Chapter Eleven
Innovation and Change
Thomson Learning
© 2004
11-1
Forces Driving the Need for Major
Organizational Change
Global Changes, Competition and Markets
• Technological Change
• International Economic Integration
• Maturation of Markets in Developed Countries
• Fall of Communist and Socialist Regimes
More Threats
More Opportunities
More domestic competition
Increased Speed
International competition
Bigger markets
Fewer barriers
More international markets
More Large-Scale Changes in Organizations
Structure change
Strategic change
Culture change
Knowledge management, enterprise
resource planning
Quality programs
Source: Based on John P. Kotter, The New Rules:
How to Succeed in Today’s Post-Corporate World
(New York: The Free Press, 1995).
Mergers, joint ventures, consortia
Horizontal organizing, teams, networks
New technologies, products
New business processes
E-business
Learning organizations
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11-2
Change: Content vs. Process
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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
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Thomson Learning
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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
11-3
Four Types of Change
Content
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Technology
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Products and Services
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Changes in outputs
Strategy and Structure
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Changes in production process
Administrative changes
Culture
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Changes in values, attitudes, behaviors
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11-4
Sequence of Elements for
Successful Change Process
Environment
Suppliers
Professional
Associations
Consultants
Research
literature
Internal
Creativity and
Inventions
Organization
1. Ideas
3. Adoption
Customers
Competition
Legislation
Regulation
Labor force
4.Implementation
2. Needs
5. Resources
Perceived
Problems or
Opportunities
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11-5
Organizational Response to
Environmental Change
A – Change in environment
B – Incremental adjustment
C – Radical adjustment
A
B C
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11-6
Incremental vs. Radical Change
Incremental Change
Radical Change
Continuous
progression
Paradigm-breaking
burst
Affect
organizational
part
Transform entire
organization
Through normal
structure and
management
processes
Create new structure
and management
Technology
improvements
Breakthrough
technology
Product
improvement
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 University
Press, 1992), 66-111; and Harry S. Dent, Jr., “Growth through New
Product Development,” Small Business Reports (November 1990): 30-40.
Thomson Learning
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11-7
Dual-Core Approach to
Organization Change
Type of Innovation Desired
Administrative
Structure
Administrative
Core
Technical
Core
Direction of Change:
Top-Down
Examples of Change:
Strategy
Downsizing
Structure
Best Organizational
Design for Change:
Technology
Mechanistic
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Bottom-Up
Production
techniques
Workflow
Organic
11-8
Dunphy & Stace Model
Incremental
Transformative
Change Strategies Change Strategies
Collaborative
Models
Coercive
Models
Type 1
Participative
Evolution
Type 3
Forced
Evolution
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Type 2
Charismatic
Transformation
Type 4
Dictatorial
Transformation
11-9
Exploitation vs. Exploration
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Exploitation:
Ongoing execution
of learned successful
behaviors – business
as usual
Exploration: Search
for new ideas and
behaviors to
revitalize business
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11-10
Barriers to Innovation in Large
Organizations
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Top Management
Isolation
Unfamiliar with
latest technology /
out of touch with
markets
More likely to try to
acquire innovation
(finance issues) than
develop internally Thomson Learning
© 2004
11-11
Barriers to Innovation in Large
Organizations
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Intolerance of
Diversity
Typical
entrepreneurial
personality is not a
team-player
Impatient; dislikes
rules, procedures
Poor fit with culture
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11-12
Barriers to Innovation in Large
Organizations
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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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11-13
Barriers to Innovation in Large
Organizations
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Excessive
Bureaucracy
Having to go
through channels,
paperwork, capital
appropriations, etc.
etc….
Loss of spontaneity
Loss of momentum
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11-14
Barriers to Innovation in Large
Organizations
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Inappropriate
Incentives
Reward stable
performance instead
of risk taking
behavior
Don’t penalize
missed opportunities
Inability to
adequately
compensate
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11-15
Barriers to Innovation in Large
Organizations
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Excessive Rationality
Management is
primarily about
control / order
Innovation is chaotic
Upsets plans
Difficult to forecast
Variation reducing
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11-16
Division of Labor Between Departments
to Achieve Changes in Technology
General
Manager
Creative
Department
(Organic Structure)
Using
Department
(Mechanistic Structure)
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11-17
Horizontal Linkage Model for New
Product Innovations
Environment
Organization
Environment
General
Manager
Technical
Developments
Linkage
R&D
Department
Linkage
Marketing
Department
Linkage
Customer
Needs
Production
Department
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11-18
Burgelman’s Model
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11-19
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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11-20
The Structural Context
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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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11-21
Strategic Context
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Separate evaluation
system from
structural context
More open-ended in
terms of results &
payback
Longer time frame
Strong influence
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11-22
Barriers to Change
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Excessive focus on costs
Failure to perceive benefits
Lack of coordination and cooperation
Uncertainty avoidance
Fear of loss
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11-23
Daft’s Techniques for Change
Implementation
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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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11-24
Kotter’s Eight Steps
1. Establishing a Sense
of Urgency
2. Forming a Powerful
Guiding Coalition
3. Creating a Vision
4. Communicating the
Vision
5. 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
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© 2004
11-25