Week 8 - Topic 5A: Organizational Change and Innovation

Why Business Need to Manage Change

1. The marketplace is becoming more segmented, more niche products.

2. More competitors offering targeted products, requiring faster speed-to-market.

3. Some traditional companies may not survive radically innovative change: disruptive innovation.

4. China, India, and other offshore suppliers are changing the way we work

5. Knowledge, not innovation, is becoming the new competitive advantage.

Two Types of Change

Reactive and proactive (planned)

Reactive Change

Making changes in response to problems or opportunities as they arise

Proactive

Involves making carefully-thought-out changes in anticipation of possible or expected problems or opportunities

Forces for Change

Outside: Demographics, technological advancements, market changes, social & political pressures

Inside: Human resource concerns, managers' behavior

Three Kinds of Change

1. Least threatening: Adaptive change

2. Somewhat threatening: Innovative change

3. Very threatening: Radically innovative change

Adaptive Change

Reintroduction of a familiar practice, "we've seen this before"

Innovative Change

Introduction of a practice that is new to the organization

Radically Innovative Change

Involves introducing a practice that is new to the industry

Lewin's Change Model

1. Unfreezing: creating the motivation to change

2. Changing: new information, models & procedures

3. Refreezing: supporting & reinforcing the change

Three Parts of the "Systems Approach"

1. Analyze inputs: "why should we change, and how willing and able are we to change?"

2. Target elements of change: “what “levers” in the organization do we want to pull to produce the change we want?” Levers include: (1) People, (2) Organizational arrangements, (3) Methods,

(4) Social factors

3. Determine outputs: "what do we want from the change?"

Key Principles of the "Systems Approach"

1. The desired changes must align with the organization's mission statement, vision statement, and strategic plan

2. The organization must be ready and willing to change

3. Any change made in each and every target element (lever) will ripple across the entire organization.

4. All organizational change ultimately affects the people in it and vice versa

Readiness for Change

The beliefs, attitudes, and intentions of the organization's staff regarding the extent of changes needed and how willing and able they are to implement them

Force Field Analysis

A technique to determine which forces could facilitate proposed change and which forces could act against it

Organizational Development

A set of techniques for implementing planned change to make people and organizations more effective

Change Agent

A consultant with a background in behavioral sciences who can be a catalyst in helping organizations deal with old problems in new ways

What Can Organizational Development Be Used For?

1. Managing conflict

2. Revitalizing organizations

3. Adapting to mergers

How Organizational Development Works

1. Diagnosis: What is the problem?

2. Intervention: What shall we do about it?

3. Evaluation: How well has the intervention worked?

4. Feedback: How can the diagnosis be further refined?

Effectiveness of Organizational Development

1. Success tends to include multiple interventions.

2. It is more likely to succeed with management support.

3. It has more success when oriented to achieve both short and long-term results.

4. OD is affected by cross-cultural considerations.

Resistance to Change

An emotional/behavioral response to real or imagined threat to an established work routine

Ten Reasons Employees Resist Change

1. Individual's predisposition toward change.

2. Surprise and 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 system.

Importance of Innovation

- Many new businesses are started due to innovation

- Innovation provides a significant source of growth for existing firms

Invention

Creation of a novel and useful idea

Innovation

The act of introducing something new

Commercialize

To manage in such a way as to achieve a profit

Product Development Strategy: Possible Priorities

As part of our choosing our new product development strategy, we need to identify the most important priority for our business

1. Maximize the fit of the new product with customer requirements

2. Minimize the development cycle time

3. Control development costs and achieve a high Return on Invested Capital (ROIC)

Maximizing Fit with Customer Requirements

Must offer more compelling features, greater quality, more attractive pricing, better value than competing products

Minimize Development Cycle Time

The "cycle time" of a process refers to the time from start to completion of the process

Why minimize development cycle time?

- be first to market with new products

- catch up quickly to competitors

- delay obsolescence of our products

A Tool for Minimizing Cycle Time

- A "sequential" process is one in which each step must be completed before the next step is started

- A "parallel" process is one in which many steps are performed simultaneously

- A "partly parallel" process refers to a process in which there is some degree of overlap; the steps are performed in sequence, but a new step will start before completion of the prior step

The New Product Development Process is...

- Time intensive

- Resource intensive

- Risky (outcomes are not assured)

ROIC on Innovation

Common measure used to control development because it relates: (1) profits to (2) required investments and expenditures

Equation for ROIC on Innovation

(Total Profits from New Products) / (Total Investments and Expenditures for New Products)

Stage Gate Process for Product Development

Each Stage includes:

–Deliverables

–Criteria

–Outputs

Each Gate Decision:

–Go,

–Kill,

–Hold, or

Recycle