Chapter 7Change and Innovation

Management Principles

Craig W. Fontaine, Ph.D.

Responding to Events or SWOT Analysis

Strategic renewal: change in an organization’s strategy through a process of creating new products, services, capabilities, and knowledge bases.

Change implementation: actions taken by organizational leaders in order to support strategic renewal and maintain outstanding performance in a dynamic environment.

Why Change is Needed…• Trigger event: a shift in the environment that

precipitates a need for organizational change.

“Trigger events….are so named because their magnitude and potential for organizational as well as

personal impact set into motion a series of mental shifts as individuals strive to understand and redefine

a situation. By their very nature, they unbalance established routines and evoke conscious thought on

the part of organizational members. They stir up feelings and emotions that come to affect people’s

reactions to the change. In short, trigger events bring people’s mindsets into the arena of change.”

Examples of Trigger Events

CompanyAltered

StrategyTrigger Events

EnronMove from energy

productionto energy trading

New leader (Jeff Skilling) Desire for new business model

GEMove from commodity

business to high value-added products and

services

Recession in 1990’s New leader (Jack Welch)

IBMMove from product to

service/consulting company

Declining performanceNew competitorsNew Leader (L. Gerstner)

Marks and Spencer

Move from a department store appealing to

traditional, conservative adult British shoppers to

a store appealing to young, trendy shoppers

New Competitor (Zara)Fragmenting of retail business model

Examples of Trigger Events

CompanyAltered

StrategyTrigger Events

Renault Move from French-

based to internationally focused automobile company

Stagnant marketNew leader (Carlos Ghosn)

WalgreensMove from store-

based chain in order to capture growing Internet business

New Technology (Internet)

Facebook

Move from restricted, college campus-only

social network to become a “universal

utility” open to everyone

Increase customer baseOut maneuver

competitor (My Space)

Strategic Renewal and Organizational Change

Shifting CompetitiveEnvironment

NewOpportunities

Strategic Renewal

OrganizationalChange

Altering BehaviorPatterns ofEmployees

Behavioral Change is Needed…• Behavioral change: alterations in employee

behavior in order to enable the organization to meet the demands of its strategy while achieving and sustaining outstanding performance.

• Behavior: the enactment of roles, responsibilities, and relationships by employees within an organization.

• Individuals may be satisfied with the status quo. Because their needs are being met, they may view any potential change as negative.

• Individuals may view change as a threat, fearing it will adversely affect them in some significant way.

• Individuals may understand that change brings both benefits and costs, but feel that the costs far outweigh the benefits.

• Individuals may view change as potentially positive, but may still resist because they believe that the organization’s management is mishandling the change process.

• Individuals may believe in the change effort ,but still believe that the change is not likely to succeed.

Underlying Causes of Resistance

Resistance will Occur

• Resistance: efforts exerted by employees either overtly or covertly to maintain the status quo.

“Employee response to change runs across a broad spectrum, ranging from

commitment at one end to aggressive resistance” on the other. Each of these

reactions to change helps shape the behavior of individuals and, ultimately, the

success of a change effort.”

Management’s Role in Creating Resistance

Text in this colorResistance Cause

Satisfied with status quo Employees not included

Change is perceived as threat

Employees see little opportunity to get required

skills

Cost outweighs benefitsInadequate articulation of

goals

Belief that management is mishandling the

process

Employees’ voice and interest not being included

Employees doubt successPast change efforts lack

sustained success

Managing Resistance to Change

• Educate employees• Communication change-related information• Have those affected by change participate in

planning and implementing• Let employees discuss and agree on who will

do what after change• Coercion

Mistakes Managers Make

• Not establishing a great enough sense of urgency

• Not creating a powerful enough coalition• Lacking a vision• Undercommunicating the vision• Not removing obstacles to the new vision• Not systematically planning for and creating

short-term wins• Declaring victory too soon• Not anchoring changes in the corporation’s

culture

Key Understandings about Resistance and Participation

Imposing change from above can lead to employee resistance.

but

A participative process can help build support for change efforts.

Involve the Workers• Participation: the process of allowing

employees a voice in work-related decisions.

“By diagnosing problems, understanding their importance, and being part of the process of

formulating solutions, people develop a psychological sense of ownership over the outcome. That ownership now creates in employees the heightened motivation to

implement change in order to achieve desired goals”

Organizational Change Process - Lewin

• Unfreezing– getting the people affected by change to

believe that change is needed

• Change– workers and managers change their

behavior and work practices

• Refreezing– supporting and reinforcing the new

changes so that they stick

Force Field Analysis

• Change forces– lead to differences

in an organization over time

• Resistance forces– support the status

quo

The Anatomy of Not Changing

Organizational declines occurs when companies don’t anticipate, recognize, neutralize, or adapt to the internal and

external pressures that threaten their survival. • Blinded stage (failure to recognize) • Inaction stage (don’t react the need)• Faulty action stage (belt tightening

response)• Crisis stage (begin to break-up company)• Dissolution stage ( bankruptcy)

Innovation

Technology Cycles

• Begins with the birth of a new technology…

• …ends when that technology reaches limit and dies.

Examples…..anyone?

Discontinuity = Disruptive Technologies

Managing on Two Fronts

• During discontinuous change, companies must find a way to anticipate and survive technological changes.

and……• Manage incremental change

and innovation.

So how do managers do that….

Different approaches for different circumstances..

Experiential Approach to Innovation

• Used in time of uncertainty • Rapid design iteration cycles (the tactic)– Use of product prototype – Testing of the prototype

• More costly approach• Milestones tracking• Involvement of multifunctional teams

Compression Approach

• Used in more certainty times• Lower cost approach, incremental approach• Planned steps• Supplier involvement• Shorten the time of individual steps• Overlapping steps