Chapter 7
Innovation and
Change
© 2015 Cengage Learning
MGMT7
Organizational Innovation
• Organizational Innovation
o The successful implementation of creative ideas in an organization.
• Creativity
o the production of novel and useful ideas.
3
Why Innovation Matters
1900-1910
• airplane, plastic, air
conditioner
1911-1920
• mammogram, zipper, sonar
1921-1930
• talking movies, penicillin, jet
engine
1931-1940
• radar, helicopter, computer
1941-1950
• atomic bomb, bikini,
transistor
1951-1960
• DNA, oral contraceptive,
Tylenol
1961-1970
• video recorder, handheld
calculator, computer mouse
1971-1980
• compact disc, gene splicing,
laser printer
1981-1990
• MS-DOS, space shuttle,
CD-ROM
1991-2000
• taxol, Pentium processor, Java
2001-Today
• mapping of human genome,
first cloning of human embryo
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Technology Cycles
• Begins with the birth of a new technology…
• …ends when that technology reaches limit and
dies.
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S-Curves and Technological Innovation
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Technological Discontinuity
A scientific advance or unique
combination of existing technologies
that creates a significant breakthrough
in performance or function.
Innovation Streams
• Patterns of innovation over time that
can create sustainable competitive
advantage.
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Innovation Streams
Discontinuous Change
Characterized by technological
substitution and design competition
Dominant Design
The new accepted market standard for
technology
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Innovation Streams
Technological
Discontinuities
Discontinuous
Change
(Era of Ferment)
Technological
Substitution
Design
Competition
Dominant Design
1.2
Critical Mass
Solves a pratical problem
Independent Standards Body
Copyright ©2008 by Cengage Learning. All rights reserved
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Innovation Streams: Technology Cycles over Time
© 2015 Cengage Learning
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Innovation Streams
• Technological innovation can enable a
company to sustain its competitive
advantage, but it can also quickly turn a
company’s competitive advantage into a
competitive disadvantage.
o Ex. Kodak
• Companies that want to sustain a
competitive advantage must understand
and protect themselves from the strategic
threats of innovation.
• Over the long run, the best way for a
company to do that is to create a stream of
its own innovative ideas and products, year
after year.
Emergence of Dominant
Design
• There are winners and losers
o technological lockout
• Signals a shift from design experimentation and
competition to incremental change
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Managing Innovation
Managing
Sources of
Innovation
Managing During
Discontinuous
Change
Managing During
Incremental
Change
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Managing Sources of Innovation
• Creativity is the production of
novel and useful ideas.
o innovation begins with creativity.
• Creative work environments
o Workplace cultures in which workers
perceive that new ideas are
encouraged
• Flow
o The psychological state of effortlessness
in which you become absorbed in your
work and time seems to pass quickly
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Components of Creative Work Enviroments
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Managing Sources of
Innovation
• Experiential Approach
o Managing Innovation during
Discontinuous Change
• Compression Approach
o Managing Innovation during Incremental
Change
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Managing Innovation
During Discontinuous Change
Experiential approach to
innovation
• innovation is occurring within
an uncertain environment
• the key to fast product
innovation is to use:
o intuition
o flexible options
o hands-on experience
2.2
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Experiential Approach to
Innovation
Design Iterations
P:roduct Prototype
Aspects of
Experiential
Approach
Testing
Milestones
2.2
Multifunctional Teams
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Experiential Approach
• Design iteration
o a cycle of repetition in which a company tests a prototype of
a new product or service, improves on the design, and then
builds and tests the improved product or service prototype.
• Product prototype
o a full-scale working model that is being tested for design,
function, and reliability
• Testing
o a systematic comparison of different product designs or design
iterations
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Experiential Approach
• Milestones
o formal project review points used to assess
progress and performance
• Multifunctional teams
o accelerate learning and understanding by
mixing and integrating technical, marketing, and
manufacturing activities
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Expanding Sources of
Innovation
Companies can avoid
internal impediments to
creativity by looking
outside the organization.
Customers are an
important source of
innovation.
Sportime International
followed a customer idea
and created Hands-On
basketballs for children
who need help learning
how to shoot.
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Managing Innovation During
IncrementalChange(Compression Approach)
• Periods of incremental change
o The focus is on systematically improving the
performance and lowering the cost of the
dominant technological design.
• Compression approach to
innovation
o Assumes that innovation is a predictable process that can be
planned in steps and the time it takes to compress the steps
can speed up the innovation.
o Most planning for incremental innovation is based on the
idea of generational change.
• Occurs when incremental improvements are made to a
dominant technological design such that the improved
version of the technology is fully backward compatible
with the older version.
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Compression Approach
•
•
•
•
Generational change
Supplier involvement
Shorten the time of individual steps
Overlapping steps
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Compression Approach to Innovation
• Planning for incremental innovation,-the goal is to
squeeze or compress development time as much as
possible, and the general strategy is to create a
series of planned steps to accomplish that goal
• Generational change-based on incremental
improvements to a dominant technological design
and achieving backward compatibility with older
technology
• Supplier involvement-delegating some of the
preplanned steps in the innovation process to outside
suppliers reduces the amount of work that internal
development teams must do
• Shorten the time of individual steps in the innovation
process. One of the most common ways to do that is
through computer-aided design (CAD).
• Overlapping steps shortens the development process
by reducing the delays or waiting time between 26
steps.
Managing Innovation
Experimental
Approach
Environment
Uncertain discontinuous
change:
technological substitution
and design competition
Certain incremental change
established technology
(i.e., dominant design)
Speed
Performance Improvements
New dominant design
Speed
Lower costs
Incremental improvements
in performance of dominant
design
Build something new,
different, and better
Compress time/steps needed
to bring about small
improvements
Design iterations
Testing
Milestones
Multifunctional teams
Powerful leaders
Planning
Supplier involvement
Shorten time of steps
Overlapping steps
Multifunctional teams
Goals
Approach
Steps
Compression
Approach
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The Risk of Not Changing
• Organizational Decline
o Occurs when companies don’t anticipate,
recognize, neutralize, or adapt to the internal or
external pressures that threaten their survival.
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Five Stages of Organizational Decline
Blinded
Inaction
Faulty
Action
Crisis
Dissolution
3
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Five Stages of Organizational Decline
• In the blinded stage, decline begins because key
managers don’t recognize the internal or external
changes that will harm their organizations.
• In the inaction stage, as organizational performance
problems become more visible, management may
recognize the need to change but still take no action.
• In the faulty action stage, due to rising costs and
decreasing profits and market share, management will
announce “belt-tightening” plans designed to cut
costs, increase efficiency, and restore profits.
• . In the crisis stage, bankruptcy or dissolution (i.e.,
breaking up and selling the different parts of the
company) is likely to occur unless the company
completely reorganizes the way it does business.
• In the dissolution stage, after failing to make the
changes needed to sustain the organization, the
company is dissolved through bankruptcy proceedings
or by selling assets in order to pay suppliers, banks, and
creditors.
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Managing Change
Managing
resistance
to change
What not
to do when
leading change
Different change
tools and
techniques
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Resistance to Change
Change Forces
Change
Resistance Forces
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Forces
• Change forces
o lead to differences in the form, quality, or condition of an organization
over time
• Resistance forces
o caused by self-interest, misunderstanding, and distrust
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Managing Change
• Resistance to change
o Self-interest
• Fear that change will cost or deprive them.
o Misunderstanding and distrust
• Don’t understand change or distrust people behind
the change.
o Low tolerance for change
• Threatened by uncertainty associated with
change.
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Lewin’s Managing Resistance to Change
Unfreezing
• Share reasons
• Empathize
• Communicate
Change
Intervention
Refreezing
• Benefits
• Top management
• Champion
support
• Create
• Reinforce
opportunity for
feedback
• Time it right
• Offer security
• Educate
• Don’t rush
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Managing Resistance to
Change
• Educate employees
• Communication change-relate d information
• Have those affected by change participate in
planning and implementing
• Let employees discuss and agree on who will do
what after change
• Coercion
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Mistakes Managers Make
Not establishing a great enough sense of urgency
Not creating a powerful enough coalition
Lacking a vision
Undercommunicating the vision by a factor of 10
Not removing obstacles to the new vision
Not systematically planning for and creating shortterm wins
• Declaring victory too soon
• Not anchoring changes in the corporation’s culture
•
•
•
•
•
•
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Change Tools and
Techniques
Results-Driven Change
General Electric Workout
Transition Management Teams
4.3
Organizational Development
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Results-Driven Change
1. Create measurable short-term goals to improve performance
2. Use action steps only if likely to improve performance
3. Stress the importance of immediate improvements
4. Consultants and staffers should help managers achieve
quick improvements in performance
5. Test action steps to see if they yield improvements
4.3
6. It takes few resources to get results-driven change started
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Change Tools and
Techniques
Results-driven change
• supplants emphasis on activity with focus on quickly
measuring and improving results
General Electric Workout
• three-day meeting that generates solutions to
specific business problems
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General Electric Workout
Day
1. Boss discusses agenda and targets specific
business problems, then leaves
2. Outside facilitator works with
teams, who debate solutions
3. “Town Meeting”
o teams make suggestions
o boss must decide on the spot—
agree, say no, or ask for more information
4.3
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Organizational Development
4.3
• A philosophy and collection of planned change
interventions designed to ensure organizations
long-term health and performance.
• Organizational development takes a long-range
approach to change, assumes that top
management support is necessary for change to
succeed, creates change by educating workers
and managers to change ideas, beliefs, and
behaviors so problems can be solved in new
ways, and emphasizes employee participation in
diagnosing, solving, and evaluating problems.
• Change Agent
o the person formally charged with guiding a change effort
o can be an internal or external person
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Interventions
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Interventions
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Holden Outerwear
<click screenshot for video>
© 2015 Cengage Learning
1. Identify the type of
change that
Holden’s leaders are
managing on a
daily basis.
2. What resistance has
Holden
encountered while
introducing
innovative garment
designs? How was it
able to overcome
that resistance?