Chapter 7 Innovation and Change MGMT 3 Chuck

Chapter 7 Innovation and Change MGMT 3 Chuck Williams Copyright © 2011 by Cengage Learning. All rights reserved Designed & Prepared by B-books, Ltd.

Organizational Innovation After reading these sections, you should be able to: 1. explain why innovation matters to companies. 2. discuss the different methods that managers can use to manage innovation in their organizations effectively 2 Copyright © 2011 by Cengage Learning. All rights reserved

Why Innovation Matters Technology Cycles Innovation Streams 1 3 Copyright © 2011 by Cengage Learning. All rights reserved

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 • 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 • first cloning of human embryo 1 4 Copyright © 2011 by Cengage Learning. All rights reserved

Technology Cycles Technology Cycle A cycle that begins with the birth of a new technology and ends when that technology reaches its limits and is replaced by a newer, better technology. 1. 1 5 Copyright © 2011 by Cengage Learning. All rights reserved

S-Curves and Technological Innovation Performance Discontinuity C New Technology B A Effort 1. 1 6 Copyright © 2011 by Cengage Learning. All rights reserved

Beyond the Book A Shift in the DVD Market As the market for movie distribution shifts from discs to digital content, Best Buy has announced that it will partner with Sonic Solutions to stream movies directly to consumers online. Customers would pay once for the DVD and would be able to play it on any device, from television and Blue-ray disc players to handheld media devices and smartphones. Best Buy has also made a deal with Netflix to deliver movies from Netflix on Best Buy’s Insignia Blue-ray disc players. Source: S. Lohr, “Best Buy Prepares for the Post-DVD Era”, The New York Times, 3 November 2009. http: //bits. blogs. nytimes. com/2009/11/03/best-buyprepares-for-the-post-dvd-era/ (accessed 11/4/2009). Copyright © 2011 by Cengage Learning. All rights reserved 7

Innovation Streams Patterns of innovation over time that can create sustainable competitive advantage. Technological Discontinuity 1. 2 When a scientific advance or unique combination of existing technologies that creates a significant breakthrough in performance or function. 8 Copyright © 2011 by Cengage Learning. All rights reserved

Innovation Streams: Technology Cycles over Time Technological Discontinuity (2) Technological Substitution Incremental Change (2) Variation Selection Discontinuous Change (2) Dominant Design (2) Technological Discontinuity (1) Incremental Change (1) 1. 2 Variation Selection Discontinuous Change (1) Dominant Design (2) 9 Copyright © 2011 by Cengage Learning. All rights reserved

Innovation Streams Technological Discontinuities Technological Substitution Discontinuous Change Design Competition Dominant Design 1. 2 10 Copyright © 2011 by Cengage Learning. All rights reserved

Managing Innovation Managing Sources of innovation Managing During Discontinuous Change Managing During Incremental Change 2 11 Copyright © 2011 by Cengage Learning. All rights reserved

Managing Sources of Innovation Creative work environments Workplace cultures in which workers perceive that new ideas are encouraged Flow The psychological state of effortlessness in which you become absorbed in your work and time seems to pass quickly 2. 1 12 Copyright © 2011 by Cengage Learning. All rights reserved

Components of Creative Work Environments Organizational Encouragement Challenging Work Lack of Organiz. Impediments Creative Work Environments Freedom Supervisory Encouragement Work Group Encouragement Flow 2. 1 13 Copyright © 2011 by Cengage Learning. All rights reserved

Managing Innovation During Discontinuous Change Experiential approach to innovation • innovation is occurring within an uncertain environment • the key to innovation is to use: – intuition – flexible options – hands-on experience 2. 2 14 Copyright © 2011 by Cengage Learning. All rights reserved

Experiential Approach to Innovation Design Iterations Testing Parts of Experiential Approach Milestones Multifunctional Teams Powerful Leaders 2. 2 15 Copyright © 2011 by Cengage Learning. All rights reserved

Managing Innovation During Incremental Change • Compression approach to innovation – assumes that innovation is a predictable process that can be planned in steps • Generational change – based on incremental improvements to a dominant design and achieving backward compatibility with older technology 2. 3 16 Copyright © 2011 by Cengage Learning. All rights reserved

Compression Approach to Innovation Planning Supplier Involvement Parts of Compression Approach Shortening Time of Individual Steps Overlapping Steps Multifunctional Teams 2. 3 17 Copyright © 2011 by Cengage Learning. All rights reserved

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 18 Goals Approach 2 Steps Compression Approach Copyright © 2011 by Cengage Learning. All rights reserved

Organizational Change After reading these sections, you should be able to: 3. discuss why not changing can lead to organizational decline. 4. discuss the different methods that managers can use to manage better change as it occurs 19 Copyright © 2011 by Cengage Learning. All rights reserved

Five Stages of Organizational Decline Blinded Inaction Faulty Action Crisis Dissolution 3 20 Copyright © 2011 by Cengage Learning. All rights reserved

Organizational Decline: GM AP Images/Seth Wenig As GM moved through the crisis stage, CEO Rick Wagoner was replaced by Fritz Henderson, pictured, who, unlike Wagoner, acknowledged that bankruptcy was possible. Henderson began an aggressive cost cutting plan to layoff nearly 30, 000 factory workers and 10, 000 white-collar employees and close 17 factories and parts centers. 21 Copyright © 2011 by Cengage Learning. All rights reserved

Managing Change Forces Change Resistance Forces 4 22 Copyright © 2011 by Cengage Learning. All rights reserved

Managing Change Managing resistance to change What not to do when leading change Different change tools and techniques 4 23 Copyright © 2011 by Cengage Learning. All rights reserved

Managing Resistance to Change Unfreezing • Share reasons • Empathize • Communicate Change Intervention • • Benefits Champion Input Timing Security Training Pace Refreezing • Top management support • Reinforce 4. 1 24 Copyright © 2011 by Cengage Learning. All rights reserved

Managing Resistance to Change Education and Communication Participation Negotiation Managerial Support Coercion 4. 1 25 Copyright © 2011 by Cengage Learning. All rights reserved

Errors Made when Leading Change Unfreezing 1. Not establishing a great enough sense of urgency. 2. Not creating a powerful enough guiding coalition. Change 3. Lacking a vision. 4. Undercommunicating the vision by a factor of 10. 5. Not removing obstacles to the new vision. 6. Not systematically planning for and creating short-term wins. Refreezing 7. Declaring victory too soon. 4. 2 8. Not anchoring changes in the corporation’s culture. 26 Copyright © 2011 by Cengage Learning. All rights reserved

Change Tools and Techniques Results-Driven Change General Electric Workout Transition Management Teams Organizational Development 4. 3 27 Copyright © 2011 by Cengage Learning. All rights reserved

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 28 Copyright © 2011 by Cengage Learning. All rights reserved

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 – teams make suggestions – boss must decide on the spot— agree, say no, or ask for more information 4. 3 29 Copyright © 2011 by Cengage Learning. All rights reserved

Beyond the Book Transition Management Team • A team of employees whose full-time job is to manage and coordinate change • Anticipate and manage employee reactions to change • Work with the CEO to… – decide on change projects – select and evaluate people in charge – make sure change projects are complementary 30 Copyright © 2011 by Cengage Learning. All rights reserved

Organizational Development • A philosophy and collection of planned change interventions • Designed to improve an organization’s longterm health and performance • Change Agent – the person formally charged with guiding a change effort – can be an internal or external person 4. 3 31 Copyright © 2011 by Cengage Learning. All rights reserved

Organizational Development General Steps for Organizational Development Interventions 4. 3 1. 2. 3. 4. 5. 6. 7. 8. Entry Startup Assessment and Feedback Action Planning Intervention Evaluation Adoption Separation 32 Copyright © 2011 by Cengage Learning. All rights reserved

Kinds of OD Interventions LARGE SYSTEM INTERVENTIONS Sociotechnical systems Survey feedback SMALL GROUP INTERVENTIONS Team building Unit goal setting PERSON-FOCUSED INTERVENTIONS Counseling/Coaching Training 4. 3 33 Copyright © 2011 by Cengage Learning. All rights reserved