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Chapter Eleven

Innovation and Change

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Forces Driving the Need for Major Organizational Change

More Large-Scale Changes in OrganizationsStructure change Mergers, joint ventures, consortiaStrategic change Horizontal organizing, teams, networksCulture change New technologies, productsKnowledge management, enterprise New business processesresource planning E-businessQuality programs Learning organizations

More ThreatsMore domestic competitionIncreased SpeedInternational competition

Global Changes, Competition and Markets• Technological Change• International Economic Integration• Maturation of Markets in Developed Countries• Fall of Communist and Socialist Regimes

More OpportunitiesBigger marketsFewer barriersMore 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).

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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

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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

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Sequence of Elements for Successful Change ProcessEnvironment

SuppliersProfessionalAssociationsConsultantsResearchliterature

CustomersCompetitionLegislationRegulationLabor force

1. Ideas

2. Needs

3. Adoption 4.Implementation

5. Resources

InternalCreativity and

Inventions

PerceivedProblems or

Opportunities

Organization

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AB C

A – Change in environment

B – Incremental adjustment

C – Radical adjustment

Organizational Response to Environmental Change

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Incremental vs. Radical Change

Continuousprogression

Paradigm-breakingburst

Through normal structure and management

processes

Transform entireorganization

Affect organizational

part

Create new structureand management

Technologyimprovements

Breakthroughtechnology

Productimprovement

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 UniversityPress, 1992), 66-111; and Harry S. Dent, Jr., “Growth through New

Product Development,” Small Business Reports (November 1990): 30-40.

Incremental Change Radical Change

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Dual-Core Approach to Organization Change

Type of Innovation DesiredAdministrative

Structure Technology

Direction of Change: Top-Down Bottom-Up

Examples of Change: Strategy Production Downsizing techniques Structure WorkflowBest Organizational Design for Change: Mechanistic Organic

AdministrativeCore

TechnicalCore

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IncrementalChange Strategies

Transformative Change Strategies

Collaborative Models

Type 1 Participative

Evolution

Type 2 Charismatic Transformation

Coercive Models

Type 3Forced Evolution

Type 4 Dictatorial Transformation

Dunphy & Stace Model

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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

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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

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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

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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

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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

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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

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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

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Division of Labor Between Departments to Achieve Changes in

Technology

GeneralManager

CreativeDepartment

(Organic Structure)

Using Department

(Mechanistic Structure)

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Horizontal Linkage Model for New Product Innovations

Environment

TechnicalDevelopments

Environment

CustomerNeeds

Organization

GeneralManager

R&DDepartment

MarketingDepartment

ProductionDepartment

Linkage

Linkage Linka

ge

Linkage Linkage

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Burgelman’s Model

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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)

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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

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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

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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

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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.

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Kotter’s Eight Steps

1. Establishing a Sense of Urgency

2. Forming a Powerful Guiding Coalition

3. Creating a Vision4. Communicating the

Vision5. Empowering Others

to Act on the Vision

6. Planning for and Creating Short-term Wins

7. Consolidating Improvements and Producing Still More Change

8. Institutionalizing New Approaches