies of


human resource and its practices must be changed in order to attract interest and
retain a diverse workforce besides trying to avoid any court action.

Technology is viewed as one of the forces that could change the work methods
and the organisation itself. For example, the use of computers as one of the tools
to monitor and control employees causes the managerÊs span-of-control to
become wider and the structure of organisation to become more open. The
sophistication of information technology has caused organisations to be more
sensitive. Consequently, some organisations now could develop, produce and
distribute products faster than before.

SELF-CHECK 15.2

From your point of view, what are the ways to make changes in the
morals and attitude of staff in their areas of employment?

Starting from the early 1970Ês, due to the rise of the world petroleum price, the
world economy has continuously affected organisations. The most obvious
example is when the economic breakdown took place in Malaysia somewhere
around the middle of 1997. The value of the ringgit fell, leading to the collapse of
the stock exchange and to the downfall of several of the countryÊs most
significant industries. It is the effect of this fall in ringgit value that also caused
Malaysia to lose its competitive force in the international market and later forced
the government to peg the ringgit to the US dollar. Besides that, the loan interest
rates that had gradually increased forced many organisations to retrench their
employees and worse, some of them were forced to close their businesses. From
the examples above, it is clear that economy also becomes one of the factors why
an organisation needs to change.

ACTIVITY 15.2
The pegging of the Malaysian Ringgit to the US dollar and the flexibility
of loan interest rates has given a satisfying effect. Will this condition
continue? Discuss this with your friends.

Competition also experiences change especially in the aspect of quantity and


quality. As a result of global trading, competition not only comes from inside the
country but also involves overseas organisations. Competition not only involves
organisations in the same industry but also those in other industries. Due to this
competition, organisations must retain their survival from the threat of
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competition. Successful organisations are those that are able to adapt to the
current flow of competition. They are the organisations that are fast and capable
of developing new products and services and selling them in the market.

Organisations need to adapt to change of direction of social trends. Changes


in the direction of social trends could change the preferences and wants of
customers.

This change will definitely alter the level of demand towards products and
services of the organisation. Not only that, the products and services that were
once in high demand become outdated due to this change. Therefore, the
organisation needs to make changes in order to adapt to the current condition of
the direction of social trends.

The countryÊs internal and global political conditions affect organisations. If


there is any change of government in a country, it will also cause change in
terms of the business rules and regulations of that particular country.

SELF-CHECK 15.3
The transfer of power from the Prime Minister of Malaysia to his
deputy causes surprise and worry for foreign investors in Malaysia. Is
this good for the country?

Table 15.1: Forces of Change and Their Effects

Forces of Change Examples


Workforce conditions • Increase in the number of professionals
• Increase in cost of workforce
Technology • Use of computer and automation
• TQM Programmes
Economy • Increase in interest rates
• Crisis in currency value
Competition • Global competition
• Mergers and acquisitions
Social trend chart • Increase in educated groups of people
• Change in preferences
Politics • Downfall of communist countries
• Change to new government
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EXERCISE 15.3

Essay Question

Other than the examples given in Table 15.1, give one example of effects
for each of the forces of change

15.4 MANAGING CHANGES

Changes refer to carrying out something using new ways and methods
compared to before. Making changes in organisations without any planning
can lead to the destruction of a particular organisation. Therefore,
organisation must make planned changes. Planned changes means changing
activities that are necessary and required and it has to be goal-oriented.

SELF-CHECK 15.4

What is your opinion on the differences between changes that are


planned with changes that are carried out without proper planning?

According to Robbin (1998), there are two goals to changes, that is, (1) to increase
the capability of the organisation in order to be able to accept challenges and
changes in the environment, and (2) to change the behaviour of individuals
within the organisation. If an organisation wishes to stay in the business, it must
respond to the changes in the environment. When competitors produce new
products and services, the government starts to implement new rules, the supply
of resources becomes scarce and any other changes that take place, organisations
must be able to adapt to these conditions. Generating innovation, granting power
to employees and introducing teamwork are some of the examples of planned
changes activities that are directed to give response towards the changes in the
environment.

Since the success of an organisation depends on the efficiency and effectiveness


of employees, planned changes are also concerned with changing the behaviour
of individuals or groups within an organisation.
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In implementing changes within the organisation, there are two types of changes,
that is, (1) change of first order and (2) change of second order. First order change
is a linear change, slow in nature and implemented in stages. This change is
made without any apparent change in the basic structure of the organisation. It is
also conducted that way if there is no strong pressure from the environment.
Besides that, if the particular organisation has a strong culture, changes must be
implemented slowly and in stages.

The second order change is a change that is radical in nature, multidimensional


and multilevel. This type of change needs high levels of leadership in order to
realise the changes. It takes place when there is intense pressure from the
environment that disrupts the survival of the organisation. This demands the
organisation to make drastic changes.

SELF-CHECK 15.5
Do you agree that second order change requires a leader who is
charismatic and has a clear vision in order to ensure the continuity of
the organisation?

We have already discussed what is meant by planned changes, its objectives and
the types of changes that can happen in an organisation. Now the question rises
on who will be responsible for managing the activities of change in organisations.
The answer is the change agents. Change agents are anyone, managers, non-
managers, employees or external negotiators. In the effort to make a significant
change in the organisation, the management is more inclined to use external
negotiators who have more knowledge regarding theories and methods of
changes.

EXERCISE 15.4

Essay Question
Try to explain briefly the two types of changes in organisations.
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15.4.1 Aspects that Can be Changed by Change Agents


There are aspects in organisations that can be changed by change agents, which
are structure, technology, physical layout and employees.

Figure 15.3: Aspects that can be changed by change agents

(a) Change of Structure


Structure for an organisation is not something that is absolute. Structure must
be changed to adapt to the condition of the environment. Thus, change agents
might need to change the structure of organisation if necessary.

The structures of organisation explain the methods of work divisions,


combined and coordinated. Change agents can change one or more of the
important elements in designing the organisation. For example, widening
the span-of-control, combining the responsibilities of departments and
others. Adding rules and procedures can be implemented to increase
standard or the level of decentralisation that can assist in accelerating the
process of decision making.

Change agents can introduce significant modification in the true design of


organisations. This can include the change of form from a simple structure
into a team-based structure or in other words, changing the form of
departmentalisation. Change agents can also take into consideration the
redesigning of work and work schedules. Another example of modification
is the reward system for the employees. Motivation can be increased by
making improvements in the employeesÊ rewards system. For example, by
introducing the system of bonus based on performance and profit sharing
between organisation and employees.

SELF-CHECK 15.6

„Change in the structure of an organisation could increase the moral of


the staff.‰ Do you agree with this statement?
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(b) Change of Technology


Technology is another aspect in the organisation that can be changed or
modified by change agents. Nowadays, changes in the technology
environment involves introduction to tools, equipments or methods that
can either be new automation or computerisation. Competitive factors or
innovation in industry requires the change agents to introduce the new
tools, equipment and operation methods.

In order to maintain the survival of the organisation, the introduction of


new technology will be able to assist the organisation in accelerating
product development and distribution to the customers. It can also help
build the competitive advantage of the organisation. The use of this
technology also can ensure the ability and effectiveness of the competing
strength of the organisation in the industry.

SELF-CHECK 15.7
The change of a particular technology in an organisation will give rise
to substantial risk. What are the factors that must be carried out to
minimise this risk?

(c) Change of Physical Layout


Physical layout comprises space and arrangement of tools, equipment and
others in the workplace. This physical layout can influence the work
productivity, efficiency and the effectiveness of the employees. For
example, removing walls or partition or creating an open workspace area in
the workplace will facilitate communication among employees. For
instance, the management can also change the quantity or types of lighting,
level of heat and cold, level of sound, cleanliness of the workplace and the
interior design dimension such as furniture, decorations, colour, and others.
(d) Change of Employees
The final aspect that can be changed by change agents is the employees.
Change agents can assist individuals or groups within an organisation to
work more efficiently. This involves changing the attitude and behaviour of
the members of the organisation through communication, making decisions
and solving problems.

ACTIVITY 15.3
Do you agree if a series of developmental training are conducted for the
employees in order to help them gain new skills and exposure towards
new technologies? Discuss this with your friends.
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EXERCISE 15.5

Essay Question

List organisational aspects that can be changed by change agents.

15.5 BARRIERS TO CHANGE


When change is needed, the ones that are involved will be the organisation and
its members. Based on past experiences, if a change happens, we will not be able
to avoid facing barriers. In this case, an organisation will face obstacles of change
from two parties: the individual employees and the organisation itself. Below is
the explanation regarding the sources of obstructions from both the parties.

ACTIVITY 15.4

A change frequently has good and bad implications for an


organisation. Based on the factors of individuals and organisation, in
your opinion, what is the most difficult barrier to be changed? Discuss
this with your friends.

15.5.1 Individual Barriers


The source of change barrier of individuals comes from basic human
characteristics itself, such as perception, personality and needs. The following are
five reasons why an individual opposes change.

One of the reasons is due to human habits. Habit is a behaviour performed by an


individual periodically. The inability of individuals in carrying out the behaviour
known as habit (for instance, not being able to have coffee before reporting for
duty) will result in the individual feeling uneasy or anxious. Individuals feel that
if changes are to be made, then they will no longer be able to satisfy their habits.
Besides that, individuals feel anxious towards change due to their feeling of fear
towards the guarantee and security of their employment. For example, if an
organisation introduces the use of robotic equipment in the production process,
individuals will develop the feeling that their work is no longer secure.

Economic factor is also one of the factors that cause individuals to oppose
change. Individuals have the assumption that change will affect their income.
Changes in work activities or developing a new work routine can raise the
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feelings of economic fear to the individuals. This is because due to the changes,
individuals are worried that they are no longer able to perform the work
following the new standards, particularly if payment made is based on
productivity.

Besides that, the anxiety towards something that is unknown causes individuals
to oppose changes. This is because change can bring a new approach that they
themselves do not know whether they can perform fairly or otherwise. This
causes the individuals to be inclined to think of only the negative aspects.

Other than that, the reason that contributes towards change barriers is the
selective nature in processing information. Individuals only want to hear and
process information that they desire or information that are equal to their
assumptions. Therefore, when this condition rises, individuals are usually
inclined to have negative thoughts.

15.5.2 Organisational Barriers


There are several sources that are identified as being organisational barriers.
Organisations already have built a mechanism that is able to provide stability.
When an organisation faces the need for change, the organisation fears that the
stability felt all this while will be severely affected. This condition is referred to as
structure inertia.

Restriction of change focus refers to the condition when an organisation makes


changes on a certain sub-system only. An organisation is formed from the
combination of interdependent sub-systems. Therefore, modification cannot be
made towards one sub-system without involving the other sub-systems. Thus, if
changes are made towards one sub-system only, the changes may neither be
acceptable nor successful.

Group inertia is one of the sources of organisational barriers. It is inertia in the


form of a group that creates barriers towards change. For example, individuals
have already agreed to accept the changes that will be made but the employee
union does not want any change, which then causes individuals to be forced to
oppose the change and this is referred to as group inertia.

Organisational change may be a threat to the expertise of certain groups. These


groups are worried that if change takes place, their expertise may no longer be
needed and this will further jeopardise the security of their employment. Besides
that, changes are also viewed as a threat towards the authority of some groups.
For example, the introduction of involvement in decision making and the
formation of self-managed teamwork are the types of changes that can threaten
the authority of managers.
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Other than that, changes are also assumed to become a threat towards the
existing allocation of resources. Some groups in the organisation that have
control over the resources usually view change as a threat to their position. These
groups fear that change will result in scarcity or permanent loss of resources that
has been enjoyed all this while.

SELF-CHECK 15.8
List the differences between individual barriers and organisational
barriers.

15.6 OVERCOMING THE BARRIERS TO CHANGE


There are six tactics that can be implemented by change agents to overcome
change barriers.

ACTIVITY 15.5
If you are the general manager of an organisation, are the following
factors needed to overcome barriers towards change? Discuss this with
your friends.

(a) Communication and Learning


Barriers can be reduced through communication with employees in order to
help them to see the logical aspect of a particular change. This tactic is
based on the assumption that the source of barrier is caused by obtaining
the wrong information, or interpreting information at the wrong condition,
or through a bad communication condition. This tactic is used to provide
clarification and accurate information regarding the changes which can
help in reducing barriers. Communication can be implemented through
face-to-face discussions, memos, group presentation or reports.

(b) Involvement
This tactic assumes that it is difficult for a person to oppose change if he
himself is also involved in the effort and activities of change. With this
involvement, the involved parties will contribute their expertise and
involvement and this will reduce barriers. Not only that, commitment can
also be obtained and able to increase the quality of change in decisions.
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(c) Facilities and Support


Change agents can offer forms of facilities and support to reduce barriers.
When employees have a high level of anxiety, counselling services and
therapy, new skills training or giving paid leaves are the forms of facilities
and support that can be given to employees.

(d) Negotiation
One of the ways that can be done by change agents in dealing with change
barriers is by making valuable exchange in order to reduce barriers. For
example, if the barriers come from some individuals having power, reward
packages can be used as negotiation substance and as the substance in
exchange with the barrier by the individuals. Besides that, this reward
packages and offers will be able to fulfil the needs of the individuals.
Negotiation tactics are most suitable when change barriers are caused by
powerful individuals in the organisation.

(e) Manipulation and Co-optation


Manipulation refers to the effort of changing the standpoint of a person.
Altering or changing facts to make them interesting, restricting bad
information and creating rumours are some of the ways to obtain
employeesÊ agreement. Co-optation is the combination of manipulation and
involvement. The act of co-optation will try to ÂbuyÊ group leaders who
cause barriers by providing these leaders important roles in making change
decisions. Advices from these leaders were inquired, not to find the best
solution but as confirmation. By buying these leaders and successfully
changing their standpoint, indirectly it will also change the perception and
standpoint of their followers.

(f) Force
This is the final tactic that can be implemented by the change agents. This is
an application that uses threat towards the person who is a barrier. For
example, threat to be moved to other department, losing the chance of a
promotion, and a bad evaluation of performance are threats imposed if the
person does not want to

EXERCISE 15.6

Essay Question

Give the differences between negotiation, co-optation and force.


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15.7 MANAGING CHANGE


Change to be made by a particular organisation must be managed as properly as
possible in order to avoid the occurrence of any negative matters especially from
groups that obstruct change. Based on the theory by Kurt Lewin, managing
organisational change is the basis to the process of liquidation, change
intervention and freezing.

Liquidation refers to getting individuals who are affected by the changes in


believing the needs towards changes.

Change intervention means the processes used towards employees and


managers in order to change their behaviour and work practices.

Meanwhile, freezing refers to supporting and strengthening the changes that was
successfully carried out in order for it to prolong. Table 15.2 explains several
suggestions that can be used by managers when there are groups who are
barriers to the changes by using the suggestions by Kurt Lewin.

ACTIVITY 15.6
What is the importance in managing a particular change that wants to
be carried out by a particular organisation? Discuss this with your
friends.

EXERCISE 15.7

Essay Question

Give a brief description on the theory proposed by Kurt Lewin.


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Table 15.2: Things that Needs to be Done


When Employees form Barriers towards Change
Source: Williams (2000)

Liquidation Changes Freezing

• Sharing thoughts • Explaining the benefits • Upper management


with employees on that can be gained from needs to give support
why change is changes. by providing
needed. • Identifying respected consistent messages
• Exhibits sympathy individuals in the and resources.
towards the organisation to manage • Let everyone know
difficulties faced by the efforts of changes. about where and
the managers and • Allowing individuals to when changes had
employees due to the accept the suitable effect taken place
change. from the changes, for successfully.
• Communication example while the • Offer counselling or
regarding the changes employees are busy other services that can
in a context that is carrying out their work. assist the employees
simple, clear, widely • If possible, ensure that in overcoming the
verbal or written. no employees are being pressure due to the
terminated to reduce change.
fear towards change.
• Offer training to ensure
employees are confident
and capable in
performing the needs of
the new task.
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EXERCISE 15.8

Multiple Choice Questions

1. Which of the following is NOT the method suggested managing


change barriers?

A. Education and communication


B. Participation
C. Test
D. Negotiation

2. At which stage in the S-pattern innovation curve indicates that


slight effort will produce obvious progress in the technology
performance?

A. Initial stage of cycle


B. Intermediate stage of cycle
C. Final stage of cycle
D. Initial and final stage of cycle

3. Change agents can make changes on the following aspects


EXCEPT:
A. organisation structure
B. technology
C. behaviour of employees
D. all of the above cannot be changed by the change agents

4. The method of „buying‰ group leaders who cause barriers towards


change is referred to as the effort of _________________.

A. negotiation
B. force
C. co-optation
D. involvement

5. Change that is radical in nature, multidimensional and multilevel is


the ___________ order change.

A. fourth
B. third
C. second
D. first
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• Innovation helps organisations to build their own competition advantages.


• Therefore, it is the duty of every organisation to create a creative work
environment to encourage the emergence of creative ideas from its human
resources.
• It is these creative ideas that assist organisations in discovering new
technologies.
• In order to guarantee the survival of the organisation, changes must be made
from time to time in order for it to be in line with the changes of the business
environment.
• Organisation changes must be planned as properly as possible in order for it
to give benefit instead of detriment to the organisation.

Change intervention Freezing


Co-optation Liquidation
Creativity Manipulation
Encouragement S-pattern innovation