topic 11 innovation and change

8/13/2019 Topic 11 Innovation and Change

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LEARNING OUTCOMES

INTRODUCTIONThis section will begin by discussing the issues related to organisationalinnovation. Organisational innovation means success in the implementation ofcreative ideas in the organisation. Where do the ideas come from? Creative ideascome from creativity, that is, the creation of ideas that are useful for theorganisation. Innovation can bring about many advantages and benefits to theorganisation but the main benefit is that it is able to create and retain thecompetition 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 fromone structure, quality or condition into another form from time to time.Organisations need to change due to several reasons; the most important isenvironmental change. This section will explain the environmental factors thataffect organisations, how important change is to an organisation and how tomanage organisational change effectively.

ToTopiiccp Innovationand Change

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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 change in organisations and ways toovercome them.


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TOPIC 11 INNOVATION AND CHANGE 183

WHY IS INNOVATION IMPORTANT?11.1

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

ACTIVITY 11.1

In your opinion, with the rapid development in information technologynowadays, how far does innovation play an important role in anorganisation? Discuss this with your friends.

11.1.1 Technology Cycle

According to Williams (2000), technology refers to knowledge, tools andequipment, and also the techniques and methods used to change inputs intooutputs. Technology cycle begins with the founding of a certain new technologyand ends when the technology achieves certain limits, becomes outdated and isreplaced with new technology that is more sophisticated. The S-patterninnovation curve is a curve that represents the life cycle of technology.

Figure 11.1:Technology life-cycle chartSource:Williams, C. (2000). Management. SouthWestern-Thomson LearningAt the early stage of the existence of technology (denoted by point A), there isstill a lot more to be learned from the technology in order to develop it and thisresults in a slightly slow progress. From point A to point B, there is a slight curvewhich indicates increase in effort (in the form of finance, research anddevelopment) that only provides a slight increase in the performance of thetechnology.


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TOPIC 11 INNOVATION AND CHANGE184

When this technology matures (indicated by point B), researchers have identifiedthe methods to obtain better performance from that particular technology. Thecurve 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 astimulating level. Point C indicates that additional effort in developing thetechnology will only result in a slight increase in performance. More importantly,point C denotes that the technology has reached its maximum level. This meansthat additional efforts will no longer bring any benefits or increase theperformance of that particular technology.

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

EXERCISE 11.1

List the phases involved in the life cycle of technology.

MANAGING INNOVATION11.2

Innovation must be managed properly for organisations to enjoy its benefits. Ifnot properly managed, it will not bring any benefit and may bring about badresults for the organisation. The next section will explain the methodsimplemented to manage innovation in organisations.

SELF-CHECK 11.1

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

11.2.1 Managing Innovation Resources

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


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organisation; encouragement from supervisors; encouragement from the workgroups; 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 workwill encourage creativity since it is able to create a reward of experience in termsof the psychology of the executor. When accepting challenging work, anemployee will try to figure out the methods or ideas that can assist in performingthe particular job. The success in performing the challenging job will givesatisfaction to the employee.

A creative work environment requires three types of encouragement, namelyencouragement from the organisation, encouragement from supervisors andencouragement from the workgroups. (Refer to Figure 11.2)

Figure 11.2:Factors that encourages creativity in the work place(a) Encouragement from the organisation

Encouragement from the organisation is present when the managementencourages risk-taking and new ideas, supporting and making goodevaluation towards particular ideas, grant rewards and recognition towardscreativity and encourages the sharing of new ideas among the sectionswithin the organisation.

(b) Encouragement from supervisorsEncouragement from supervisors or managers is the form ofencouragement given by those who are in the chain of command of anemployee. This type of encouragement is given by the managers in order toprovide clear goals to encourage open interaction with subordinates andactively show support towards the development of new ideas.

(c) Encouragement from the workgroupsMeanwhile, encouragement from the workgroups exists when members ofthe group have diversity of experience, education and background, andwhen there is openness in the contribution and sharing of ideas.


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Freedom here means providing a slight amount of power or authority tothe employee towards his work activities. The power given can providespace 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 toperform his work successfully. However, control must also be given toavoid any occurrence of unwanted issues, for example, the employee takesthe opportunity to do something negative as a result of the authority given.

EXERCISE 11.2

Based on your understanding, describe briefly the following:

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

ORGANISATIONAL CHANGE

Organisations normally face two types of environments: stable and dynamic. It isalmost difficult nowadays to find a business environment that is completelystable. Organisations nowadays face a dynamic environment where theenvironmental factors, either specific or general, change rapidly. If anorganisation is not capable of handling environmental changes, it has a poorchance of maintaining its position in its area of business. Therefore, theorganisation 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 ismeant by organisational change?

11.3

Organisational change is the need for an organisation to change from onecondition to another to take the opportunity or avoid a threat caused byenvironmental changes in order to retain the survival of the organisation.

11.3.1 Forces of Change

As you already know, organisations nowadays face environments that aredynamic and continually changing. What are the forces that demand anorganisation to change? One of the forces is the change in the conditions of theworkforce. The condition of workforce nowadays requires the organisation to be


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suited to the various cultures in the environment. This is because the currentenvironment provides a diversity of workforce, either diversity from an obviousangle 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 andretain a diverse workforce besides trying to avoid any court action.

Technology is viewed as one of the forces that can change the work methods andthe organisation itself. For example, the use of computers as one of the tools tomonitor and control employees causes the managers span-of-control to becomewider and the structure of organisation to become more open. The sophisticationof information technology has caused organisations to be more sensitive.Consequently, some organisations now can develop, produce and distributeproducts faster than before.

SELF-CHECK 11.2

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

Starting from the early 1970s, due to the rise of the world petroleum price, theworld economy has continuously affected organisations. The most obviousexample is when the economic downturn took place in Malaysia somewhere

around the middle of 1997. The value of the ringgit fell, leading to the collapse ofthe stock exchange and to the downfall of several of the countrys mostsignificant industries. It is the effect of this fall in ringgit value that also causedMalaysia to lose its competitive force in the international market and later forcedthe government to peg the ringgit to the US dollar. Besides that, the loan interestrates that had gradually increased forced many organisations to retrench theiremployees and worse, some of them were forced to close their businesses. Fromthe examples above, it is clear that the economy is also one of the factors why anorganisation needs to change.

Competition also results in change especially in the aspect of quantity andquality. As a result of global trading, competition not only comes from inside thecountry but also involves overseas organisations. Competition not only involvesorganisations in the same industry but also those in other industries. Due to thiscompetition, organisations must retain their survival from the threat ofcompetition. Successful organisations are those that are able to adapt to thecurrent flow of competition. They are the organisations that are fast and capableof developing new products and services and selling them in the market.


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

The countrys internal and global political conditions affect organisations. Ifthere 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.

Organisations need to adapt to changes in social trends. Changes in socialtrends could change the preferences and wants of customers.

Table 11.1:Forces of Change and Their EffectsForces 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

ACTIVITY 11.2

The transfer of power from the Prime Minister of Malaysia to hisdeputy causes surprise and worry for foreign investors in Malaysia. Isthis good for the country? Discuss.


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EXERCISE 11.3

Other than the examples given in Table 11.1, give one example of effectsfor each of the forces of change.

MANAGING CHANGE11.4

Initiating change refers to carrying out something using new ways andmethods 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 changingactivities that are necessary and required and these changes have to be goal-oriented.

SELF-CHECK 11.3

What is your opinion on the differences between changes that areplanned with changes that are carried out without proper planning?

According to Robbin (1998), there are two goals for changes, that is:

(a) To increase the capability of the organisation in order to be able to acceptchallenges and changes in the environment; and

(b) To change the behaviour of individuals within the organisation.If an organisation wishes to stay in the business, it must respond to the changesin the environment. When competitors produce new products and services, the

government starts to implement new rules, the supply of resources becomesscarce and any other changes that take place, organisations must be able to adaptto these conditions. Generating innovation, granting power to employees andintroducing teamwork are some of the examples of planned changes activitiesthat are directed as a response towards the changes in the environment.

Since the success of an organisation depends on the efficiency and effectivenessof employees, planned changes are also concerned with changing the behaviourof individuals or groups within an organisation.


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In implementing changes within the organisation, there are two types of changes,that is:

(a) Change of first order; and(b) 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 theorganisation. It is also conducted that way if there is no strong pressure from theenvironment. 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, multidimensionaland 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 theenvironment that disrupts the survival of the organisation. This demands theorganisation to make drastic changes.

We have already discussed what is meant by planned changes, its objectives andthe types of changes that can happen in an organisation. Now the question riseson 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 significantchange in the organisation, the management is more inclined to use externalnegotiators who have more knowledge regarding theories and methods ofchanges.

ACTIVITY 11.3

Do you agree that second order change requires a leader who ischarismatic and has a clear vision in order to ensure the continuity ofthe organisation? State your reasons.

EXERCISE 11.4

Try to explain briefly the two types of changes in organisations.


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11.4.1 Aspects that Can be Changed by ChangeAgents

There are aspects in organisations that can be changed by change agents, whichare structure, technology, physical layout and employees. (Refer to Figure 11.3)

Figure 11.3:Aspects that can be changed by change agents(a) Change of Structure

Structure for an organisation is not something that is absolute. Structure mustbe changed to adapt to the conditions in the environment. Thus, change agentsmight need to change the structure of the organisation if necessary.

The structures of organisation explain the methods of work divisions,

combined and coordinated. Change agents can change one or more of theimportant elements in designing the organisation. For example, wideningthe span-of-control, combining the responsibilities of departments andothers. Rules and procedures can be implemented to increase standards orthe level of decentralisation can be increased to accelerate the process ofdecision making.

Change agents can introduce significant modification in the true design oforganisations. This can include the change of form from a simple structureinto a team-based structure or in other words, changing the form ofdepartmentalisation. Change agents can also take into consideration theredesigning of work and work schedules. Another example of modificationis the reward system for employees. Motivation can be increased by makingimprovements in the employees rewards system. For example, byintroducing the system of bonus based on performance and profit sharing

between organisation and employees.


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ACTIVITY 11.4

Change in the structure of an organisation can increase the moral ofthe staff. Do you agree with this statement? Give your reasons.

(b) Change of TechnologyTechnology is another aspect in the organisation that can be changed ormodified by change agents. Nowadays, changes in the technologicalenvironment involves introduction to tools, equipments or methods thatcan either be new automation or computerisation. Competitive factors orinnovation 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 ofnew technology will be able to assist the organisation in acceleratingproduct development and distribution to customers. It can also help buildthe competitive advantage of the organisation. The use of this technologyalso can ensure the ability and effectiveness of the organisation in theindustry.

ACTIVITY 11.5

The change of a particular technology in an organisation will give riseto substantial risk. What are the factors that must be considered tominimise this risk?

(c) Change of Physical LayoutPhysical layout comprises space and arrangement of tools, equipment andother things in the workplace. This physical layout can influence the workproductivity, efficiency and effectiveness of employees. For example,

removing walls or partitions or creating an open workspace area in theworkplace will facilitate communication among employees. For instance,the management can also change the quantity or types of lighting, level ofheat and cold, level of sound, cleanliness of the workplace and the interiordesign dimensions such as furniture, decorations, and colour.

(d) Change of EmployeesThe final aspect that can be changed by change agents is the employees.Change agents can assist individuals or groups within an organisation towork more efficiently. This involves changing the attitude and behaviour of


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the members of the organisation through communication, making decisionsand solving problems.

ACTIVITY 11.6

Do you agree if a series of developmental training are conducted for theemployees in order to help them gain new skills and exposure towardsnew technologies? Discuss this with your friends.

EXERCISE 11.5

List organisational aspects that can be changed by change agents.

11.5 BARRIERS TO CHANGE

When change is needed, the ones that are involved will be the organisation andits members. Based on past experiences, if a change happens, we will not be ableto avoid facing barriers. In this case, an organisation will face obstacles of change

from two parties: the individual employees and the organisation itself. Below isthe explanation regarding the sources of obstructions from both the parties.

ACTIVITY 11.7

A change frequently has good and bad implications for anorganisation. In your opinion, what is the most difficult barrier to bechanged? Discuss this with your friends.

11.5.1 Individual Barriers

The source of change barrier for individuals comes from basic humancharacteristics itself, such as perception, personality and needs. The following arefive reasons why an individual opposes change.

One of the reasons is due to human habits. Habit is a behaviour performed by anindividual periodically. The inability of individuals to carry out the behaviourknown as habit (for instance, not being able to have coffee before reporting forduty) will result in the individual feeling uneasy or anxious. Individuals feel that


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(c) Facilities and SupportChange 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 paid leaves are forms of facilities andsupport that can be given to employees.

(d) NegotiationChange agents can also deal with change barriers by making valuableexchange in order to reduce barriers. For example, if the barriers come fromsome individuals having power, reward packages can be used asnegotiation substance. Besides that, this reward packages and offers will beable to fulfil the needs of the individuals. Negotiation tactics are mostsuitable when change barriers are caused by powerful individuals in theorganisation.

(e) Manipulation and Co optationManipulation refers to the effort of changing the standpoint of a person.Altering or changing facts to make them interesting, restricting badinformation and creating rumours are some of the ways to obtainemployees agreement. Co-optation is the combination of manipulation andinvolvement. The act of co-optation will try to buy group leaders whocause barriers by providing these leaders important roles in making changedecisions. Advices from these leaders are required, not to find the bestsolution but as confirmation. By buying these leaders and successfullychanging 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 change agents. This is anapplication that uses threat towards the person who is a barrier. Forexample, threat to be moved to another department, losing the chance of apromotion, and a bad performance evaluation are threats imposed if theperson does not want to abide by the changes that will be made.

EXERCISE 11.6

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

SELF-CHECK 11.5

If you are the general manager of an organisation, what are the factorsneeded to overcome barriers towards change?


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WAYS TO MANAGE CHANGE

Change to be made by a particular organisation must be managed as properly aspossible in order to avoid the occurrence of any negative matters especially fromgroups that obstruct change. Change can be managed using several ways:

(a) Liquidation:Refers to getting individuals who are affected by the changesto believe the need for these changes.

(b) Change intervention:Refers to the processes used towards employees andmanagers in order to change their behaviour and work practices.

(c) Freezing: Refers to supporting and strengthening the changes that weresuccessfully carried out in order for it to continue. Table 11.2 explains

several suggestions that can be used by managers when there are groupswho are barriers to change by using the suggestions by Kurt Lewin.

Table 11.2:Things that need to be DoneWhen Employees form Barriers towards ChangeSource:Williams (2000)

Liquidation Changes Freezing Sharing thoughts

with employees on

why change isneeded.

Exhibits sympathytowards the

difficulties faced by

the managers and

employees due to the

change.

Explaining the benefitsthat can be gained from

changes. Identifying respected

individuals in the

organisation to manage

the efforts of changes.

Allowing individuals toaccept the suitable effect

from the changes, for

example while the

employees are busy

carrying out their work.

Upper managementneeds to give support

by providingconsistent messages

and resources.

Let everyone knowabout where and

when changes had

taken place

successfully.

11.7


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Communicationregarding the changes

in a context that is

simple, clear, widelyverbal or written.

If possible, ensure thatno employees are being

terminated to reduce

fear towards change. Offer training to ensure

employees are confident

and capable in

performing the needs of

the new task.

Offer counselling orother services that can

assist the employees

in overcoming thepressure due to the

change.

ACTIVITY 11.8

What is the importance in managing a particular change that wants tobe carried out by a particular organisation? Discuss this with yourfriends.

EXERCISE 11.7

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


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EXERCISE 11.8

Multiple Choice Questions1. Which of the following is NOTa method suggested for managing

change barriers?

A. Education and communicationB. ParticipationC. TestD. Negotiation

2. Which stage in the S-pattern innovation curve indicates that slighteffort will produce obvious progress in the technologyperformance?

A. Initial stage of cycle

B. Intermediate stage of cycle

C. Final stage of cycle

D. Initial and final stage of cycle

3. Which tactic for overcoming barriers to change uses threattowards the employee posing the barrier?

A. Negotiation

B. Manipulation

C. Co-optation

D. Force

4. What does the method of buying group leaders who causebarriers towards change referred to?

A. Negotiation

B. Force

C. Co-optation

D. Involvement

5. Change that is radical in nature, multidimensional andmultilevel refers to which order of change?

A. Fourth

B. Third

C. Second

D. First


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Innovation Caselet

1. What does innovation mean?2. What factors would encourage innovation in an organisation?3. What are some of the barriers to change?

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 humanresources.

It is these creative ideas that assist organisations in discovering newtechnologies.

In order to guarantee the survival of the organisation, changes must be madefrom time to time in order for it to be in line with the changes of the businessenvironment.

Organisation changes must be planned as properly as possible in order for itto give benefit instead of detriment to the organisation.


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Change intervention

Co-optation

Creativity

Encouragement

Freezing

Liquidation

Manipulation

S-pattern innovation

topic 11 innovation and change

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