Chapter 6

Organizational innovation

The successful implementation of creative ideas in organizations

Creativity

The production of novel and useful ideas

Organizational change

A difference in the form, quality, or condition of an organization over time

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

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

Innovation streams

Patterns of innovation over time that can create sustainable competitive advantage

Technological discontinuity

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

Discontinuous change

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

Technological substitution

The purchase of new technologies to replace older ones

Design competition

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

Dominant design

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

Technological lockout

When a new dominant design (i.e., a significantly better technology) prevents a company from competitively selling its products or makes it difficult to do so

Incremental change

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

Creative work environments

Workplace cultures that foster the acceptance, appreciation, and encouragement of new ideas.

Flow

A psychological state of effortless concentration and complete absorption in a task, where time seems to pass quickly.

Experiential approach to innovation

An innovation strategy that embraces uncertainty and relies on intuition, flexible options, and hands-on experience to reduce uncertainty and accelerate learning.

Design iteration

A repetitive cycle in which a company tests a prototype, improves upon it, and then builds and tests the improved version to refine the design.

Product prototype

A fully functional and scaled model of a product or service that is being tested for design, functionality, and reliability.

Testing

The systematic comparison of different product designs or design iterations to evaluate their effectiveness and performance.

Milestones

Formal review points within a project used to assess progress and performance.

Multifunctional teams

Work teams composed of individuals from various departments or areas of expertise, promoting diverse perspectives and collaboration.

Compression approach to innovation

An innovation approach that assumes incremental improvements can be planned through a series of steps, and compressing these steps can expedite innovation.

Generational change

A change in technology that involves incremental improvements to a dominant design, allowing full compatibility with older technology.

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 survival.

Change forces

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

Resistance forces

Forces that support the existing state of conditions in organizations.

Resistance to change

Opposition to change resulting from self-interest, misunderstanding and distrust, a low tolerance for change, and time and cost factors.

Unfreezing

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

Change intervention

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

Refreezing

Supporting and reinforcing new changes so that they stick.

Coercion

Using formal power and authority to force others to change.

Results-driven change

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

General Electric Workout

A three-day meeting in which managers and employees from different levels and parts of an organization quickly generate and act on solutions to specific business problems.

Organizational development

A philosophy and collection of planned change interventions designed to improve an organization’s long-term health and performance.

Change agent

The person formally in charge of guiding a change effort.

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.

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. Since 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.

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.


1. In the blinded stage, managers fail to recognize the changes that threaten their organization’s survival.
2. In the inaction stage, management recognizes the need to change but doesn’t act, hoping that the problems will correct themselves.
3. In the faulty action stage, management focuses on cost cutting and efficiency rather than facing up to the fundamental changes needed to ensure survival.
4. In the crisis stage, failure is likely unless fundamental reorganization occurs.
5. 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 better manage change as it occurs.

The basic change process involves unfreezing, change, and refreezing.

Resistance to change stems from self-interest, misunderstanding, and distrust as well as a general intolerance for change.

• It 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 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 GE Workout 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.