What is Organizational Change?

An alteration of an organizations environment, structure, culture, technology, or people

A constant force An organizational reality An opportunity or a threat

Change agent
A person who initiates and assumes the responsibility for managing a change in an organization

Basic Questions for Change Agents

What are the forces acting upon me?
What are the pressures I should take into consideration as I decide what to change and how I should change it?

What should we change?

Should the changes be strategic and companywide or relatively limited?

How should we change it?

How should we actually implement the change?

Why organisations need to change?

challenges of growth, especially global markets

challenge of economic downturns and tougher trading conditions

changes in strategy

technological changes
competitive pressures, including mergers and acquisitions customer pressure, particularly shifting markets to learn new organisation behaviour and skills government legislation/initiatives.

Forces for Change

External Forces
Competition Laws and regulations New technologies Labor market shifts Business cycles Social change

Internal Forces
Strategy modifications New equipment New processes Workforce composition Job restructuring Compensation and benefits Labor surpluses and shortages Employee attitude

Three Categories of Change

Types of Change
Structural
Changing an organizations structural components or its structural design

Technological
Adopting new equipment, tools, or operating methods that displace old skills and require new ones
Automation: replacing certain tasks done by people with machines Computerization

People
Changing attitudes, expectations, perceptions, and behaviors of the workforce

Model for Planned Organizational Change

The Strategic Role of Change

Organizations must run fast to keep up with changes taking place all around them Todays organizations must keep themselves open to continuous innovation to survive

Three types of change:

Episodic change Continuous change Disruptive change

Change has become the norm today

Elements for Successful Change

Organizational change is the adoption of a new idea or behavior by an organization Organizational innovation is the adoption of an idea or behavior that is new to the organizations industry, market, or general environment Change process within organizations comes from innovation and new ideas regardless of timing Successful change includes ideas and creativity, need, decision to adopt, implementation, and resources

Successful Change Elements

Techniques for Encouraging Technology Change

Switching Structures create an organic structure Creative Departments department for innovation Venture Teams a small company within the organization Corporate Entrepreneurship promote entrepreneurial spirit Bottom-up Approach useful ideas come from people and daily work

Strategy and Structure Change

Organizations need to change strategies, structures, processes, and procedures more often to adapt Many organizations are preparing for more change by:
Cutting out layers Decentralizing decision making Shift toward horizontal structures Empowered teams and workers Virtual network strategies Incorporating eBusiness

Two Views Of The Change Process

Calm waters metaphor
A description of traditional practices in and theories about organizations that likens the organization to a large ship making a predictable trip across a calm sea and experiencing an occasional storm

White-water rapids metaphor

A description of the organization as a small raft navigating a raging river

Change in Calm Waters

Kurt Lewins Three-Step Process
Unfreezing
The driving forces, which direct behavior away from the status quo, can be increased. The restraining forces, which hinder movement from the existing equilibrium, can be decreased. The two approaches can be combined.

Implementation of change Refreezing

The Change Process

Change In White-water Rapids

Change is constant in a dynamic environment. The only certainty is continuing uncertainty. Competitive advantages do not last. Managers must quickly and properly react to unexpected events.
Be alert to problems and opportunities Become change agents in stimulating, implementing and supporting change in the organization

Implementing Planned Changes

Organization development (OD)
An activity (intervention) designed to facilitate planned, long-term organization-wide change
Focuses on the attitudes and values of organizational members; Is essentially an effort to change an organizations culture.

Organizational Development Techniques

Typical OD Techniques
Survey feedback
A method of assessing employees attitudes toward and perceptions of a change they are encountering by asking specific questions

Process consultation
The use of consultants from outside an organization to help change agents within the organization assess process events such as workflow, informal intra-unit relationships, and formal communications channels

Typical OD Techniques (contd)

Team-building
An activity that helps work groups set goals, develop positive interpersonal relationships, and clarify the roles and responsibilities of each team member

Intergroup development
An activity that attempts to make several work groups become more cohesive

Typical OD Techniques (contd)

Sensitivity Training (Laboratory or T-groups)
Purpose is to increase participants insight into their own behavior and that of others by encouraging an open expression of feelings in a trainer-guided group.

Definition of innovation
Technological innovations are defined as new products and processes and major technological modifications to products and processes. An innovation is considered performed if it is introduced to the market (product innovation) or implemented in the production process (process innovation). Innovation includes many research, technological, organizational, financial and commercial activities.

WHAT IS INNOVATION?
Invention Technology Innovation Creating new or improved products, processes and services Knowledge and learning Uncertainty

Innovation and the Changing Workplace

In todays dynamic environment, managing change and innovation is key Organizations must embrace many types of change Todays successful companies are continually innovating Organizational change requires the adoption of new ideas and/or behavior Many organizations struggle with changing successfully..

CHARACTERISTICS OF SUCCESSFUL INNOVATING COMPANIES - 1

Systematic collection of all impulses that could lead to innovation Creativity of employees Ability to evaluate the possibility of the innovation idea Good team work Project-based approach and ability to manage projects

CHARACTERISTICS OF SUCCESSFUL INNOVATING COMPANIES - 2

Cooperation with external experts (universities, research laboratories) Proper rate of risk-taking Employees motivation (the employees are willing to improve the product and the operation of the whole company) Continued education of employees Ability to finance the innovation activities

WHAT TO DO
1. Start with analysis and study of opportunities. 2. Go among people, ask questions, listen 3. Effective innovations are surprisingly simple. They must be focused on specific needs and on specific final products. 4. Effective innovation start on a small scale. 5. A successful innovation always tries to win a leading position, otherwise you create opportunities for your competitors.

WHAT TO AVOID
1. Dont try to be too clever. All that is too sophisticated will almost certainly go wrong. 2. Dont try to do too many things at once. Focus on the core of the problem. 3. Dont try to make innovations for the future but for today. An innovation can have a longterm impact but there must be an immediate need for it.

7 SOURCES OF INNOVATION IMPULSES (Drucker)

INTERNAL
1. 2. 3. 4. unexpected event contradiction change of work process change in the structure of industry or market

EXTERNAL
5. Demographic changes 6. Changes in the world view 7. New knowledge

1. Unexpected event
Unexpected success
1. 2. 3. 4. What will the use of the offered opportunity mean to us? Where will its introduction take us? What do we need to do for its implementation? How can we achieve that?

Unexpected failure Unexpected external event

2. Contradiction
Non-compliance with economic reality Contradiction between reality and anticipations about it Contradiction between the anticipated and real behavior of customers and their values

3. Change of process
realize the necessity of change, identify the weak point of the chain be convinced that if something does not work the way it should, then it is necessary to attempt a change the solution must be convenient for those who will implement it. It must place moderate and feasible requirements

4. Change in the structure of industry and market

Rapid growth of the industry
Identification of new market segments Convergence of technologies (e.g. use of computers in telecommunications) Rapid change of the industry and resulting need of a structural change

5. Demography
easiest to describe and to predict influence what will be bought, who and in which amounts will purchase

6. Change of attitudes
change in the approach to health: health-care, food, spending the leisure time upper-middle class: a chance to offer nonstandard services at non-standard prices increasing migration, feminism, regionalism etc Timing is essential - to be the first

7. New knowledge
Based on convergence or synergy of various kinds of knowledge, their success requires, high rate of risk
Thorough analysis of all factors. identify the missing elements of the chain and possibilities of their supplementing or substitution; Focus on winning the strategic position at the market. the second chance usually does not come; Entrepreneurial management style. Quality is not what is technically perfect but what adds the product its value for the end user

Roles of Innovation and Organizational Change

Creativity
the generation of a novel idea or unique approach that solves a problem or crafts an opportunity.

Innovation
the process of taking a new idea and putting it into practice.

Process Innovations
result in better ways of doing things.

Product Innovations
result in new or improved goods or services.

Commercializing Innovations
turns ideas into economic value

Roles of Innovation and Organizational Change

Roles of Innovation and Organizational Change

Critical Innovation Roles in Organizations
Idea generatorsprovide new insights and discoveries. Information gatekeepersstay abreast of outside developments. Product championsadvocate for new products or processes. Project managerskeep innovation projects on track. Innovation leaderskeep innovation values, goals visible.

INNOVATION AND ORGANIZATIONAL CHANGE

Roles of Innovation and Organizational Change

Kotters Transformation Model
Eight steps to create and sustain change
1) Establish urgency 2) Create guiding coalition 3) Develop vision 4) Communicate change vision Empower broad-based action 6) Create short-term wins 7) Consolidate gains 8) Anchor new approaches in culture

Forms of Innovation
Radical innovation
A new product, service or technology that completely replaces an existing one

Incremental innovation
A new product, service or technology that modifies an existing one

Forms of Innovation
Technical innovation
A change in the appearance or performance of products or services, or of the physical processes through which a product passes

Managerial innovation
A change in the management process in an organization

Forms of Innovation
Product Innovation
A change in physical characteristics or performance of an existing product or service or the creation of new ones

Process Innovation
A change in the way a product or service is manufactured, created or distributed

Stimulating Innovation
Creativity
The ability to combine ideas in a unique way or to make unusual connections

Innovation
The process of taking a creative idea and turning it into a useful product, service, or method of operation
Perception Incubation Inspiration Innovation

Idea Champion
Dynamic self-confident leaders who actively and enthusiastically inspire support for new ideas, build support, overcome resistance, and ensure that innovations are implemented.

Systems View of Innovation

Innovation Variables

Creating the Right Environment for Innovation

Structural Variables
Adopt an organic structure
Make available plentiful resources

Engage in frequent interunit communication

Minimize extreme time pressures on creative activities

Provide explicit support for creativity

Creating the Right Environment for Innovation (contd)

Cultural Variables
Accept ambiguity Tolerate the impractical Have low external controls Tolerate risk taking Tolerate conflict Focus on ends rather than means Develop an open-system focus Provide positive feedback

Creating the Right Environment for Innovation (contd)

Human Resource Variables
Actively promote training and development to keep employees skills current.
Offer high job security to encourage risk taking. Encourage individual to be champions of change.

Components of innovation
The virtuous checklist
Shared vision, leadership Appropriate structure Key individuals Effective team work Development of the human capital Extensive communication High involvement in innovation External focus Creative climate

Shared vision, leadership

Leadership and change agents do not always overlap Top management commitment: easier said than done Involvement Commitment Enthusiasm Support Challenge to secure long-term commitment in balance with short-term returns and acceptance of risk

Examples: Bill Gates / Microsoft Siemens: Edward Krubasik (outside) transformed the company from an electrical engineering firm to a major IT and software firm

Appropriate structure
No best practice / perfect model

Minzberg structural archetypes Simple structure: centralized organic type (e.g. Small start-ups in high tech) Machine bureaucracy: centralized mechanistic organization, controlled centrally by systems (e.g. McDonalds) Divisionalized form: decentralized form designed to adapt to local environmental challenges / core and periphery (e.g. HSBC)

Appropriate structure
Professional Bureaucracy: Decentralized mechanistic form with power located with individuals but coordinated via standards (e.g. Ericsson) Ahocracy: Project type of organization designed to deal with instability and complexity (e.g. Man on the Moon project by NASA) Emergent model: Associated with shared common values (e.g. Academia, NPOs)

Key individuals
Entrepreneur : change agent important at start of the innovation journey

Champion: important when transforming ideas into practice and keeping heads in the same direction
Mentor: powerful outside promotor needed to find support and resources for the innovation outside its immediate group Critic: necessary evil needed to identify problems and bottlenecks at an early stage Gatekeeper: mediator of information to relevant people

Effective team work

Combining different perspectives Crucial to put together the right team, four stages

Forming Storming Norming Performing

Key elements Clear tasks Effective leadership Balance of team roles Conflict resolutiom Links to organization

Development of the human capital

Strong correlation between human capital and innovation capabilities on all levels (firms, regions and nations) Training works as a double-sided sword: it increases capabilities and takes away resistance to change Learning-by-doing: learning how to do things better Learning-by-learning: learning how to do better things

Extensive communication
Communication is key to combine the different knowledge sets needed for innovation Multidirectional (up, down and laterally) Makes use of multiple channels Job rotation Cross-functional teams Review sessions Team briefings Multiple media

High involvement in innovation

High level of participation improves competitiveness substantially Associated with total quality management and lean production The appeal to create a culture of innovation If succesfull it creates a sustained basis for organizational learning Easier destroyed than constructed

External focus
Navel gazing is the end-all of innovation even in technology based industries The challenge of understanding (often latent) user needs

Also other players: suppliers, competitors, regulators, univerisities.... Both threat and opportunity! Aspects of quality management and of coumunication

Innovation is a risky process....but also a mandatory one. Success depends of a variety of:
Internal factors
Good management Core competencies Clear innovation strategy Right technology

External factors
Links with market and suppliers Learning from competitors Institutional support: financing, human capital, etc

Table 2.3 Problems of partial views of innovation

Table 2.3 Problems of partial views of innovation (continued)