Chapter 11Managing Change and Innovation

• IBM– (1960 – 2000) From hardware, software company– (2000 – present) To a service company (mainly,

consulting)

• If organizations don’t successfully change and innovate, they die

Why Change?

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Innovation & Changing Workplace

• The adoption of a new idea or behavior by an organization

• Change and innovation can come from outside forces

• Managers want to initiate change from the inside

• Disruptive innovation is a goal for global competition

• Trickle-up / reverse innovation: Jeep at China3

Organizational Change

• Change is not easy;

• organizations must take an ambidextrous approach

– Incorporating structures and processes that are appropriate for:

– Creative impulse and for the systematic implementation

• Managers encourage flexibility and freedom to innovate

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Changing Things: New Products and Technologies

• Product Change – a change in the organization’s product or service outputs

• Technology Change – a change in the organization’s production process

• Three innovation strategies: 1. exploration, 2. cooperation, and 3. entrepreneurship

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Three Innovation Strategies

• Creativity – novel ideas that meet perceived needs or offer opportunities

• Idea incubator – a safe harbor where employees can develop ideas and experiment without interference from company bureaucracy or politics– Yahoo Brickhouse Top management support

Exploration

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Characteristics of Creative People and Organizations

The World’s Most Innovative Companies

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CooperationCooperation – (1) Internal Coordination

• Horizontal Linkage Model: – Simultaneously contribute to innovation– Horizontal coordination mechanisms: • Marketing = Research = Manufacturing

– Key to Success: • MANAGEMENT – Planning, organizing, leadership, control• Team Building• Project Manager

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CooperationCooperation – (2) External Coordination

• Includes customers, partners, suppliers• Open innovation – commercialization of ideas

beyond the organization– P&G – Patent– LEGO + Hollywood studios

• Crowdsoucing – Threadless – web 2.0 (open, share, participate)

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Coordination Model for Innovation

• Managers should support entrepreneurship activities and foster idea champions

– Energy and effort is required to promote a new idea

• Sponsors approve and protect ideas when critics challenge the concept

• New-venture teams give free rein to creativity

• Skunkworks are informal, autonomous, secretive groups that focus on breakthrough ideas

• New-venture funds provide resources for new ideas

Innovation Roles

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Four Roles in Organizational Change

Changing People and Culture

• Changes in how employees think; Changes in mind-set

People change = Training and Development (T&D)

Culture change = Organizational Development (OD)

• Large culture change is not easy

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Training and Development

• Training – Frequently used approach to changing people’s mind-sets

• Training and development is emphasized for managers– Behavior and attitudes will influence people and

lead to culture change

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Organizational Development

• Planned, systematic process of change using behavioral science (psychology)

• Addresses three types of problems: Mergers and acquisitions (M&A) Organizational decline and revitalization Conflict management

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OD Activities

• Team-building activities: Enhancing cohesiveness and success of organizational groups and teams

• Survey-feedback activities: an employee questionnaire asking “values, climate, participation, leadership, and group cohesion”

• Large-group interventions: participants from all parts of the organization to discuss problems or opportunities and plan for change

OD Steps

• Unfreezing: – Participants must be made aware of problems and be willing to

change; Diagnosis Identifies work-related problems

• Changing: – when employees learn new skills to be used in the workplace;

Intervention; Implements a plan for training managers and employees; Include team building, survey feedback, intergroup coaching, process-consultation, or symbolic leadership.

• Refreezing. – When individuals acquire new attitudes or values; Rewarded;

Institutionalized in the organizational culture

11.6 OD Approaches to Culture Change

Implementing Change

• Outline the Need for Change– Show the performance gap (disparity) b/w existing &

desired performance levels– Get employees involved in the change as early as

possible; in the planning stage; Empower them!

• Understand the Resistance to Change– Self-Interest– Lack of Understanding and Trust– Uncertainty– Different Assessments and Goals– Job security 21

11.7 Force-Field Analysis

• Change is a result of the competition between driving and restraining forces

–Driving forces – problems or opportunities that provide motivation for change

–Restraining forces – barriers to change

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Force-Field Analysis: A Case

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Tactics for Overcoming Resistance to Change

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Discussion Questions

• Define organizational change and explain the forces driving innovation and change in today’s organizations.

• Identify the three innovation strategies managers implement for changing products and technologies.

• Explain the value of creativity, idea incubators, horizontal linkages, open innovation, idea champions, and new-venture teams for innovation.

• Discuss why changes in people and culture are critical to any change process.• Define organization development (OD) and large-group interventions.• Explain the OD stages of unfreezing, changing, and refreezing.• Identify sources of resistance to change.• Explain force-field analysis and other implementation tactics that can be used

to overcome resistance.

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Discussion Questions (continued)

• Describe how IBM has changed during last two decades.• Explain the major motive of Chrysler to produce Jeep at China in early 2000s, in terms of

change management.

• Explain ambidextrous approach in change management.

• Describe Yahoo’s Brickhouse, from the innovation strategy perspectives.

• Explain briefly key to success of horizontal linkage.

• Describe P&G’s purchase of patents, in terms of innovation strategy.

• Explain how LEGO survived in early 2000s, by innovation strategy.

• Explain briefly crowdsourcing.

• List three features of Web 2.0, in contrast to Web 1.0.

• Describe innovation strategies of Treadless.

• Explain briefly a skunkworks.26