Organizational Change and Innovation

1
Organizational Change and Innovation

• Chapters 10 13

2
Questions to be Addressed

• Why do organizations need to change?
• What kinds of change occur in organizations?
• When change takes place, what gets changed?
• What elements of an organization make change
  difficult?
• What theoretical models exist to explain change?
• What basic approaches exist to put change in
  place, and which is the best approach?
• What success factors exist that can make change
  initiatives successful?

3
Why do Organizations Need to Change?

• To adapt to changes in the external environment
• Economic - Political - Global - Competitors
• Customers - Distributors - Suppliers -
  Workforce
• Socio-cultural - Technology
• To adapt to changes in the internal environment
• Employee attitudes - managerial attitudes -
  unions
• To adjust strategy because the initial reading of
  the internal/external environment was incorrect

4
Symptoms of Need for Change

• Decreases in productivity
• Decreases in quality
• Failure to achieve goals
• Economic indicators (costs or revenues)
• Loss of competitive position
• Increased employee turnover, absenteeism
• All of these are symptoms of decline in the
  Weitzel and Jonnson model of org. decline

5
What Kinds of Change Exist?

• Unintentional (growth, culture shift over time)
• Deliberate change occurring through managerial
  intervention
• Evolutionary bottom-up, proactive, incremental
  change. Adjustment of the status quo.
• Revolutionary top-down, radical,
  organization-wide, reactive. Breaking he frame
  and starting over.
• Reengineering simplifying processes to meet
  customer needs in the simplest way possible
• Restructuring development of drastically new
  structures
• Innovation internally-driven search for ideas

6
What Gets Changed?

• Strategy and structure to adapt to the
  environment and attempt to reverse a pattern of
  decline
• Technology and Processes to modernize,
  differentiate products, reduce costs, improve
  competitive advantage
• Products to generate new revenue, to diversify,
  to replace or upgrade mature product lines
• People and Culture upgrading skills, replacing
  the senior management team, increasing employee
  diversity, making the culture more aligned to
  customer needs or corporate strategy

7
What Gets Changed? (2)

• Structures established roles, responsibilities,
  processes, relationships that have developed over
  time and are hard to change
• Strategy escalating commitment and entrenched
  goals
• Subunit orientation difficulty of changing
  cohesive subcultures
• Individual uncertainty and apprehension - fear,
  insecurity, suspicions, stress
• Human inertia people become comfortable with
  established routines and face the anxiety of
  learning new things
• Failure to see the need or usefulness of change

8
What Makes Change Difficult?

• Individual Factors
• Habit
• Fear of the Unknown
• Economic concerns
• Cynicism and change-weariness
• Lack of understanding
• Not seeing the need/benefit of change
• Existing political issues
• Security
• Informed opposition

9
What Makes Change Difficult (2)

• Organizational Forces
• Structural inertia (deep structure)
• Piecemeal (subsystem) changes negated
• Group coalitions
• Threats to resources and power structures
• Fear of training deficiencies
• Commitment to existing strategies

10
Change Theories

• Lewins 3-stage model

Unfreezing
Moving
Refreezing

• Force-fields

Driving Forces
Restraining Forces
Status Quo
11
Change Theories (2)

• Gersicks Punctuated Equilibrium and Deep
  Structure

Continuous
P. Eq.
New Status Quo ?
?Revolutionary Change
?Status Quo
Time
12
Which Approach is Best?

• Evolution
• Less risk of failure
• Less shock to the system
• Longer time to adjust
• May allow reversion to the mean
• Inability to overcome deep structure inertia
• Allows critics to fight the change

• Revolution
• Riskier
• Greater shock to the system harder to recover
• Overcomes inertia and deep structure
• One shot at getting it right
• May be necessary in late stages of decline

13
Mixed Approach

• Do your best to be forward-looking and adaptive
• Be prepared to undertake radical change from time
  to time in order to overcome times of inertia and
  to make major adjustments to the paradigm
• Recall Greiners model of evolution and revolution

14
What are the Success Factors in Change?

• Leadership
• Clearly Defined Need for Change
• Linking the Change to a Larger Vision
• Celebrating Early Successes to Build Momentum
• Employee Involvement Participation
• Commit Enough Resources to the Change
• Communicate, Communicate, Communicate!

15
Communicating Change

• Communication must come from the top
• Tireless communication and repetition of the
  message in clear terms and using various media
• Consistent messages in words and actions
• Tailor the message to the audience
• Effective two-way communication
• Not communicating is communicating
• Communication must filter down through all levels
  in the hierarchy
• Communicate uncertainty and bad news too
• When is communication finished? Never!

16
Managing Innovation

• Few ideas that are generated are converted into
  successful products
• The key is to generate as many ideas as possible,
  but have an efficient selection process in place
  to assess potential and risks of new ideas so
  that only the best ones move forward
• Stage-gate development funnel

17
Facilitating Innovation

• Structure
• Organic structures are best
• Cross-functional integration enables creativity
• Remove barriers to collaboration
• Dedicate resources to innovation (e.g.
  skunkworks)
• Empower champions or intrapreneurs who have
  the power and influence to sell ideas
• New venture teams remove them from bureaucracy
  in order to enable creativity

18
Facilitating Innovation (2)

• Culture
• Encourage risk taking, learning and
  experimentation
• Encourage the interaction of people with diverse
  backgrounds
• Treat mistakes as learning opportunities
• Reward creativity, not compliance to rules
• Open property rights employees have a stake in
  the success of their ideas and the organization
  as a whole (e.g. gainsharing, profit-sharing
• Encourage knowledge transfer
• Keep people (and their ideas) from leaving!