CHAPTER 7FOSTERING AN INNOVATIVE ORGANISATION

LECTURE OUTLINE

• The nature of change & innovation• Organisational life cycles• Change management & innovation

process• Key organisational change

components

THE NATURE OF CHANGE AND INNOVATION

Change

Any alteration of the status quo

Innovation

New idea applied to initiating or improving a process, product or service

THE NATURE OF CHANGE AND INNOVATION• EXTERNAL FORCES

Response to opportunities and threats from the market, regulators and other elements of the environment

• INTERNAL FORCES Strategy & plans, employees’ behaviour, change & innovation decisions, cultural change, restructures, technological & leadership change

7–5

ORGANISATIONAL LIFE CYCLES

Life cycles: Predictable stages of development organisations typically follow.

There are four life-cycle stages.

ORGANISATIONAL LIFE CYCLE STAGES

Entrepreneurial stageEntrepreneurial stage

Collectivity stageCollectivity stage

Formalisation and control stageFormalisation and control stage

Elaboration-of-structure stageElaboration-of-structure stage

ORGANISATIONAL LIFE CYCLESPossible causes for termination:• Curtailed innovation• Scapegoating• Resistance to change• Turnover• Conflict

ORGANISATIONAL LIFE CYCLESMethods of organisational termination:

• Bankruptcy• Liquidation• Merger• Acquisition• Take-over

Change is with us! We have three options – what will you choose?

• Change Reactively by responding only when we have no choice

• Change Proactively by anticipating the needs of the future in advance.

• Decide to ignore Change and hope that it will go away.

Today The NewWorld

CHANGE MANAGEMENT & INNOVATION PROCESS

Making change/innovation effectiveEight-step model:• Recognition of opportunity/problem• Obtain powerful sponsors• Develop/communicate a vision• Empower others to implement• Prepare for resistance• Plan to reward visible progress• Consolidate change & facilitate more change• Institutionalise changes achieved

CHANGE MANAGEMENT & INNOVATION PROCESS

Recognition of opportunityor problem

Recognition of opportunityor problem

Line up powerful sponsorsLine up powerful sponsors

Develop and communicatea vision

Develop and communicatea vision

Empower others toact out the vision

Empower others toact out the vision

Prepare to overcome resistancePrepare to overcome resistance

Plan for & reward visible progressPlan for & reward visible progress

Consolidate improvements & facilitate further change

Consolidate improvements & facilitate further change

Monitor & institutionalise changeMonitor & institutionalise change

CHANGE MANAGEMENT & INNOVATION PROCESS• Organisational development• Innovation for competitive

advantage• Product development• Intrapreneurship

CHANGE MANAGEMENT & INNOVATION PROCESS

Organisational development

Is a change effort to improve interpersonal working relationships and organisational effectiveness through strategies that use a change agent or third party who is well versed in the behavioural sciences.

CHANGE MANAGEMENT & INNOVATION PROCESSOrganisational development

DiagnosisDiagnosis

EvaluationEvaluation

Intervention: 4 techniques•Process consultation•Team building•Third-party intervention•Technostructural activities

Intervention: 4 techniques•Process consultation•Team building•Third-party intervention•Technostructural activities

CHANGE MANAGEMENT & INNOVATION PROCESSInnovation for competitive advantage:

Four factors needed to ensure advantage

Four factors needed to ensure advantage

1) Hard for competitors to imitate1) Hard for competitors to imitate

2) Meeting significant customer needs2) Meeting significant customer needs

3) Fit of innovation to organisation’s time advantages

3) Fit of innovation to organisation’s time advantages

4) Innovation needs to rely on capabilities accessible to the organisation, but less so to competitors

4) Innovation needs to rely on capabilities accessible to the organisation, but less so to competitors

CHANGE MANAGEMENT & INNOVATION PROCESS

Product development principles:1. Establish a stage-gate development funnel2. Establish cross-functional teams3. Use concurrent engineering4. Involve both customers & suppliers

CHANGE MANAGEMENT & INNOVATION PROCESSIntrapreneurship:

Encourage the take-up of entrepreneurship roles by organisation members, e.g.

• Idea generator• Idea champion• Idea sponsor• Idea orchestrator

KEY ORGANISATIONAL CHANGE COMPONENTS

Significant change usually means changingone or more key components:

• Structural• Technological• Human resource• Cultural• Component inter-relationship

KEY ORGANISATIONAL CHANGE COMPONENTS

Culture

Structure Human Resources

Technology

KEY ORGANISATIONAL CHANGE COMPONENTS

Structural components:• Job definitions• Job groupings• Teams• Delegation• Reporting relationships

KEY ORGANISATIONAL CHANGE COMPONENTSTechnological components:Technology may drive change/innovation by:

• Requiring new work methods.• Providing/removing competitive edge.

KEY ORGANISATIONAL CHANGE COMPONENTSHuman resources components:Human resources is the vehicle for changingknowledge, skills, perceptions & behavioursneeded for a job. It utilises:

• Recruitment & selection• Training• Performance appraisal• Reward systems.

KEY ORGANISATIONAL CHANGE COMPONENTS

Cultural components:Major organisational changes often requireconcomitant changes to organisational culture.

Organisational culture can be defined as a system of shared values, assumptions, beliefs and norms linking an organisation’s members.

KEY ORGANISATIONAL CHANGE COMPONENTSInterrelationship amongst components:Change to one component creates tensions onother components until they are adjusted accordingly.

• Minor changeMay relate to only one component

• Major changeMay relate to all four components

LECTURE SUMMARY• Nature of change & innovation

• Distinguishing change from innovation• External & internal forces for change &

innovation

LECTURE SUMMARY

• Organisational life cycles

• Life cycle stages• Termination

LECTURE SUMMARY• Change management & innovation

process• Organisational development (OD)• Innovation for competitive advantage• Product development• Entrepreneurship

LECTURE SUMMARY

• Key organisational change components• Structural• Technological• Human resource• Cultural• Component interrelationship