Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 1 CHAPTER ELEVEN Innovation and Change

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 2 What Would You Do? As the director of glass and glass ceramics at Corning… v It’s your job to maintain innovation--the key to Corning’s strategy v You have to find the right balance between creativity and keeping Corning happy v What should you do to continue to encourage creativity? How do you decide which ideas deserve R&D time and Corning’s dollars?

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 3 Organizational Innovation After reading the next two 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.

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 4 Why Innovation Matters Technology Cycles Innovation Streams 1

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 5 Technology Cycles Effort Performance Discontinuity New Technology A B C Adapted from Exhibit

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 6 Innovation Streams Adapted from Exhibit 9.3 Era of Ferment (1) Era of Ferment (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) Era of Ferment (2) Era of Ferment (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

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 7 Technological Innovation Since v airplane, plastic, air conditioner v mammogram, zipper, sonar v talking movies, penicillin, jet engine v radar, helicopter, computer v atomic bomb, bikini, transistor v DNA, oral contraceptive, Tylenol v video recorder, handheld calculator, computer mouse v compact disc, gene splicing, laser printer v MS-DOS, space shuttle, CD-ROM v taxol, Pentium processor, Java 2001-Today  mapping of human genome, first cloning of human embryo

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 8 Managing Innovation Managing Sources of Innovation Managing During Discontinuous Change Managing During Incremental Change 2

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 9 Managing Sources of Innovation v Creative work environments v workplace cultures in which workers perceive that new ideas are encouraged v Flow v the psychological state of effortlessness in which you become absorbed in your work 2.1

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 10 Components of Creative Work Environments Adapted from Exhibit 9.4 Creative Work Environments Challenging Work Work Group Encouragement Organizational Impediments Supervisory Encouragement Organizational Encouragement Valuable Resources Flo w 2.1

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 11 Managing Innovation During Discontinuous Change v Discontinuous Change v technological discontinuity creates a significant breakthrough v Experiential approach to innovation v the key to innovation is to use intuition, flexible options, and hands-on experience v innovation is occurring within an uncertain environment 2.2

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 12 Managing Innovation During Discontinuous Change 2.2  Highly uncertain environment Era of ferment—technological substitution and design competition  Highly uncertain environment Era of ferment—technological substitution and design competition  Goals Speed Improvements in performance New dominant design  Approach Build something new, different, and better

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 13 Experiential Approach to Innovation Parts of Experiential Approach MilestonesMilestones Design Iterations TestingTesting Multifunctional Teams Powerful Leaders 2.2

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 14 Managing Innovation During Incremental Change v Compression approach to innovation v assumes that innovation is a predictable process that can be planned in steps v Generational change v based on incremental improvements to a dominant technological design and achieving backward compatibility with older technology 2.3

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 15 Managing Innovation During Incremental Change  Certain environment Era of incremental change—established technology  Certain environment Era of incremental change—established technology  Goals Speed Lower costs Incremental improvements in performance  Approach Compress time and steps needed to bring about small improvements 2.3

Copyright ©2006 by South-Western, a division of Thomson 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

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 17 Organizational Change After reading the next section, you should be able to: 3. discuss why change occurs and why it matters.

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 18 Resistance to Change Peer Pressure Self-InterestSelf-InterestHabitHabitFearFear Resistance to Change Bureaucratic Inertia

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 19 Managing Change Managing resistance to change Managing resistance to change Different change tools and techniques What not to do when leading Change What not to do when leading Change 3

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 20 Managing Resistance to Change Unfreezing Change Refreezing Share reasons Empathize Communicate Benefits Champion Input Timing Security Training Pace Top management support Reinforce Adapted from Exhibit

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 21 Reducing Resistance to Change Negotiation and Agreement Education and Communication Coercion Participation and Involvement Resistance to Organizational Change Facilitation and Support Manipulation and Co-optation

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 22 Change Tools and Techniques Results-Driven Change General Electric Workout Transition Management Teams Organizational Development 3.2

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 23 Results-Driven Change Adapted from Exhibit 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 3.2

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 24 General Electric Workout 1. Boss sets agenda and identifies targets, then leaves 2. Outside facilitator works with sub-groups, who debate solutions 3. “Town Meeting” v subgroups make suggestions v boss must decide on the spot Phase 3.2

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 25 Transition Management Team v A team of employees whose full- time job is managing change v Anticipate and manage employee reactions to change v Work with the CEO to… v decide on change projects v select and evaluate people in charge v make sure change projects are complementary 3.2

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 26 Transition Management Team 1. Establish a context for change and provide guidance. 2. Stimulate conversation. 3. Provide appropriate resources. 4. Coordinate and align projects. 5. Ensure congruence of messages, activities, policies, and behaviors. 6. Provide opportunities for joint creation. 7. Anticipate, identify, and address people problems. 8. Prepare the critical mass. Primary Responsibilities of TMT Adapted from Exhibit

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 27 Organizational Development v A philosophy and collection of planned change interventions v Designed to ensure an organization’s long-term survival v Change Agent v the person formally charged with guiding a change effort v can be internal or external person 3.2

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 28 Organizational Development Adapted from Exhibit Entry 2. Startup 3. Assessment and Feedback 4. Action Planning 5. Intervention 6. Evaluation 7. Adoption 8. Separation General Steps for Organizational Development Interventions 3.2

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 29 Organizational Development Adapted from Exhibit 9.9 Types of OD Interventions Large System v Sociotechnical Systems v Survey Feedback Small Group v Team Building v Unit Goal Setting Person-Focused v Counseling/Coaching v Training 3.2

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 30 What Not to Do When Leading Change Adapted from Exhibit 9.10 UNFREEZING REFREEZING CHANGE 1.Not establishing a great enough sense of urgency 2.Not creating a powerful enough guiding coalition 3.Lacking a vision 4.Undercommunicating the vision 5.Not removing obstacles 6.Not planning for and creating short-term wins 7.Declaring victory too soon 8.Not anchoring changes in the corporation’s culture 3.3

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 31 What Really Works Change the Work Setting or Change the People? Changing the Work Setting 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success 55% Changing the People 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success57% Changing Individual Behavior & Organizational Performance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success76%