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Innovation and Change

LEARNING OUTCOMES
By the end of this topic, you should be able to: Describe the importance of innovation in organisations; Explain the ways to manage innovation effectively; Discuss four factors that cause change and ways to manage the changes in organisations; and Examine the obstacles to change in organisations and ways to overcome them.

INTRODUCTION
This section will begin by discussing the issues related to organisational innovation. Organisational innovation means success in the implementation of creative ideas in the organisation. Where do the ideas come from? Creative ideas come from creativity, that is, the creation of ideas that are useful for the organisation. Innovation can bring about many advantages and benefits to the organisation but the main benefit is that it is able to create and retain the competition advantage of the organisation. The second part of this topic will explain the change in organisations. Organisational change means the modification or alteration of organisations from one structure, quality or condition into another form from time to time. Organisations need to change due to several reasons; the most important is environmental change. This section will explain the environmental factors that affect organisations, how important change is to an organisation and how to manage organisational change effectively.

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11.1 WHY IS INNOVATION IMPORTANT?


There are several matters that we need to know when discussing innovation. The following explains matters related to innovation and from there we will be able to know why innovation is crucial for organisations these days.

ACTIVITY 11.1
In your opinion, with the rapid development in information technology nowadays, how far does innovation play an important role in an organisation? Discuss this with your friends.

11.1.1 Technology Cycle


According to Williams (2000), technology refers to knowledge, tools and equipment, and also the techniques and methods used to change inputs into outputs. Technology cycle begins with the founding of a certain new technology and ends when the technology achieves certain limits, becomes outdated and is replaced with new technology that is more sophisticated. The S-pattern innovation curve is a curve that represents the life cycle of technology.

Figure 11.1: Technology life-cycle chart Source: Williams, C. (2000). Management. SouthWestern-Thomson Learning

At the early stage of the existence of technology (denoted by point A), there is still a lot more to be learned from the technology in order to develop it and this results in a slightly slow progress. From point A to point B, there is a slight curve which indicates increase in effort (in the form of finance, research and development) that only provides a slight increase in the performance of the technology.

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When this technology matures (indicated by point B), researchers have identified the methods to obtain better performance from that particular technology. The curve from point B to point C indicates that the injection of effort in a small quantity is already enough to increase the performance of the technology to a stimulating level. Point C indicates that additional effort in developing the technology will only result in a slight increase in performance. More importantly, point C denotes that the technology has reached its maximum level. This means that additional efforts will no longer bring any benefits or increase the performance of that particular technology. After the technology has achieved its maximum limit, that is, at the end of the S-curve, increase in performance usually comes from new or the latest technology. The second S-curve is the curve that represents the new technology replacing the old technology.

EXERCISE 11.1
List the phases involved in the life cycle of technology.

11.2 MANAGING INNOVATION


Innovation must be managed properly for organisations to enjoy its benefits. If not properly managed, it will not bring any benefit and may bring about bad results for the organisation. The next section will explain the methods implemented to manage innovation in organisations.

SELF-CHECK 11.1
Why must innovation that is a result of ideas and staff be managed and administered?

11.2.1 Managing Innovation Resources


Innovation begins with creativity. Therefore, an organisation needs to establish a creative work environment in order to generate creativity. A creative work environment means a workplace culture where employees believe that new ideas are evaluated, appreciated and encouraged. There are five factors that encourage creativity in the workplace: challenging work; encouragement from the

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organisation; encouragement from supervisors; encouragement from the work groups; and freedom (Williams, 2000). Work will become challenging when it requires hard work, focus and attention, and viewed as important by other people in the organisation. Challenging work will encourage creativity since it is able to create a reward of experience in terms of the psychology of the executor. When accepting challenging work, an employee will try to figure out the methods or ideas that can assist in performing the particular job. The success in performing the challenging job will give satisfaction to the employee. A creative work environment requires three types of encouragement, namely encouragement from the organisation, encouragement from supervisors and encouragement from the workgroups. (Refer to Figure 11.2)

Figure 11.2: Factors that encourages creativity in the work place

(a)

Encouragement from the organisation Encouragement from the organisation is present when the management encourages risk-taking and new ideas, supporting and making good evaluation towards particular ideas, grant rewards and recognition towards creativity and encourages the sharing of new ideas among the sections within the organisation. Encouragement from supervisors Encouragement from supervisors or managers is the form of encouragement given by those who are in the chain of command of an employee. This type of encouragement is given by the managers in order to provide clear goals to encourage open interaction with subordinates and actively show support towards the development of new ideas. Encouragement from the workgroups Meanwhile, encouragement from the workgroups exists when members of the group have diversity of experience, education and background, and when there is openness in the contribution and sharing of ideas.

(b)

(c)

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Freedom here means providing a slight amount of power or authority to the employee towards his work activities. The power given can provide space for the employee to be able to make decisions. The process of decision making will produce useful ideas that are able to assist the employee to perform his work successfully. However, control must also be given to avoid any occurrence of unwanted issues, for example, the employee takes the opportunity to do something negative as a result of the authority given.

EXERCISE 11.2
Based on your understanding, describe briefly the following: (a) (b) (c) Innovation Technology Creative working environment

11.3 ORGANISATIONAL CHANGE


Organisations normally face two types of environments: stable and dynamic. It is almost difficult nowadays to find a business environment that is completely stable. Organisations nowadays face a dynamic environment where the environmental factors, either specific or general, change rapidly. If an organisation is not capable of handling environmental changes, it has a poor chance of maintaining its position in its area of business. Therefore, the organisation must always monitor and view the effect of each of the changes. Any change may bring either opportunity or threat for the organisation. It is because of these effects that the organisation needs to make changes. What is meant by organisational change? Organisational change is the need for an organisation to change from one condition to another to take the opportunity or avoid a threat caused by environmental changes in order to retain the survival of the organisation.

11.3.1 Forces of Change


As you already know, organisations nowadays face environments that are dynamic and continually changing. What are the forces that demand an organisation to change? One of the forces is the change in the conditions of the workforce. The condition of workforce nowadays requires the organisation to be

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suited to the various cultures in the environment. This is because the current environment provides a diversity of workforce, either diversity from an obvious angle up to something that can hardly be detected. Therefore, the policies of human resource and its practices must be changed in order to attract interest and retain a diverse workforce besides trying to avoid any court action. Technology is viewed as one of the forces that can change the work methods and the organisation itself. For example, the use of computers as one of the tools to monitor and control employees causes the managers span-of-control to become wider and the structure of organisation to become more open. The sophistication of information technology has caused organisations to be more sensitive. Consequently, some organisations now can develop, produce and distribute products faster than before.

SELF-CHECK 11.2
From your point of view, what are the ways to make changes in the morals and attitude of staff in their areas of employment?

Starting from the early 1970s, due to the rise of the world petroleum price, the world economy has continuously affected organisations. The most obvious example is when the economic downturn took place in Malaysia somewhere around the middle of 1997. The value of the ringgit fell, leading to the collapse of the stock exchange and to the downfall of several of the countrys most significant industries. It is the effect of this fall in ringgit value that also caused Malaysia to lose its competitive force in the international market and later forced the government to peg the ringgit to the US dollar. Besides that, the loan interest rates that had gradually increased forced many organisations to retrench their employees and worse, some of them were forced to close their businesses. From the examples above, it is clear that the economy is also one of the factors why an organisation needs to change. Competition also results in change especially in the aspect of quantity and quality. As a result of global trading, competition not only comes from inside the country but also involves overseas organisations. Competition not only involves organisations in the same industry but also those in other industries. Due to this competition, organisations must retain their survival from the threat of competition. Successful organisations are those that are able to adapt to the current flow of competition. They are the organisations that are fast and capable of developing new products and services and selling them in the market.

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Organisations need to adapt to changes in social trends. Changes in social trends could change the preferences and wants of customers.

This change will definitely alter the level of demand towards products and services of the organisation. Not only that, the products and services that were once in high demand become outdated due to this change. Therefore, the organisation needs to make changes in order to adapt to the current condition of social trends. The countrys internal and global political conditions affect organisations. If there is any change of government in a country, it will also cause change in terms of the business rules and regulations of that particular country.

Table 11.1: Forces of Change and Their Effects Forces of Change Workforce conditions Examples

Increase in the number of professionals Increase in cost of workforce Use of computer and automation TQM Programmes Increase in interest rates Crisis in currency value Global competition Mergers and acquisitions Increase in educated groups of people Change in preferences Downfall of communist countries Change to new government

Technology

Economy

Competition

Social trend chart

Politics

ACTIVITY 11.2
The transfer of power from the Prime Minister of Malaysia to his deputy causes surprise and worry for foreign investors in Malaysia. Is this good for the country? Discuss.

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EXERCISE 11.3
Other than the examples given in Table 11.1, give one example of effects for each of the forces of change.

11.4

MANAGING CHANGE

Initiating change refers to carrying out something using new ways and methods compared to before. Making changes in organisations without any planning can lead to the destruction of a particular organisation. Therefore, organisation must make planned changes. Planned changes means changing activities that are necessary and required and these changes have to be goaloriented.

SELF-CHECK 11.3
What is your opinion on the differences between changes that are planned with changes that are carried out without proper planning?

According to Robbin (1998), there are two goals for changes, that is: (a) (b) To increase the capability of the organisation in order to be able to accept challenges and changes in the environment; and To change the behaviour of individuals within the organisation.

If an organisation wishes to stay in the business, it must respond to the changes in the environment. When competitors produce new products and services, the government starts to implement new rules, the supply of resources becomes scarce and any other changes that take place, organisations must be able to adapt to these conditions. Generating innovation, granting power to employees and introducing teamwork are some of the examples of planned changes activities that are directed as a response towards the changes in the environment. Since the success of an organisation depends on the efficiency and effectiveness of employees, planned changes are also concerned with changing the behaviour of individuals or groups within an organisation.

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In implementing changes within the organisation, there are two types of changes, that is: (a) (b) Change of first order; and Change of second order.

First order change is a linear change, slow in nature and implemented in stages. This change is made without any apparent change in the basic structure of the organisation. It is also conducted that way if there is no strong pressure from the environment. Besides that, if the particular organisation has a strong culture, changes must be implemented slowly and in stages. The second order change is a change that is radical in nature, multidimensional and multilevel. This type of change needs high levels of leadership in order to realise the changes. It takes place when there is intense pressure from the environment that disrupts the survival of the organisation. This demands the organisation to make drastic changes.

ACTIVITY 11.3
Do you agree that second order change requires a leader who is charismatic and has a clear vision in order to ensure the continuity of the organisation? State your reasons. We have already discussed what is meant by planned changes, its objectives and the types of changes that can happen in an organisation. Now the question rises on who will be responsible for managing the activities of change in organisations. The answer is the change agents. Change agents are anyone, managers, nonmanagers, employees or external negotiators. In the effort to make a significant change in the organisation, the management is more inclined to use external negotiators who have more knowledge regarding theories and methods of changes.

EXERCISE 11.4
Try to explain briefly the two types of changes in organisations.

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11.4.1 Aspects that Can be Changed by Change Agents


There are aspects in organisations that can be changed by change agents, which are structure, technology, physical layout and employees. (Refer to Figure 11.3)

Figure 11.3: Aspects that can be changed by change agents

(a)

Change of Structure Structure for an organisation is not something that is absolute. Structure must be changed to adapt to the conditions in the environment. Thus, change agents might need to change the structure of the organisation if necessary. The structures of organisation explain the methods of work divisions, combined and coordinated. Change agents can change one or more of the important elements in designing the organisation. For example, widening the span-of-control, combining the responsibilities of departments and others. Rules and procedures can be implemented to increase standards or the level of decentralisation can be increased to accelerate the process of decision making. Change agents can introduce significant modification in the true design of organisations. This can include the change of form from a simple structure into a team-based structure or in other words, changing the form of departmentalisation. Change agents can also take into consideration the redesigning of work and work schedules. Another example of modification is the reward system for employees. Motivation can be increased by making improvements in the employees rewards system. For example, by introducing the system of bonus based on performance and profit sharing between organisation and employees.

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ACTIVITY 11.4
Change in the structure of an organisation can increase the moral of the staff. Do you agree with this statement? Give your reasons.

(b)

Change of Technology Technology is another aspect in the organisation that can be changed or modified by change agents. Nowadays, changes in the technological environment involves introduction to tools, equipments or methods that can either be new automation or computerisation. Competitive factors or innovation in industry requires the change agents to introduce the new tools, equipment and operation methods. In order to maintain the survival of the organisation, the introduction of new technology will be able to assist the organisation in accelerating product development and distribution to customers. It can also help build the competitive advantage of the organisation. The use of this technology also can ensure the ability and effectiveness of the organisation in the industry.

ACTIVITY 11.5
The change of a particular technology in an organisation will give rise to substantial risk. What are the factors that must be considered to minimise this risk?

(c)

Change of Physical Layout Physical layout comprises space and arrangement of tools, equipment and other things in the workplace. This physical layout can influence the work productivity, efficiency and effectiveness of employees. For example, removing walls or partitions or creating an open workspace area in the workplace will facilitate communication among employees. For instance, the management can also change the quantity or types of lighting, level of heat and cold, level of sound, cleanliness of the workplace and the interior design dimensions such as furniture, decorations, and colour. Change of Employees The final aspect that can be changed by change agents is the employees. Change agents can assist individuals or groups within an organisation to work more efficiently. This involves changing the attitude and behaviour of

(d)

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the members of the organisation through communication, making decisions and solving problems.

ACTIVITY 11.6
Do you agree if a series of developmental training are conducted for the employees in order to help them gain new skills and exposure towards new technologies? Discuss this with your friends.

EXERCISE 11.5
List organisational aspects that can be changed by change agents.

11.5 BARRIERS TO CHANGE


When change is needed, the ones that are involved will be the organisation and its members. Based on past experiences, if a change happens, we will not be able to avoid facing barriers. In this case, an organisation will face obstacles of change from two parties: the individual employees and the organisation itself. Below is the explanation regarding the sources of obstructions from both the parties.

ACTIVITY 11.7
A change frequently has good and bad implications for an organisation. In your opinion, what is the most difficult barrier to be changed? Discuss this with your friends.

11.5.1 Individual Barriers


The source of change barrier for individuals comes from basic human characteristics itself, such as perception, personality and needs. The following are five reasons why an individual opposes change. One of the reasons is due to human habits. Habit is a behaviour performed by an individual periodically. The inability of individuals to carry out the behaviour known as habit (for instance, not being able to have coffee before reporting for duty) will result in the individual feeling uneasy or anxious. Individuals feel that

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if changes are to be made, then they will no longer be able to satisfy their habits. Besides that, individuals feel anxious towards change due to their feeling of fear towards the guarantee and security of their employment. For example, if an organisation introduces the use of robotic equipment in the production process, individuals will develop the feeling that their work is no longer secure. Economics is also one of the factors that cause individuals to oppose change. Individuals have the assumption that change will affect their income. Changes in work activities or developing a new work routine can raise the feelings of fear in the individuals. Individuals become worried that they are no longer able to perform the work following the new standards, particularly if payment made is based on productivity. Besides that, the anxiety towards something that is unknown causes individuals to oppose changes. They do not know whether they can perform under the new approach. This causes the individuals to think only of negative aspects. Other than that, the reason that contributes towards change barriers is the selective nature in processing information. Individuals only want to hear and process information that they desire or information that are equal to their assumptions. Therefore, when this condition rises, individuals are usually inclined to have negative thoughts.

11.5.2 Organisational Barriers


There are several sources that are identified as being organisational barriers. Organisations usually have built in mechanisms that are able to provide stability. When an organisation faces the need for change, the organisation fears that the stability felt all this while will be severely affected. This condition is referred to as structure inertia. Restriction of change focus refers to the condition where an organisation makes changes on a certain sub-system only. An organisation is formed from the combination of interdependent sub-systems. Therefore, modification cannot be made towards one sub-system without involving the other sub-systems. Thus, if changes are made towards one sub-system only, the changes may neither be acceptable nor successful. Group inertia is one of the sources of organisational barriers. It is inertia in the form of a group that creates barriers towards change. For example, individuals have already agreed to accept the changes that will be made but the employee union does not want any change, which then causes individuals to be forced to oppose the change and this is referred to as group inertia.

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Organisational change may be a threat to the expertise of certain groups. These groups are worried that if change takes place, their expertise may no longer be needed and this will further jeopardise the security of their employment. Besides that, changes are also viewed as a threat towards the authority of some groups. For example, the introduction of involvement in decision making and the formation of self-managed teamwork are the types of changes that can threaten the authority of managers. Other than that, changes are also assumed to become a threat towards the existing allocation of resources. Some groups in the organisation that have control over the resources usually view change as a threat to their position. These groups fear that change will result in scarcity or permanent loss of resources that have been enjoyed all this while.

SELF-CHECK 11.4
List the differences between individual barriers and organisational barriers.

11.6 OVERCOMING THE BARRIERS TO CHANGE


There are six tactics that can be implemented by change agents to overcome change barriers. (a) Communication and Learning Barriers can be reduced through communication with employees in order to help them to see the logical aspect of a particular change. This tactic is based on the assumption that the source of barrier is caused by obtaining the wrong information, or interpreting information in the wrong condition, or through a bad communication condition. This tactic is used to provide clarification and accurate information regarding the changes which can help in reducing barriers. Communication can be implemented through face-to-face discussions, memos, group presentation or reports. Involvement This tactic assumes that it is difficult for a person to oppose change if he himself is also involved in the effort and activities of change. With this involvement, the involved parties will contribute their expertise and involvement and this will reduce barriers. Not only that, commitment can also be obtained and this will enable an increase in the quality of change.

(b)

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(c)

Facilities and Support Change agents can offer forms of facilities and support to reduce barriers. When employees have a high level of anxiety, counselling services and therapy, new skills training or paid leaves are forms of facilities and support that can be given to employees. Negotiation Change agents can also deal with change barriers by making valuable exchange in order to reduce barriers. For example, if the barriers come from some individuals having power, reward packages can be used as negotiation substance. Besides that, this reward packages and offers will be able to fulfil the needs of the individuals. Negotiation tactics are most suitable when change barriers are caused by powerful individuals in the organisation. Manipulation and Co-optation Manipulation refers to the effort of changing the standpoint of a person. Altering or changing facts to make them interesting, restricting bad information and creating rumours are some of the ways to obtain employees agreement. Co-optation is the combination of manipulation and involvement. The act of co-optation will try to buy group leaders who cause barriers by providing these leaders important roles in making change decisions. Advices from these leaders are required, not to find the best solution but as confirmation. By buying these leaders and successfully changing their standpoint, indirectly it will also change the perception and standpoint of their followers. Force This is the final tactic that can be implemented by change agents. This is an application that uses threat towards the person who is a barrier. For example, threat to be moved to another department, losing the chance of a promotion, and a bad performance evaluation are threats imposed if the person does not want to abide by the changes that will be made.

(d)

(e)

(f)

SELF-CHECK 11.5
If you are the general manager of an organisation, what are the factors needed to overcome barriers towards change?

EXERCISE 11.6
Give the differences between negotiation, co-optation and force.

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11.7 WAYS TO MANAGE CHANGE


Change to be made by a particular organisation must be managed as properly as possible in order to avoid the occurrence of any negative matters especially from groups that obstruct change. Change can be managed using several ways: (a) (b) (c) Liquidation: Refers to getting individuals who are affected by the changes to believe the need for these changes. Change intervention: Refers to the processes used towards employees and managers in order to change their behaviour and work practices. Freezing: Refers to supporting and strengthening the changes that were successfully carried out in order for it to continue. Table 11.2 explains several suggestions that can be used by managers when there are groups who are barriers to change by using the suggestions by Kurt Lewin.
Table 11.2: Things that need to be Done When Employees form Barriers towards Change Source: Williams (2000) Liquidation Sharing thoughts with employees on why change is needed. Exhibits sympathy towards the difficulties faced by the managers and employees due to the change. Changes Explaining the benefits that can be gained from changes. Identifying respected individuals in the organisation to manage the efforts of changes. Allowing individuals to accept the suitable effect from the changes, for example while the employees are busy carrying out their work. Freezing Upper management needs to give support by providing consistent messages and resources. Let everyone know about where and when changes had taken place successfully.

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Communication regarding the changes in a context that is simple, clear, widely verbal or written.

If possible, ensure that no employees are being terminated to reduce fear towards change. Offer training to ensure employees are confident and capable in performing the needs of the new task.

Offer counselling or other services that can assist the employees in overcoming the pressure due to the change.

ACTIVITY 11.8
What is the importance in managing a particular change that wants to be carried out by a particular organisation? Discuss this with your friends.

EXERCISE 11.7
Give a brief description on the theory proposed by Kurt Lewin.

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EXERCISE 11.8
Multiple Choice Questions 1. Which of the following is NOT a method suggested for managing change barriers? A. Education and communication B. Participation C. Test D. Negotiation 2. Which stage in the S-pattern innovation curve indicates that slight effort will produce obvious progress in the technology performance? A. Initial stage of cycle B. Intermediate stage of cycle C. Final stage of cycle D. Initial and final stage of cycle Which tactic for overcoming barriers to change uses threat towards the employee posing the barrier? A. Negotiation B. Manipulation C. Co-optation D. Force What does the method of buying group leaders who cause barriers towards change referred to? A. Negotiation B. Force C. Co-optation D. Involvement Change that is radical in nature, multidimensional and multilevel refers to which order of change? A. Fourth B. Third C. Second D. First

3.

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Innovation Caselet

1. 2. 3.

What does innovation mean? What factors would encourage innovation in an organisation? What are some of the barriers to change?

Innovation helps organisations to build their own competition advantages. Therefore, it is the duty of every organisation to create a creative work environment to encourage the emergence of creative ideas from its human resources. It is these creative ideas that assist organisations in discovering new technologies. In order to guarantee the survival of the organisation, changes must be made from time to time in order for it to be in line with the changes of the business environment. Organisation changes must be planned as properly as possible in order for it to give benefit instead of detriment to the organisation.

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Change intervention Co-optation Creativity Encouragement

Freezing Liquidation Manipulation S-pattern innovation

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