Chapter 11

Managing Change and Innovation

 Why Change?

• IBM
– (1960 – 2000) From hardware, software company
– (2000 – present) To a service company (mainly,
consulting)
• If organizations don’t successfully change and
innovate, they die

Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 2

Innovation & Changing Workplace

• The adoption of a new idea or behavior by an

organization
• Change and innovation can come from outside
forces
• Managers want to initiate change from the inside
• Disruptive innovation is a goal for global
competition
• Trickle-up / reverse innovation: Jeep at China
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 Organizational Change

• Change is not easy;

• organizations must take an ambidextrous approach
– Incorporating structures and processes that are
appropriate for:

– Creative impulse and for the systematic implementation

• Managers encourage flexibility and freedom to

innovate

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 Changing Things: New Products 
and Technologies
• Product Change – a change in the
organization’s product or service outputs

• Technology Change – a change in the

organization’s production process

• Three innovation strategies:

1. exploration,
2. cooperation, and
3. entrepreneurship
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Three Innovation Strategies
 Exploration

• Creativity – novel ideas that meet perceived needs

or offer opportunities

• Idea incubator – a safe harbor where employees

can develop ideas and experiment without
interference from company bureaucracy or politics
– Yahoo  Brickhouse  Top management support

Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 7

Characteristics of Creative People and Organizations
The World’s Most Innovative Companies

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Cooperation – (1) Internal Coordination
Cooperation

• Horizontal Linkage Model:

– Simultaneously contribute to innovation
– Horizontal coordination mechanisms:
• Marketing = Research = Manufacturing
– Key to Success:
• MANAGEMENT – Planning, organizing, leadership, control
• Team Building
• Project Manager

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Cooperation – (2) External Coordination
Cooperation

• Includes customers, partners, suppliers

• Open innovation – commercialization of ideas
beyond the organization
– P&G – Patent
– LEGO + Hollywood studios

• Crowdsoucing
– Threadless – web 2.0 (open, share, participate)

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Coordination Model for Innovation
 Innovation Roles

• Managers should support entrepreneurship activities and

foster idea champions
– Energy and effort is required to promote a new idea
• Sponsors approve and protect ideas when critics
challenge the concept
• New-venture teams give free rein to creativity
• Skunkworks are informal, autonomous, secretive groups
that focus on breakthrough ideas
• New-venture funds provide resources for new ideas
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Four Roles in Organizational Change
 Changing People and Culture

• Changes in how employees think; Changes in

mind-set

People change = Training and Development (T&D)

Culture change = Organizational Development (OD)

• Large culture change is not easy

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 Training and Development

• Training – Frequently used approach to

changing people’s mind-sets
• Training and development is emphasized for
managers
– Behavior and attitudes will influence people and
lead to culture change

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 Organizational Development

• Planned, systematic process of change using

behavioral science (psychology)
• Addresses three types of problems:
 Mergers and acquisitions (M&A)
 Organizational decline and revitalization
 Conflict management

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 OD Activities

• Team-building activities: Enhancing cohesiveness and

success of organizational groups and teams

• Survey-feedback activities: an employee questionnaire

asking “values, climate, participation, leadership, and
group cohesion”

• Large-group interventions: participants from all parts

of the organization to discuss problems or opportunities
and plan for change
 OD Steps

• Unfreezing:
– Participants must be made aware of problems and be willing to
change; Diagnosis  Identifies work-related problems
• Changing:
– when employees learn new skills to be used in the workplace;
Intervention; Implements a plan for training managers and
employees; Include team building, survey feedback, intergroup
coaching, process-consultation, or symbolic leadership.
• Refreezing.
– When individuals acquire new attitudes or values; Rewarded;
Institutionalized in the organizational culture
11.6 OD Approaches to Culture 
Change
 Implementing Change

• Outline the Need for Change

– Show the performance gap (disparity) b/w existing &
desired performance levels
– Get employees involved in the change as early as
possible; in the planning stage; Empower them!
• Understand the Resistance to Change
– Self-Interest
– Lack of Understanding and Trust
– Uncertainty
– Different Assessments and Goals
– Job security 21
 11.7 Force­Field Analysis

• Change is a result of the competition

between driving and restraining forces

– Driving forces – problems or opportunities

that provide motivation for change

– Restraining forces – barriers to change

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Force­Field Analysis: A Case

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Tactics for Overcoming Resistance to Change

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 Discussion Questions

• Define organizational change and explain the forces driving innovation and
change in today’s organizations.
• Identify the three innovation strategies managers implement for changing
products and technologies.
• Explain the value of creativity, idea incubators, horizontal linkages, open
innovation, idea champions, and new-venture teams for innovation.
• Discuss why changes in people and culture are critical to any change process.
• Define organization development (OD) and large-group interventions.
• Explain the OD stages of unfreezing, changing, and refreezing.
• Identify sources of resistance to change.
• Explain force-field analysis and other implementation tactics that can be used
to overcome resistance.

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 Discussion Questions (continued)
• Describe how IBM has changed during last two decades.
• Explain the major motive of Chrysler to produce Jeep at China in early 2000s, in terms of
change management.

• Explain ambidextrous approach in change management.

• Describe Yahoo’s Brickhouse, from the innovation strategy perspectives.

• Explain briefly key to success of horizontal linkage.

• Describe P&G’s purchase of patents, in terms of innovation strategy.

• Explain how LEGO survived in early 2000s, by innovation strategy.

• Explain briefly crowdsourcing.

• List three features of Web 2.0, in contrast to Web 1.0.

• Describe innovation strategies of Treadless.

• Explain briefly a skunkworks.

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