Chapter 7 Innovation and Change 2015 Cengage Learning

Chapter 7 Innovation and Change © 2015 Cengage Learning MGMT 7

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 4

Technology Cycles • Begins with the birth of a new technology… • …ends when that technology reaches limit and dies. © 2015 Cengage Learning 7 -1

S-Curves and Technological Innovation © 2015 Cengage Learning 7 -1

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. 8

Innovation Streams Discontinuous Change Characterized by technological substitution and design competition Dominant Design The new accepted market standard for technology 9

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 10

Innovation Streams: Technology Cycles over Time © 2015 Cengage Learning 7 -1

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 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 7 -1 © 2015 Cengage Learning

Managing Innovation Managing Sources of Innovation Managing During Discontinuous Change Managing During Incremental Change 14

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 15

Components of Creative Work Enviroments © 2015 Cengage Learning 7 -2

Managing Sources of Innovation • Experiential Approach o Managing Innovation during Discontinuous Change • Compression Approach o Managing Innovation during Incremental Change 18

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 19

Experiential Approach to Innovation Design Iterations P: roduct Prototype Aspects of Experiential Approach Testing Milestones 2. 2 Multifunctional Teams 20

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 © 2015 Cengage Learning 7 -2

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 © 2015 Cengage Learning 7 -2

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. 23

Managing Innovation During Incremental. Change(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. 24

Compression Approach • • Generational change Supplier involvement Shorten the time of individual steps Overlapping steps © 2015 Cengage Learning 7 -2

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 steps. 26

Managing Innovation Experimental Approach Environment Goals Approach Steps Compression Approach 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 27

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. 28

Five Stages of Organizational Decline Blinded Inaction Faulty Action Crisis Dissolution 3 29

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 “belttightening” 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. 30

Managing Change Managing resistance to change What not to do when leading change Different change tools and techniques 31

Resistance to Change Forces Change Resistance Forces 32

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 7 -4 © 2015 Cengage Learning

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. 34

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 35

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 7 -4 © 2015 Cengage Learning

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 short-term wins • Declaring victory too soon • Not anchoring changes in the corporation’s culture © 2015 Cengage Learning 7 -4

Change Tools and Techniques Results-Driven Change General Electric Workout Transition Management Teams 4. 3 Organizational Development 38

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 39

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 © 2015 Cengage Learning 7 -4

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 41

Organizational Development 4. 3 • A philosophy and collection of planned change interventions designed to ensure organizations longterm 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 42

Interventions © 2015 Cengage Learning 7 -4

Interventions © 2015 Cengage Learning 7 -4

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?