Chapter 7

Explain why innovation matters to companies.

Technology cycles typically follow an S-curve pattern of innovation. Early in the cycle, technological progress is slow, and improvements in technological performance are small. As a technology matures, however, performance improves quickly. Finally, as the limits of a technology are reached, only small improvements occur. At this point, significant improvements in performance must come from new technologies. The best way to protect a competitive advantage is to create a stream of innovative ideas and products. Innovation streams begin with technological discontinuities that create significant breakthroughs in performance or function. Technological discontinuities are followed by discontinuous change, in which customers purchase new technologies, and companies compete to establish the new dominant design. Dominant designs emerge because of critical mass because they solve a practical problem, or because of the negotiations of independent standards bodies. Because technological innovation both enhances and destroys competence, companies that bet on the wrong design often struggle, while companies that bet on the eventual dominant design usually prosper. When a dominant design emerges, companies focus on incremental change, lowering costs, and making small but steady improvements in the dominant design. This focus continues until the next technological discontinuity occurs.

Discuss the different methods that managers can use to better manage change as it occurs.

The basic change process involves unfreezing, change intervention, and refreezing. Resistance to change stems from self-interest, misunderstanding, and distrust as well as a general intolerance for change. Resistance can be managed through education and communication, participation, negotiation, top management support, and coercion. Knowing what not to do is as important as knowing what to do to achieve successful change. Managers should avoid these errors when leading change: not establishing a sense of urgency, not creating a guiding coalition, lacking a vision, undercommunicating the vision, not removing obstacles to the vision, not creating short-term wins, declaring victory too soon, and not anchoring changes in the corporation's culture. Finally, managers can use a number of change techniques. Results-driven change and the General Electric fastworks reduce resistance to change by getting change efforts off to a fast start. Organizational development is a collection of planned change interventions (large-system, small-group, person-focused), guided by a change agent, that are designed to improve an organization's long-term health and performance.

Discuss why not changing can lead to organizational decline.

The five-stage process of organizational decline begins when organizations don't recognize the need for change. In the blinded stage, managers fail to recognize the changes that threaten their organization's survival. In the inaction stage, management recognizes the need to change but doesn't act, hoping that the problems will correct themselves. In the faulty action stage, management focuses on cost cutting and efficiency rather than facing up to the fundamental changes needed to ensure survival. In the crisis stage, failure is likely unless fundamental reorganization occurs. Finally, in the dissolution stage, the company is dissolved through bankruptcy proceedings; by selling assets to pay creditors; or through the closing of stores, offices, and facilities. If companies recognize the need to change early enough, however, dissolution may be avoided.

Discuss the different methods that managers can use to effectively manage innovation in their organizations.

To successfully manage innovation streams, companies must manage the sources of innovation and learn to manage innovation during both discontinuous and incremental change. Because innovation begins with creativity, companies can manage the sources of innovation by supporting a work environment in which creative thoughts and ideas are welcomed, valued, and encouraged. Creative work environments provide challenging work; offer organizational, supervisory, and work group encouragement; allow significant freedom; and remove organizational impediments to creativity. Discontinuous and incremental change require different strategies. Companies that succeed in periods of discontinuous change typically follow an experiential approach to innovation. The experiential approach assumes that intuition, flexible options, and hands-on experience can reduce uncertainty and accelerate learning and understanding. A compression approach to innovation works best during periods of incremental change. This approach assumes that innovation can be planned using a series of steps and that compressing the time it takes to complete those steps can speed up innovation.

design iteration

a cycle of repition in which a company tests a prototype of a new product or service, improves on that design, and then builds and tests new prototypes

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 substantially better technology

product prototype

a full scale, working model that is being tested for design, function, and reliability

organizational decline

a large decrease in organizational performance that occurs when companies don't anticipate, recognize, neutralize, oradapt to the internal or external pressures that threaten their survival

dominant design

a new technological design or process that becomes the accepted market standard

S curve pattern of

a pattern of technological innvation characterized by slow initial progress, then rapid progress, and then slow prgress again as technology matres and reaches limits

organizational development

a philosophy and collection of planned change intervention designed to improve an organizations long term health and performance

flow

a psycological state of effortlessness. in which you become completely absorbed in what you are doing, and timne seems to pass quickly

experiential approach to innovation

an approach to innovation that assumes highly uncertain environment and uses intuition, flexible options, and hands on experience to reduce uncertainty and accelerate learning

compression approach to innovation

an approach to innovation that assumes that incremental innovation can be planned using a series of steps and that compressing those steps can speed innovation

generational change

change based in 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 measuremtn and improvement of results

design competition

competition between old and new technologies to establish a new technological standard or dominant design

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 organiozation

milestones

formal project review points used to assess progress and performance

unfreezing

getting the people affected by change to believe change is needed

resistance to change

opposition to change resulting from self-interest, misunderstanding and distrust, and a general intolerance for change

innovation streams

patterns of innovation over time that can create sustainable competitive advantage

general electric fastworks

quickly experimenting with new ideas to solve customer problems and learn from repeated tests and improvements

refreezing

supporting and reinforcing new changes so they stick

technological lockout

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

change agent

the person formally in charge of guiding a change effort

discontinuos change

the phase of a technology cycle characterized by technological substitution and design competition

incremental change

the phase of a technology cycle in which companies innovate by lowering costs and improving the functioning and performance of the dominant technology

technological discontinuity

the phase of an innovation stream in which a scientific advance or unique combination of existing technologies creates a significant breakthrough in performance or function

change intervention

the process used to get workers and mangers to change their behavior and work practices

technological substitution

the purchase of new technologies to replace older ones

organizational innovation

the successful implementation of creative ideas in organizations

testing

the systematic comparison of different product designs or design iterations

coercion

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

multifunctional teams

work teams composed of people from different departments

creative work environment

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