Chapter 10

Innovation and Change

©2004 by Nelson, a division of Thomson Canada Limited

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What Would You Do?
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©2004 by Nelson, a division of Thomson Canada Limited

IBM must change Share of personal computer market was once 70 percent is now 7 percent How do you quickly and effectively create change? The strong corporate culture will likely produce resistance to change What would you do?
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Learning Objectives: Organizational Innovation
After reading the next two sections on organizational innovation, you should be able to: 1. explain why innovation matters to companies 2. discuss the different methods that managers can use to effectively manage innovation in their organizations
©2004 by Nelson, a division of Thomson Canada Limited

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Why Innovation Matters

Innovation streams Technology cycles

©2004 by Nelson, a division of Thomson Canada Limited

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Technology Cycles

Technology cycle

starts with a new technology and ends when that technology reaches its limits and is replaced with better technology a pattern of innovation characterized by slow initial progress, then rapid progress, then slow progress again as technology matures
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S-curve pattern of innovation

©2004 by Nelson, a division of Thomson Canada Limited

Technology Cycle S-Curve Pattern of Innovation

Exhibit 10.1 ©2004 by Nelson, a division of Thomson Canada Limited

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Innovation Streams
Patterns of innovation that can create sustainable competitive advantage
Technological discontinuity Era of ferment

Technological substitution

Design competition

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Design Competition

Dominant design Incremental change

©2004 by Nelson, a division of Thomson Canada Limited

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Managing Innovation

Managing innovation during discontinuous change Managing innovation during incremental change

©2004 by Nelson, a division of Thomson Canada Limited

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Managing Innovation During Discontinuous Change

Experiential approach to innovation

in an uncertain environment uses intuition, flexible options and hands-on experience to increase learning a cycle of repetition that improves on a design prototype systematic comparison of different designs
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Design iteration

Testing

©2004 by Nelson, a division of Thomson Canada Limited

Managing Innovation During Discontinuous Change

Milestones

Formal project review points used to assess progress and performance

Multifunctional teams

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Work teams composed of people form different departments

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Managing Innovation During Incremental Change

Compression approach to innovation

assumes that innovation is a predictable process that can be planned in steps Based on incremental improvements to a dominant technological design and achieving backward compatibility with older technology
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Generational change

©2004 by Nelson, a division of Thomson Canada Limited

Learning Objectives: Organizational Change
After reading these next two sections on organizational change, you should be able to: 3. discuss why change occurs and why it matters 4. Discuss the different methods that managers can use to better manage change as it occurs
©2004 by Nelson, a division of Thomson Canada Limited

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Change & Resistance Forces
Change forces

forces that produce differences in the form, quality, or condition of an organization over time forces that support the existing state of conditions in organizations

Resistance forces

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How Change is Created

Exhibit 10.4 ©2004 by Nelson, a division of Thomson Canada Limited

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Organizational Decline: The Risk of Not Changing
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Blinded stage Inaction stage Faulty action stage Crisis stage Dissolution stage

©2004 by Nelson, a division of Thomson Canada Limited

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Managing Change
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Managing resistance to change Change tools and techniques Managing conversations to promote change What not to do when leading change

©2004 by Nelson, a division of Thomson Canada Limited

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Managing Resistance to Change
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Lewin’s framework Methods of managing resistance to change

©2004 by Nelson, a division of Thomson Canada Limited

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Lewin’s Change Process

Unfreezing

getting those affected by the change to believe change is needed getting people to change their behaviours supporting and reinforcing the new changes so they “stick”
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Change and intervention

Refreezing

©2004 by Nelson, a division of Thomson Canada Limited

Methods of Managing Resistance to Change
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Education and communication Participation Negotiation Top management support Coercion

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Change Tools and Techniques
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Results-driven change General Electric Workout Transition management team (TMT) Organizational development Change agent

©2004 by Nelson, a division of Thomson Canada Limited

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Results-Driven Change

Adapted from Exhibit 10.6

©2004 by Nelson, a division of Thomson Canada Limited

Create measurable short-term goals Use action steps likely to improve performance Immediate improvements important Consultants and staffers help managers Test action steps to see they lead 22 to improvement

General Electric Workout

Boss discusses agenda, targets specific problems, then leaves Outside facilitator works with subgroups to discuss solutions “Town meeting” on day three
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subgroups present solutions boss must decide on the spot
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©2004 by Nelson, a division of Thomson Canada Limited

Transition Management Team (TMT)
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Establish context for change Stimulate conversation Provide appropriate resources Coordinate and align projects Ensure congruence of messages and activities Provide opportunities for joint creation Anticipate, identify, and address people problems Prepare the critical mass
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Adapted from Exhibit 10.7 ©2004 by Nelson, a division of Thomson Canada Limited

Organizational Development (OD)

A philosophy and collection of planned change interventions Focuses on organization’s longterm survival Change agent
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person formally in charge of guiding a change can be an internal or external person
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©2004 by Nelson, a division of Thomson Canada Limited

General Steps for OD Interventions
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Adapted from Exhibit 10.8

Entry Start-up Assessment and feedback Action planning Intervention Evaluation Adoption Separation
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©2004 by Nelson, a division of Thomson Canada Limited

Different Kinds of Organizational Development Interventions

Large System
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Sociotechnical Systems Survey Feedback Team Building Unit Goal Setting Counselling/Coaching Training
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Small Group
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Person-Focused
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Adapted from Exhibit 10.9 ©2004 by Nelson, a division of Thomson Canada Limited

What Really Works
Change the Work Setting or Change the People? Do Both!
Changing the work setting

Changing the People

Changing Individual Behaviour and Organizational Performance

©2004 by Nelson, a division of Thomson Canada Limited

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Managing Conversations to Promote Change
Organization dialogue

process by which people in an organization talk effectively with each other
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initiative conversations conversations for understanding conversations for performance conversations for closure
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©2004 by Nelson, a division of Thomson Canada Limited

Errors Managers Make when Leading Change
Unfreezing
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not enough sense of urgency not a powerful enough guiding coalition lacking a vision undercommunicating the vision not removing obstacles to the vision not planning for and creating short-term wins declaring victory too soon not anchoring changes in corporate culture
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Change
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Refreezing
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Adapted from Exhibit 10.10 ©2004 by Nelson, a division of Thomson Canada Limited

What Really Happened?
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©2004 by Nelson, a division of Thomson Canada Limited

Changed bonus system Cut workforce from 40,000 to 20,000 Focused on participation to reduce resistance Used coercion selectively Improved job of bringing new technologies to market
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