Lecture (9)

Innovation and change

04th January 2024
 Syllabus.
Lecture Topics Date
1 Organizations and organizational theory (02nd Nov. 2023)
2 Strategy, organizational decision and effectiveness. (09th Nov. 2023)
3 The External organizational environment. (16th Nov. 2023)
4 Interorganizational relationship. (23rd Nov. 2023)
5 Designing organizations for international organizations. (30th Nov. 2023)
6 Mid- Term Exam (14th Dec. 2023)
7 Organizational life cycle and decline (21st Dec. 2023)
8 Organizational culture and ethical values (28th Dec. 2023)
9 Innovation and change. (04th Jan. 2024)
 Learning objectives
A)- What is the importance of organizational change?

B)- Strategic types of changes:

1)- Technology changes.
2)- Product and service changes.
3)- Strategy and structure changes.
4)- Culture changes.
 Learning objectives
C)- What is the difference between creativity and innovation?

D)- What are the stages of innovation?

E)- What are factors of success of the new products/ services?

 A)- What is the importance of organizational
change?
Change is the only constant in life.
Change mean: develop, adapt, modify, agility, …………………
Organizational change: Higher revenue, cost reduction, operational
excellence, Quality, productivity, competitive advantages, …………

To improve is to be change, and to perfect is to change often.

Your life does not get better by CHANCE

it gets better by CHANGE
 What is the difference between creativity and
Innovation
Creativity: is the act of conceiving something new.
Innovation: is the act of putting something into practice.

Example:
Creativity is thinking up the idea of flying into space.
Innovation is building the rocket.
 Strategic Types of Change
1)- Technology changes.
2)- Product and service changes.
3)- Strategy and structure changes.
4)- Culture changes.
 1)- Technology changes.
Changes in an organization’s production process, including its knowledge and
skill base, that enable distinctive competence.

These changes are designed to:

A)- Make production more efficient.
B)- Produce greater volume.

They include work methods, equipment, and workflow

 1)- Technology changes.
In today’s business world, any company that isn’t continually developing,
acquiring, or adapting new technology will likely be out of business in a few
years.

An innovative organization is characterized by:

A)- Flexibility.
B)- Empowered employees.
C)- Absence of rigid work rules.
 1)- Technology changes.
The flexibility of an organic organization is attributed to people’s freedom
to be creative and introduce new ideas.

Organic organizations encourage a bottom-up innovation process.

A mechanistic structure, in contrast, stifles innovation with its emphasis on

rules and regulations, but it is often the best structure for efficiently producing
routine products
 1)- Technology changes.
Honda and Sony succeeded in breakthrough innovations.
To develop ideas related to a new technology, the companies assign teams of
young staff members who are not entrenched in the “old way of doing things” to
work on the project.
The teams are headed by an esteemed elder and are charged with doing
whatever is needed to develop new ideas and products, even if it means
breaking rules that are important in the larger organization for implementing the
new ideas
 1)- Technology changes.
A)- Switching Structures.
B)- Creative Departments.
C)- Venture Teams.
D)- Collaborative Teams.
 A)- Switching Structures.
An organization creates an organic structure when such a structure is needed for
the initiation of new ideas.

Some of the ways organizations have switched structures

 A)- Switching Structures.
The NUMMI plant, a Toyota subsidiary located in Fremont, California, creates a
separate, organically organized, cross-functional subunit, called the Pilot Team, to
design production processes for new car and truck models.

When the model they are preparing moves into production, workers return to
their regular jobs on the shop floor
 B)- Creative Departments.
Staff departments, such as (R&D), engineering, design, and systems analysis,
create changes for adoption in other departments.

Departments that initiate change are organically structured to facilitate the

generation of new ideas and techniques.

Departments that use those innovations tend to have a mechanistic structure

more suitable for efficient production.
 B)- Creative Departments.
Example:
Research lab at Otsuka Pharmaceutical Company.

To get the kind of creative spirit that is willing to try new things and look for the
unexpected.

However, in the department that manufactures drugs, where routine and

precision is important, a pharmaceutical company would prefer to have less-
unusual people who are comfortable following rules and standard procedures.
 C)- Venture Teams.
A technique used to give free rein to creativity within organizations.

Venture teams are often given a separate location and facilities so they are not
constrained by organizational procedures.

A venture team is like a small company within a large company.

Used to free creative people from the bureaucracy of a large corporation

 D)- Collaborative Teams.
Although many individuals have creative ideas, most innovations are created
through groups of people working together.

Different specialties who had complementary skills and talents talking to one
another even bring in people from outside the organization.

IBM held an online townhall style meeting, called the Innovation Jam, inviting
employees as well as clients, consultants, and employees’ family members to an
interactive online brainstorming session about new technology ideas
 1)- Technology changes.
GlaxoSmithKline was the development of software that helps researchers screen
potential drugs for possible adverse medical reactions while the drugs are at the
earliest stage of development.

GlaxoSmithKline doesn’t spend time and resources on promising drugs only to

find out years down the road that they are potentially harmful and can’t be
marketed.
 2)- Product and service changes.
New products include small adaptations of existing products or entirely new
product lines.

New products and services designed to:

A)- Increase the market share.
B)- Develop new markets, customers.
 2)- Product and service changes.
Examples
1)-Apple’s iPod was a new product that created a new market for the company.
 2)- Product and service changes.
Examples
2)- New service designed to reach new markets and customers comes from India’s
Tata Consultancy Services.
The company’s new mKrishi service delivers weather information and crop advice
to farmers in rural India via cell phone.
The service brings together existing technologies, such as remote sensors, voice-
enabled text messaging, and camera phones, in a new way to serve a new market.
 3)- Strategy and structure changes.
Pertain to the administrative domain in an organization.
These changes include changes in:
A)- Organization structure.
B)- Strategic management.
C)- Policies.
D)- Reward systems.
E)- Labor relations.
F)-Control systems.
G)-Accounting and budgeting systems.
 3)- Strategy and structure changes.
Structure and system changes are usually top-down, that is, mandated by top
Management.

Product and technology changes often come from the bottom up.
 3)- Strategy and structure changes.
Examples:
The shift to self-directed teams at ICU Medical Inc. is an example of a top-down
structure change. Dr. George Lopez, founder and CEO, made the decision and
implemented it, even though some managers and employees at first hated the
idea
 4)- Culture changes.
Changes in the values, attitudes, expectations, beliefs, abilities, and behavior of
employees.
Culture changes pertain to changes in how employees think; these are changes in
mind-set rather than technology, structure, or products.
 Strategic Types of Change (summary).
A change in one factor often means a change in another.

A new product may require changes in the production technology, or a change in

structure may require new employee skills.
 Strategic Types of Change (summary).
Example:
Shenandoah Life Insurance Company acquired new computer technology to
process claims, the technology was not fully utilized until clerks were
restructured into teams of five to seven members that were compatible with the
technology.

The structural change was an outgrowth of the technology change.

Organizations are interdependent systems, and changing one part often has
implications for other organization elements.
 Stages of innovation
1)- Organizational change :
Adoption of a new idea or behavior by an organization.
What is the value of the new idea in the organization?
 Stages of innovation
Idea :
No company can remain competitive without new ideas.
Change is the outward expression of those ideas.
An idea is a new way of doing things.
A)- New product or service.
B)- New management concept.
C)- New procedure for working together in the organization.

Ideas can come from within or from outside the organization.

Internal creativity is a dramatic element of organizational change.
 Stages of innovation
Creativity:
Generation of novel ideas that may meet perceived needs or respond to
opportunities.

Example:
an employee at Boardroom Inc., a publisher of books and newsletters, came up
with the idea of cutting the dimensions of the company’s books by a quarter
inch.

Managers learned that the smaller size would reduce postal rates, and
implementation of the idea led to annual savings of more than $500,000.
 Stages of innovation
Creativity:
What are techniques for spurring internal creativity?
A)- Increase the diversity within the organization.
B)- Make sure employees have plenty of opportunities to interact with people
different from themselves.
C)- Give people time and freedom for experimentation.
D)- Support risk taking and making mistakes.
 Stages of innovation
2)- Organizational innovation :
What is the difference between change and innovation?
In contrast, is the adoption of an idea or behavior that is new to the
organization’s industry, market, or general environment.

The first organization to introduce a new product is considered the innovator,

and organizations that copy it are considered to adopt changes. For purposes of
managing change.
 Stages of innovation
2)- Organizational innovation :
Innovations typically are assimilated into an organization through a series of
steps:
A)- Organization members first become aware of a possible innovation.
B)- Evaluate its appropriateness.
C)- Evaluate and choose the idea.

For a change to be successfully implemented, managers must make sure each

element occurs in the organization.
If one of the elements is missing, the change process will fail
 Stages of innovation
3)- Need for changes:
When managers see a gap between actual performance and desired performance
in the organization.

Managers try to establish a sense of urgency so that others will understand the
need for change. Sometimes a crisis provides an undoubted sense of urgency
 Stages of innovation
4)- Adoption:
When decision makers choose to go ahead with a proposed idea.
Key managers and employees need to be in agreement to support the change.

Major organizational change, the decision might require the signing of a legal
document by the board of directors.

For a small change, adoption might occur with approval by a middle manager
 Stages of innovation
5)- Implementation:
When organization members actually use a new idea, technique, or behavior.

Workers may have to be trained to use the new idea.

Implementation is a very important step because without it, previous steps are
to no avail.

Implementation of change is often the most difficult part of the change process
 Reasons for New Product Success.
Innovation success is related to collaboration between technical and marketing
departments.

Successful new products and services seem to be technologically sound and also
carefully tailored to customer needs
 Reasons for New Product Success.
1). Successful innovating companies had a much better understanding of customer
needs and paid much more attention to marketing.

2). Successful innovating companies made more effective use of outside

technology and outside advice, even though they did more work in-house.

3)- Effective design for new product.

4)- Horizontal coordination across departments.

 Reasons for New Product Success.
4)- Coordination across departments:
A)- Departmental specialization.
B)- Boundary spanning.
C)- Horizontal Coordination.
 Reasons for New Product Success.
A)- Departmental specialization :
The key departments in new product development are R&D, marketing, and
production.

Personnel in all three of these departments are highly competent at their own
tasks.

The three departments are differentiated from each other and have skills, goals,
and attitudes appropriate for their specialized functions.
 Reasons for New Product Success.
B)- Boundary spanning:
Each department involved with new products has excellent linkage with relevant
sectors in the external environment.

R&D personnel are aware of recent scientific developments.

Marketing personnel:
A)-Closely linked to customer needs.
B)- Listen to what customers have to say.
C)- Analyze competitor products and suggestions by distributors.
 Reasons for New Product Success.
B)- Boundary spanning:
Kimberly-Clark had amazing success with Huggies Pull-Ups because marketing
researchers worked closely with customers in their own homes and recognized the
emotional appeal of pull-on diapers for toddlers.

By the time competitors caught on, Kimberly-Clark was selling $400 million worth
of Huggies annually.