What is Organizational Change?An alteration of an organizations environment, structure, culture, technology, or peopleA constant forceAn organizational realityAn opportunity or a threatChange agentA person who initiates and assumes the responsibility for managing a change in an organization

Basic Questions for Change AgentsWhat 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 ForcesInternal Forces

Competition Laws and regulationsStrategy modificationsNew technologiesNew equipmentLabor market shiftsNew processesBusiness cyclesWorkforce compositionSocial changeJob restructuringCompensation and benefitsLabor surpluses and shortagesEmployee attitude

Three Categories of Change

Types of ChangeStructuralChanging an organizations structural components or its structural design

TechnologicalAdopting new equipment, tools, or operating methods that displace old skills and require new onesAutomation: replacing certain tasks done by people with machinesComputerization

PeopleChanging attitudes, expectations, perceptions, and behaviors of the workforce

Model for Planned Organizational Change

The Strategic Role of ChangeOrganizations must run fast to keep up with changes taking place all around themTodays organizations must keep themselves open to continuous innovation to surviveThree types of change:Episodic changeContinuous changeDisruptive changeChange has become the norm today

Elements for Successful ChangeOrganizational 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 timingSuccessful change includes ideas and creativity, need, decision to adopt, implementation, and resources

Successful Change Elements

Techniques for Encouraging Technology ChangeSwitching Structures create an organic structureCreative Departments department for innovationVenture Teams a small company within the organizationCorporate Entrepreneurship promote entrepreneurial spiritBottom-up Approach useful ideas come from people and daily work

Strategy and Structure ChangeOrganizations need to change strategies, structures, processes, and procedures more often to adapt

Many organizations are preparing for more change by:Cutting out layersDecentralizing decision makingShift toward horizontal structuresEmpowered teams and workersVirtual network strategiesIncorporating eBusiness

Two Views Of The Change ProcessCalm waters metaphorA 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 metaphorA description of the organization as a small raft navigating a raging river

Change in Calm WatersKurt Lewins Three-Step ProcessUnfreezingThe 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 changeRefreezing

The Change Process

Change In White-water RapidsChange 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 opportunitiesBecome change agents in stimulating, implementing and supporting change in the organization

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

Organizational Development Techniques

Typical OD TechniquesSurvey feedbackA method of assessing employees attitudes toward and perceptions of a change they are encountering by asking specific questions

Process consultationThe 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-buildingAn activity that helps work groups set goals, develop positive interpersonal relationships, and clarify the roles and responsibilities of each team memberIntergroup developmentAn 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 innovationTechnological 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?InventionTechnologyInnovationCreating new or improved products, processes and servicesKnowledge and learningUncertainty

Innovation and the Changing WorkplaceIn todays dynamic environment, managing change and innovation is keyOrganizations must embrace many types of changeTodays successful companies are continually innovatingOrganizational change requires the adoption of new ideas and/or behaviorMany organizations struggle with changing successfully..0

CHARACTERISTICS OF SUCCESSFUL INNOVATING COMPANIES - 1Systematic collection of all impulses that could lead to innovationCreativity of employeesAbility to evaluate the possibility of the innovation ideaGood team workProject-based approach and ability to manage projects

CHARACTERISTICS OF SUCCESSFUL INNOVATING COMPANIES - 2Cooperation with external experts (universities, research laboratories)Proper rate of risk-takingEmployees 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 Start with analysis and study of opportunities.Go among people, ask questions, listen Effective innovations are surprisingly simple. They must be focused on specific needs and on specific final products.Effective innovation start on a small scale.A successful innovation always tries to win a leading position, otherwise you create opportunities for your competitors.

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

7 SOURCES OF INNOVATION IMPULSES (Drucker)INTERNAL unexpected eventcontradictionchange of work processchange in the structure of industry or market

EXTERNALDemographic changesChanges in the world viewNew knowledge

1. Unexpected event Unexpected success 1. What will the use of the offered opportunity mean to us?2. Where will its introduction take us?3. What do we need to do for its implementation?4. 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 non-standard 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 ChangeCreativitythe 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 Innovationsturns ideas into economic value

Roles of Innovation and Organizational Change

Roles of Innovation and Organizational ChangeCritical 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 CHANGERoles of Innovation and Organizational ChangeKotters Transformation ModelEight steps to create and sustain change

Establish urgencyCreate guiding coalitionDevelop visionCommunicate change visionEmpower broad-based action6) Create short-term wins7) Consolidate gains8) Anchor new approaches in culture

Forms of InnovationRadical innovationA new product, service or technology that completely replaces an existing oneIncremental innovationA new product, service or technology that modifies an existing one

Forms of InnovationTechnical innovationA change in the appearance or performance of products or services, or of the physical processes through which a product passesManagerial innovationA change in the management process in an organization

Forms of InnovationProduct InnovationA change in physical characteristics or performance of an existing product or service or the creation of new onesProcess InnovationA change in the way a product or service is manufactured, created or distributed

Stimulating InnovationCreativityThe ability to combine ideas in a unique way or to make unusual connections

InnovationThe process of taking a creative idea and turning it into a useful product, service, or method of operationPerceptionIncubationInspirationInnovation

Idea ChampionDynamic 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 InnovationStructural VariablesAdopt an organic structureMake available plentiful resourcesEngage in frequent interunit communicationMinimize extreme time pressures on creative activitiesProvide explicit support for creativity

Creating the Right Environment for Innovation (contd)Cultural VariablesAccept ambiguityTolerate the impracticalHave low external controlsTolerate risk takingTolerate conflictFocus on ends rather than meansDevelop an open-system focusProvide positive feedback

Creating the Right Environment for Innovation (contd)Human Resource VariablesActively 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 innovationThe virtuous checklistShared vision, leadership Appropriate structureKey individualsEffective team workDevelopment of the human capitalExtensive communicationHigh involvement in innovationExternal focusCreative climate

Shared vision, leadership Leadership and change agents do not always overlap

Top management commitment: easier said than doneInvolvementCommitmentEnthusiasmSupport

Challenge to secure long-term commitment in balance with short-term returns and acceptance of risk

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

Appropriate structureNo best practice / perfect model

Minzberg structural archetypesSimple 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)

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)Appropriate structure

Key individualsEntrepreneur : 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 workCombining different perspectives

Crucial to put together the right team, four stagesFormingStormingNormingPerforming

Key elementsClear tasksEffective leadershipBalance of team rolesConflict resolutiomLinks to organization

Development of the human capitalStrong 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 communicationCommunication is key to combine the different knowledge sets needed for innovation

Multidirectional (up, down and laterally)

Makes use of multiple channelsJob rotationCross-functional teams Review sessionsTeam briefingsMultiple media

High involvement in innovationHigh level of participation improves competitiveness substantially

Associated with total quality management and lean production

The appeal to create a culture of innovationIf succesfull it creates a sustained basis for organizational learningEasier destroyed than constructed

External focusNavel 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 factorsGood managementCore competenciesClear innovation strategyRight technology

External factorsLinks with market and suppliersLearning from competitorsInstitutional support: financing, human capital, etc

Table 2.3 Problems of partial views of innovation

Table 2.3 Problems of partial views of innovation (continued)

*******************Creativity begins with an idea. Thus far, ideas have been left to individual brilliance but a few are attempting to develop new processes for idea generation based on a group effort.*This process is critical to avoiding the many pitfalls of new product development. Studies have shown that less than 10% of new ideas result in successful new products. *These roles are often filled by a number of different people. Idea generators typically are creative types while project managers are process oriented. Product champions tend to be senior managers.*Transformational change is a major change in the organization direction, structure and possibly culture. It requires that senior managers be leaders as well as managers.*******