Chapter 7: Innovation and Change

Shorten the Time of Individual Steps

1. A common way to accomplish this is through computer-aided design (CAD). 2. CAD speeds up the design process by allowing designers and engineers to make and test design changes using computer models rather than physically testing expensive prototypes. 3. CAD also speeds innovation by making it easy to see how design changes affect engineering, purchasing, and production.

Technology Cycle

1. 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, substantially better technology. 2. Occurs whenever there are major advances in the knowledge, tools, and techniques of a field.

Product Prototype (Design Iteration)

1. A full-scale, working model that is being tested for design, function, and reliability. 2. The more you build, the more likely you are to learn what works and what doesn't.

Flow

1. A psychological state of effortlessness, in which you become completely absorbed in what you are doing, and time seems to pass quickly. 2. Who you are and what you are doing become one. 3. Removing distractions assists in creating an environment conducive to flow. 4. Should achieve a balance between skills and task challenge.

Managing Sources of Innovation

1. A starting point for managing innovation is to manage the sources of innovation, that is, where new ideas come from. 2. Managers can jump start innovation by building creative work environments.

Dissolution Stage

1. After failing to make the changes needed to sustain the organization, the company is dissolved through bankruptcy proceedings or by selling assets to pay suppliers, banks, and creditors. 2. Organizational decline is reversible in every stage except this one.

Innovation Streams: Technology Cycles over Time (Chart)

1. An innovation stream begins with a technological discontinuity. 2. Then there's a discontinuous change. 3. Next is the emergence of a dominant design. 4. Last, comes incremental change. This focus on improving the dominant design continues until the next technological discontinuity occurs.

The Experiential Approach to Innovation

1. Assumes a highly uncertain environment and uses intuition, flexible options, and hands-on experience to reduce uncertainty and accelerate learning and understanding. 2. Goal = Establishment of a dominant design.

The Compression Approach to Innovation

1. Assumes that incremental innovation can be planned using a series of steps and that compressing those steps can speed innovation. 2. Manages innovation in more certain environments 3. Goal = Lower costs, incremental improvements in the performance of the existing dominant design

Crisis Stage

1. Bankruptcy or dissolution is likely to occur unless the company completely reorganizes the way it does business. 2. At this point, however, companies typically lack the resources to fully change how they run their businesses.

The 5 Stages of Organizational Decline

1. Blinded 2. Inaction 3. Faulty action 4. Crisis 5. Dissolution

Technological Innovation

1. Can enable competitors to duplicate the benefits obtained from a company's distinctive advantage. 2. Can quickly turn a company's competitive advantage into a competitive disadvantage.

6 Components of Creative Work Environments

1. Challenging Work 2. Organizational Encouragement 3. Supervisory Encouragement 4. Workgroup Encouragement 5. Freedom 6. A Lack of Organizational Impediments

Design Competition (Discontinuous Change)

1. Competition between old and new technologies to establish a new technological standard or dominant design. 2. Companies are often reluctant to switch to a different technology during this. 3. During this, the older technology usually improves significantly in response to the competitive threat from the new technologies.

How does dominant design emerge?

1. Critical Mass- meaning that a particular technology can become the dominant design simply because most people use it. 2. If it solves a practical problem. 3. Through independent standard bodies.

Errors Managers Make in the Refreezing Stage

1. Declaring victory too soon. 2. Not anchoring changes in the corporation's culture.

Supplier Involvement

1. Delegating some of the preplanned steps in the innovation process to outside suppliers reduces the amount of work that internal development teams must do. 2. Provide an alternative source of ideas and expertise that can lead to better designs.

The 5 Aspects of the Experiential Approach to Innovation

1. Design Iteration 2. Testing 3. Milestones 4. Multifunctional Teams 5. Powerful Leaders

Managing Innovation (Lecture)

1. During discontinuous change, companies must find a way to anticipate and survive technological changes 2. Companies must also manage incremental change and innovation

Methods Used to Manage Resistance to Change

1. Education and Communication: -Educate employees about the need for change and communicate change information to them. 2. Participation: -Have those affected by the change participate in planning and implementing the change process. 3. Negotiation -Allow employees to discuss and agree on who will do what after a change occurs. 4. Top-Management Support: -Change efforts need significant managerial support. 5. Coercion -Should only be used when a crisis exists or when all other attempts to reduce resistance to change have failed.

General Steps for Organizational Development Interventions (Lecture)

1. Entry 2. Startup 3. Assessment & Feedback 4. Action Planning 5. Intervention 6. Evaluation 7. Adoption 8. Separation

Forces for Change (Lecture)

1. External forces: -Marketplace -Governmental laws and regulations -Technology -Labor market -Economic changes 2. Internal Forces: -Changes in organizational strategy -Workforce changes -New equipment -Employee attitudes

Managers must be equally good at managing innovation in 2 very different circumstances

1. First, during discontinuous change, companies must find a way to anticipate and survive the technological changes that can suddenly transform industry leaders into losers. 2. Second, after a new dominant design emerges following discontinuous change, companies must manage the very different process of incremental improvement and innovation.

Milestones

1. Formal project review points used to assess progress and performance. 2. Provide structure to the general chaos that follows technological discontinuities.

Planning for Incremental Innovation

1. Goal = To squeeze or compress development time as much as possible 2. General Strategy = To create a series of planned steps to accomplish that goal. 3. Helps avoid unnecessary steps and enables developers to sequence steps in the right order to avoid wasted time and delays between steps. 4. Reduces misunderstandings and improves coordination. 5. Based on the idea of Generational Change

Sources of Individual Resistance to Change (Lecture)

1. Habit 2. Security 3. Economic Factors 4. Fear of the Unknown 5. Selective Information Processing

Why is dominant design a key event in an innovation stream?

1. Indicates that there are winners and losers. Companies that bet on the now dominant design usually prosper. 2. Signals a shift from design experimentation and competition to incremental change.

Errors Managers Make in the Change Stage

1. Lack of vision 2. Undercommunicating the vision 3. Not removing obstacles to the new vision. 4. Lack of short term wins.

Nova Scotia Fishing Example Lessons (LECTURE ONLY)

1. Learning requires exploration -Suboptimal behavior key to eventual success 2. Efficient exploitation of existing knowledge insufficient: -Micro-diversity key to wide range of ideas 3. Learning process that allows knowledge to be created and updated drives success: -Social relationships key to transmission of ideas/methods -No optimal strategy - goal is to develop evolving spectrum of compatible strategies

To successfully manage innovation streams, companies need to be good at 3 things

1. Managing Sources of Innovation 2. Managing Innovation During Discontinuous Change 3. Managing innovation during incremental change

Mistakes Managers Make in the Unfreezing Stage

1. Not establishing a great enough sense of urgency. 2. Not creating a powerful enough coalition.

Organizational Development

1. Philosophy and collection of planned change interventions 2. Designed to improve an organization's long-term health and performance

The 5 Aspects of the Compression Approach to Innovation

1. Planning for Incremental Innovation and Generational Change 2. Supplier Involvement 3. Shortening the time of Individual Steps 4. Overlapping Steps 5. Multifunctional Teams

Powerful Leaders

1. Provide the vision, discipline, and motivation to keep the innovation process focused, on time, and on target. 2. Are able to get resources when they are needed, are typically more experienced, have high status in the company, and are held directly responsible for the product's success or failure.

Adaptive Advantages of Complex Adaptive Systems Theory (LECTURE ONLY)

1. Robustness 2. Error Tolerance 3. Self-Repair 4. Ease of Implementation 5. Simple Agents

"White-Water Rapids" Simile (LECTURE ONLY)

1. Stability and predictability don't exist 2. Face constant change, bordering on chaos 3. Requires flexibility, quick response to changing conditions, comfort with ambiguity

Testing

1. The systematic comparison of different product designs or design iterations. 2. Uncovers errors early in the design process when they are easiest to correct. 3. Accelerates learning and understanding by forcing engineers and product designers to examine hard data about porduct performance.

Challenging Work

1. Work is challenging when it requires effort, demands attention and focus, and is perceived as important to others in the organization. 2. Challenging work promotes creativity because it creates a rewarding psychological experience known as "Flow."

Multifunctional Teams

1. Work teams composed of people from different departments. 2. Accelerate learning and understanding by mixing and intergrating technical, marketing, and manufacturing activites.

Managing Resistance to Change

A basic process of unfreezing, change intervention, and refreezing.

Design Iteration

A cycle of repetition in which a company tests a prototype of a new product or service, improves on that design, and then builds and tests the improvement prototype.

Organizational Decline

A large decrease in organizational performance that occurs when companies don't anticipate, recognize, neutralize, or adapt to the internal or external pressures that threaten their surivival.

Dominant Design (Innovation Stream)

A new design that becomes the accepted market standard for technology.

S-Curve Pattern of Innovation

A pattern of technological innovation characterized by slow initial progress, then rapid progress, and then slow progress again as a technology matures and reaches its limits.

Technological Discontinuity (Innovation Stream)

A scientific advance or unique combination of existing technologies creates a significant breakthrough in performance or function.

Inaction Stage

As organizational performance problems become more visible, management may recognize the need to change but still take no action.

Generational Change

Change based on incremental improvements to a dominant technological design such that the improved technology is fully backward compatible with the older technology.

Results Driven Change

Change created quickly by focusing on the measurement and improvement of results.

"Calm Waters" Simile (LECTURE ONLY)

Change is a response to a break in status quo: 1. Unfreezing the status quo 2. Changing to a new state 3. Refreezing to make the change permanent

Discontinuous Change (Innovation Stream)

Characterized by technological substitution and design competition.

Incremental Change (Innovation Stream)

Companies innovate by lowering costs and improving the functioning and performance of the dominant technological design.

Blinded Stage

Decline begins because key managers fail to recognize the internal or external changes that will harm their organizations.

Self Organizing Systems in Nature (LECTURE ONLY)

Emergent Properties: 1. Many Agents 2. Many Interactions 3. Decentralization 4. Simple Rules Example- formation of an ant mound

Faulty Action Stage

Faced with rising costs and decreasing profits and market share, management will announce belt-tightening plans designed to cut costs, increase effeciency, and restore profits.

Purpose of Small-Group Interventions

Focuses on assessing how a group functions and helping it work more effectively to accomplish its goals.

Change Forces

Forces that produce differences in the form, quality, or condition of an organization over time.

Resistance Forces

Forces that support the existing conditions in organizations.

Unfreezing

Getting the people affected by change to believe that change is needed.

Freedom

Having autonomy over one's day-to-day work and a sense of ownership and control over one's ideas.

Purpose of Person-Focused Interventions

Intended to increase interpersonal effectiveness by helping people to become aware of their attitudes and behaviors and to acquire new skills and knowledge

Technological Substitution (Discontinuous Change)

Occurs when customers purchase new technologies to replace older technologies.

Workgroup Encouragement

Occurs when group members have diverse experience, education, and backgrounds, and the group fosters mutual openness to ideas; positive, constructive challenge to ideas; and shared commitment to ideas.

Organizational Encouragement

Occurs when management encourages risk taking and new ideas, supports and fairly evaluates new ideas, rewards and recognizes creativity, and encourages the sharing of new ideas throughout different parts of a company.

Supervisory Encouragement

Occurs when supervisors provide clear goals, encourage open interaction with subordinates, and actively support development teams work and ideas.

Resistance to Change

Opposition to change resulting from: 1. Self-Interest 2. Misunderstanding and Distrust 3. Low Tolerance for Change

Innovation Streams

Patterns of innovation over time that can create sustainable competitive agavantage.

Resisting change because of "Misunderstanding and Distrust"

People don't understand the change or the reasons for it, or they distrust the people behind the change.

Resisting change because of "Self-Interest"

People fear that change will cost or deprive them of something they value.

Resisting change because of "Low Tolerance for Change"

People feel threatened by the uncertainty associated with change and worry that they won't be able to learn the new skills and behaviors needed to successfully negotiate change

Overlapping Steps

Shorten the development process by reducing delays or waiting time between steps.

Complex Adaptive Systems Theory (LECTURE ONLY)

Study of complexity = how order emerges organically from interactions among actors

Refreezing

Supporting and reinforcing new changes so that they stick.

Technological Lockout

The inability of a company to competitively sell its products because it relies on old technology or a nondominant design.

Technology

The knowledge, tools, and techniques used to transform inputs into outputs.

Change Agent

The person formally in charge of guiding a change effort.

Change Intervention

The process used to get workers and managers to change their behaviors and work practices.

Organizational Innovation

The successful implementation of creative ideas in organizations.

Coercion

The use of formal power and authority to force others to change

General Electric Workout

Three-day meeting where managers and employees generate and act on solutions to specific business problems

Purpose of Large-System Interventions

To change the character and performance of an organization, business unit, or department.

A Lack of Organizational Impediments

To foster creativity, companies also have to remove impediments to creativity from their work environments.

Creative Work Environments

Workplace cultures in which workers perceive that new ideas are welcomed, valued and encouraged.