Chapter 10 - Organizational Change & Innovation

Factors Encouraging Innovation

(1) right organizational culture (2) human capital (3) appropriate resources (4) correct reward system

Types of Innovation

(1) Product or (2) Process (3) Core or (4) Transformational

Resistance is the Interaction of (3) Causes:

(1) employee characteristics (2) change agent characteristics (3) the change agent-employee relationship

Super Trend (5): Knowledge, not information, is becoming the new competitive advantage

"Information is rapidly becoming a profitless commodity, and knowledge is becoming the new competitive advantage" As information technology does more of the work formerly done by humans, even in high-tech areas (such as sorting data for relevance), many low-level employees previously thought of as knowledge workers are now being recognized as "data workers," who contribute very little added value to the processing of information. Unlike routine information handling, knowledge work is analytic and involves problem solving and abstract reasoning—exactly the kind of thing required of skillful managers, professionals, salespeople, and financial analysts. Example: Many back-office systems and functions—those the customer does not see, such as inventory management and accounts payable—are rapidly being outsourced

Supertrends shaping the future of business: (5)

(1) the marketplace is becoming more segmented (2) competitors offering specialized solutions require we get our products to market faster (3) some companies are unable to survive disruptive innovation (4) offshore suppliers are changing the way we work (5) knowledge, not information, is becoming the new competitive advantage

Types of Innovation: (3) Core versus (4) Transformational

(3) Core Innovation — The optimizing of products or services for existing customers (4) Transformational Innovation — The invention of breakthrough products or services that don't exist yet and that are aimed at creating brand new markets and customers

To make innovation happen?

- you need to recognize problems and opportunities - gain allies - overcome employee resistance execute well

Outside Forces: 1) Demographic Characteristics

1) Demographic: a) Age b) Education c) Skill Level d) Gender e) Immigration

The Six (6) Seeds of Innovation

1) Hard work in a specific direction - Most innovations come from dedicated people diligently working to solve a well-defined problem, hard work that can span many years 2) Hard work with direction change - In other words, hard work closes some doors and opens others 3) Curiosity - Innovations can begin when people are curious about something of interest to them 4) Wealth and money - Innovations frequently occur because an organization or an individual simply wants to make money 5) Necessity - Many innovations grow from the desire to achieve something or to complete a task that is needed to accomplish a broader goal 6) Combination of Seeds - Many innovations occur as a result of multiple factors

Inside Forces: 1) Human Resources Concerns

1) Human Resources Concerns: Job dissatisfaction—as expressed through high absenteeism and turnover—can be a major signal of the need for change a) Unmet Needs b) Job Dissatisfaction c) Absenteeism & Turnover d) Productivity e) Participation/Suggestion

Types of Innovation: (1) Product versus (2) Process

1) Product Innovation - A change in the appearance or the performance of a product or a service or the creation of a new one [Core or Incremental] 2) Process Innovation - A change in the way a product or service is conceived, manufactured, or disseminated [Transformation or Radical]

3. Overcome Employee Resistance, & Empower & Reward Them to Achieve Progress: 6 Methods

1. Education and communication 2. Participation and involvement 3. Facilitation and support 4. Negotiation and rewards 5. Manipulation and cooptation 6. Explicit and implicit coercion

**Ten Reasons Employees Resist Change**

1. Individual's Predisposition toward Change 2. Surprise & Fear of the Unknown 3. Climate of Mistrust 4. Fear of Failure 5. Loss of Status or Job Security 6. Peer Pressure 7. Disruption of Cultural Traditions or Group Relationships 8. Personality Conflicts 9. Lack of Tact or Poor Timing 10. Nonreinforcing Reward Systems

How You Can Foster Innovation: Four Steps

1. Recognize Problems & Opportunities & Devise Solutions 2. Gain Allies by Communicating Your Vision 3. Overcome Employee Resistance, & Empower & Reward Them to Achieve Progress 4. Execute Well

Inside Forces: 2) Managers' Behavior

2) Managers' Behavior: Excessive conflict between managers and employees is another indicator that change is needed a) Conflict b) Leadership c) Reward Systems d) Structural Reorganization

Outside Forces: 2) Technological Advancements

2) Tech Advancements: a) Manufacturing Technology b) Information Technology

Outside Forces: 3) Shareholder, Customer, Market Changes

3) Shareholder, Customer, Market Changes: a) Changing Customer Preferences b) Domestic & International Competition c) Mergers & Acquisitions Shareholders - have begun to be more active in pressing for organizational change. Insurance company Aflac, for example, became the first U.S. company to allow shareholders to have a say on executive pay Customers - becoming more demanding, being more inclined to take their business elsewhere if they do not get what they want from a given company, so that now firms such as General Motors and McDonald's actively collect information about customer preferences and try to address them in their new products Market Changes - global economy has forced U.S. companies to change the way they do business, with Walmart, for example, stepping up its expansion into overseas markets. The Great Recession also drastically affected many organizations

Outside Forces: 4) Social & Political Pressures

4) Social & Political Pressures: a) War b) Values c) Leadership

4. Execute Well

Execution — the process of discussing hows and whats, of using questioning, analysis, and follow-through to achieve the results promised and ensure accountability. Execution requires organizations to effectively manage people, groups, and organizational processes and systems in the pursuit of innovation In the end, then, the innovation process must be managed

3. Resources: Do Managers Put Money Where Their Mouths Are?

An organization's managers may say they encourage innovation, but if they balk at the expense, they aren't putting their money where their mouths are. Innovation doesn't come cheap. Its costs can be measured in all kinds of ways: dollars, time, energy, and focus.

1. Organizational Culture: Is Innovation Viewed as a Benefit or a Boondoggle?

An organizational culture is defined as the set of shared, taken-for-granted implicit assumptions that a group holds and that determines how it perceives, thinks about, and reacts to its various environments. An organizational culture that doesn't just allow but celebrates failure is vital toward fostering innovation. Most new ideas will fail. Only a few will be successful. But if an organization doesn't encourage this kind of risk taking—if people tend to view experimentation as a boondoggle—that organization won't become a superstar in innovation.

(3) the change agent-employee relationship

As you might expect, resistance to change is reduced when change agents and employees have a trusting relationship—faith in each other's intentions. Mistrust, on the other hand, encourages secrecy, which begets deeper mistrust, and can doom an otherwise well-conceived change

1. Recognize Problems & Opportunities & Devise Solutions

Change may be needed because you recognize a problem or recognize an opportunity • Recognizing a problem—find a "better way • Recognizing an opportunity

Super Trend (3): Some Traditional Companies May Not Survive Radical Change/Disruptive Innovation

Clayton M. Christensen, a Harvard Business School professor, argues that when successful companies are confronted with a giant technological leap that transforms their markets, all choices are bad ones Indeed, he thinks, it's very difficult for an existing successful company to take full advantage of a technological breakthrough such as digitalization—what he calls disruptive innovation

Super Trend (2): More Competitors Are Offering Targeted Products (specialized), Requiring Faster Speed of products to Market

Companies offering a broad range of products or services are now experiencing intense pressure from competitors offering specialized solutions—and beating them to the punch by devising novel speed-to-market strategies. Example: Virgin Group Ltd., headed by Sir Richard Branson, is known mainly for its music and airline businesses, but it has entered several new businesses one after the other—mobile phones, credit cards, hotels, games, trains, even space travel—and very quickly. Virgin Comics, aimed at India's multibillion-dollar comics market, went from idea to public announcement in less than 11 months.

1a) Demassification

Customer groups becoming segmented into smaller and more specialized groups responding to more narrowly targeted commercial messages Example: In the Internet Age, retailers like Amazon and Apple are not constrained by physical shelf space and can offer consumers a much wider variety of products, yet small sales, one or two rather than millions of items at a time, can produce big profits

Factors That Hinder an Organization's Ability to Learn from Failure: FOR EMPLOYEES

For Employees: 1) Play the "blame game," blaming an individual when failures are due to internal or external matters 2) Suffer "self-serving bias" 3) Don't recognize failures are not created equal; some may be preventable, some uncontrollable 4) Are afraid to discuss failures and take risks; the company isn't a learning organization 5) Are reluctant to experiment

Super Trend (4): China, India, & Other Offshore Suppliers Are Changing the Way We Work

Globalization/Outsourcing in China, India, Mexico, the Philippines, and other countries offer workers and even professionals [in those countries] are willing to work twice as hard for half the pay, giving American businesses substantial labor savings Some American jobs are lost, others become more productive, with some engineers and salespeople, for example, being liberated from routine tasks so that they can spend more time innovating and dealing with customers Example: Querétaro is not a place students would probably go for spring break, but it has become known for something not normally associated with Mexico: aircraft construction.

2. Human Capital: Are the Right Kind of People Available?

Human Capital -- What is the economic or productive potential of a company's employees' knowledge, experience, and actions, the definition of human capital? Characteristics that can help organizations innovate are creativity, self-efficacy for innovation, and quality of the relationship between managers and employees

Super Trend (1): The Marketplace Is Becoming More Segmented & Moving toward More Niche Products

In the past, managers could think in terms of mass markets—mass communication, mass behavior, and mass values. Now we have "demassification," with customer groups becoming segmented into smaller and more specialized groups responding to more narrowly targeted commercial messages

INSIDE Forces for Change & Sub Groups:

Inside the Organization Forces: 1) Human Resources Concerns 2) Managers' Behavior

Two Myths about Innovation

Myth No. 1: Innovation Happens in a "Eureka!" Moment Myth No. 2: Innovation Can Be Systematized

OUTSIDE Forces for Change & Sub Groups:

Outside the Organization Forces 1) Demographic Characteristics 2) Technological Advancements 3) Shareholder, Customer, Market Changes 4) Social & Political Pressures

2) Proactive Change: Managing Anticipated Problems & Opportunities

Proactive Change - planned change, involves making carefully thought-out changes in anticipation of possible or expected problems or opportunities

3a) Disruptive Innovation

Process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors

Product Innovation versus Process Innovation

Product Innovation - a core (incremental) innovation Process Innovation - a transformational (radical) innovation

1) Reactive Change: Responding to Unanticipated Problems & Opportunities

Reactive Change - making changes in response to problems or opportunities as they arise; when managers talk about "putting out fires."

Two types of change

Reactive versus Proactive

The Causes of Resistance to Change

Resistance to change - an emotional/behavioral response to real or imagined threats to an established work routine

Why can't Innovation be Systematized?

That there are too many challenges associated with it, which makes success unpredictable, although it's possible to establish cultural and other conditions that increase the likelihood of a payoff

Innovation

The activity of creating new ideas and converting them into useful applications—specifically new goods and services Innovation is more likely to occur when organizations have the proper culture, resources, and reward systems to support it

(1) employee characteristics

The characteristics of a given employee consist of his or her individual differences, actions and inactions, and perceptions of change. Your level of adaptability is one key characteristic that affects resistance to change

(2) change agent characteristics

The characteristics of the change agent—the individual who is a catalyst in helping organizations change—also consist of his or her individual differences, actions and inactions, and perceptions of change. Such characteristics that might contribute to employee resistance to change might include leadership style, personality, tactfulness, sense of timing, awareness of cultural traditions or group relationships, and ability to empathize with the employee's perspective.

Seeds of Innovation: Starting Point for Experimentation & Inventiveness

The starting point for organizational innovation

4. Rewards: Is Experimentation Reinforced in Ways That Matter?

Top-performing salespeople are often rewarded with all kinds of incentives, such as commissions, bonuses, and perks. Are Research & Development people rewarded the same way?

2. Gain Allies by Communicating Your Vision

You need to create a picture of the future and paint in broad strokes how your innovation will be of benefit. That is, you need to start persuading others inside—and perhaps outside— the organization to support you • Showing how the product or service will be made • Showing how potential customers will be reached — must consider breaking down the task of what the customer wants into discrete steps (a task called job mapping), to determine the points at which customers might need help • Demonstrating how you'll beat your competitors — Other companies may be pursuing the same breakthroughs. Thus, it's better to focus on a smaller number of innovations • Explaining when the innovation will take place — Timing is important. You'll need to think about when employees will be prepared to make the product and customers primed to buy it.

Invention

creating or making up something new

Systematized

made a codified and standardized process that can be designed to always yield fruitful results

Ways to encourage innovation

providing the organizational culture, the people, the resources, and the reward system.

Creativity

the act of developing new and imaginative ideas into reality,