1. Copyright ©2008 by Cengage Learning. All rights reserved 1 Chapter 7 Innovation and Change Designed & Prepared by B-books, Ltd. MGMT Chuck Williams

2. Copyright ©2008 by Cengage Learning. All rights reserved 2 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 effectively manage innovation in their organizations.

3. Copyright ©2008 by Cengage Learning. All rights reserved 3 Why Innovation Matters Technology Cycles Innovation Streams 1 1

4. Copyright ©2008 by Cengage Learning. All rights reserved 4 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 1

5. Copyright ©2008 by Cengage Learning. All rights reserved 5 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

6. Copyright ©2008 by Cengage Learning. All rights reserved 6 S-Curves and Technological Innovation Effort Performance Discontinuity New Technology A B C 1.1

7. Copyright ©2008 by Cengage Learning. All rights reserved 7 Innovation Streams Patterns of innovation over time that can create sustainable competitive advantage. Technological Discontinuity A scientific advance or unique combination of existing technologies that creates a significant breakthrough in performance or function. 1.2

8. Copyright ©2008 by Cengage Learning. All rights reserved 8 Innovation Streams: Technology Cycles over Time Discontinuous Change(1) Discontinuous Change(1) Variation Selection Technological Discontinuity (1) Technological Discontinuity (1) Dominant Design (1) Dominant Design (1) Era of Incremental Change (2) Era of Incremental Change (2) Discontinuous Change(2) Discontinuous Change(2) Variation Selection Technological Discontinuity (2) Technological Discontinuity (2) Dominant Design (2) Dominant Design (2) Technological Substitution Era of Incremental Change (1) Era of Incremental Change (1) 1.2

9. Copyright ©2008 by Cengage Learning. All rights reserved 9 Innovation Streams Discontinuous Change Dominant Design Technological Discontinuities Technological Substitution Design Competition 1.2

10. Copyright ©2008 by Cengage Learning. All rights reserved 10 Managing Innovation Managing Sources of innovation Managing During Discontinuous Change Managing During Incremental Change 2 2

11. Copyright ©2008 by Cengage Learning. All rights reserved 11 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 ©2008 by Cengage Learning. All rights reserved 12 Components of Creative Work Environments Creative Work Environments Challenging Work Work Group Encouragement Lack of Organiz. Impediments Supervisory Encouragement Organizational Encouragement Freedom Flow 2.1

13. Copyright ©2008 by Cengage Learning. All rights reserved 13 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 ©2008 by Cengage Learning. All rights reserved 14 Experiential Approach to Innovation Parts of Experiential Approach MilestonesMilestones Design Iterations TestingTesting Multifunctional Teams Powerful Leaders 2.2

15. Copyright ©2008 by Cengage Learning. All rights reserved 15 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 ©2008 by Cengage Learning. All rights reserved 16 Compression Approach to Innovation Parts of Compression Approach Shortening Time of Individual Steps PlanningPlanning Supplier Involvement Overlapping Steps Multifunctional Teams 2.3

17. Copyright ©2008 by Cengage Learning. All rights reserved 17 Experimental Approach Compression Approach Environment Goals Approach Steps Uncertain discontinuous change: technological substitution and design competition Certain incremental change established technology (i.e., dominant design) Compress time/steps needed to bring about small improvements Planning Supplier involvement Shorten time of steps Overlapping steps Multifunctional teams Build something new, different, and better Design iterations Testing Milestones Multifunctional teams Powerful leaders Managing Innovation Speed Lower costs Incremental improvements in performance of dominant design Speed Performance Improvements New dominant design 2 2

18. Copyright ©2008 by Cengage Learning. All rights reserved 18 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 better manage change as it occurs.

19. Copyright ©2008 by Cengage Learning. All rights reserved 19 Five Stages of Organizational Decline Blinded Inaction Faulty Action Crisis Dissolution 3 3

20. Copyright ©2008 by Cengage Learning. All rights reserved 20 Circuit City in Retrenchment Circuit City had only one profitable quarter in 2007- 2008. In November 2008, it had $2.3 billion in debts with only $3.4 billion in assets. Former CEO Philip Schoonover moved to reduce 3,400 higher-paid management positions in March 2007. He was ousted by Circuit City’s board in September 2008. Circuit City filed for Chapter 11 in November 2008 and aims to liquidate 155 U.S. stores and lay off 20% of its workforce in an effort to regroup. Source: K. Hudson, “Circuit City Enters New Turnaround Stage,” The Wall Street Journal, 31 May 2007, B5; M. Bustillo, “Circuit City Seeks Haven In Bankruptcy Protection,” The Wall Street Journal, 11 November 2008.. Beyond the Book

21. Copyright ©2008 by Cengage Learning. All rights reserved 21 Managing Change Resistance Forces Change Forces ChangeChange 4 4

22. Copyright ©2008 by Cengage Learning. All rights reserved 22 Managing Change Managing resistance to change Managing resistance to change What not to do when leading change What not to do when leading change Different change tools and techniques 4 4

23. Copyright ©2008 by Cengage Learning. All rights reserved 23 Managing Resistance to Change Unfreezing Change Intervention Refreezing Share reasons Empathize Communicate Benefits Champion Input Timing Security Training Pace Top management support Reinforce 4.1

24. Copyright ©2008 by Cengage Learning. All rights reserved 24 Managing Resistance to Change Education and Communication Participation Negotiation Managerial Support Coercion 4.1

25. Copyright ©2008 by Cengage Learning. All rights reserved 25 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. 8. Not anchoring changes in the corporation’s culture. 4.2

26. Copyright ©2008 by Cengage Learning. All rights reserved 26 Change Tools and Techniques Results-Driven Change General Electric Workout Transition Management Teams Organizational Development 4.3

27. Copyright ©2008 by Cengage Learning. All rights reserved 27 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 6.It takes few resources to get results-driven change started 4.3

28. Copyright ©2008 by Cengage Learning. All rights reserved 28 General Electric Workout 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 Day 4.3

29. Copyright ©2008 by Cengage Learning. All rights reserved 29 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 Beyond the Book

30. Copyright ©2008 by Cengage Learning. All rights reserved 30 Organizational Development A philosophy and collection of planned change interventions Designed to ensure an organization’s long- term 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 ©2008 by Cengage Learning. All rights reserved 31 Organizational Development 1.Entry 2.Startup 3.Assessment and Feedback 4.Action Planning 5.Intervention 6.Evaluation 7.Adoption 8.Separation General Steps for Organizational Development Interventions 4.3

32. Copyright ©2008 by Cengage Learning. All rights reserved 32 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