PART IV: Organising

Chapter 13: Managing change and innovation

13.1 Introduction
Managers initiate or experience change so regularly that in many organisations
change is the normal state of affairs.
In the most innovative areas, the primary task is to challenge current practices,
fostering a climate of exploration and innovation.
Senior managers want people to see change as the norm.
13.2 Initiating change
A particular episode of change begins when enough people perceive a gap
between desired and actual performance. Using their implicit or explicit theory
of change, they initiate a project to change one or more aspects of the internal
context in the hope of closing the performance gap. The outcomes of change
effort will be affected by practical issues of desing and implementation. Those
outcomes will in turn affect subsequent shape of external and internal context.
(Figure 13.1)
External context
Changes such as internationalisation, information technology... These changes
are transforming competitive landscape and threatening the survival of
established players.
These forces usually mean a shift of economic power from producers to
customers, many of whom enjoy greater quality, choice and value. Managers
wishing to retain customers continually need to seek new ways of adding value
to resources.
Perceived performance gap
This arises when people believe that the actual performance of a unit or
business is out of line with the level they desire. - if those responsible for
transforming resources into
outputs do so in a way that does not meet customer expectations, there is a
performance gap. If uncorrected, this will eventually cause the business to fail.
Performance imperatives - aspects of performance that are especially
important for an organisation to do well. These are:
a) flexibility

Successful businesses are likely to be those that develop a high degree of

strategic and
organisational flexibility, while also maintaining efficient and stable
processes.
b) innovation
In many areas of business, customers expect a constant flow of new
products,
embodying the latest scientific and technological developments.
Internal context
Organisation elements: business processes, structure, technology, finance,
culture, objectives, power, people.
Organisational change - attempt to change one or more aspects of the
organisation.
Change begins to happen when sufficient influential people believe that one or
more aspects of organisation is causing a performance gap, by inhibiting
flexibility or innovation. They notice external or internal events and interpret
them as threatening the performance. This interpretation and theory of change
encourage them to propose change of those aspects. They then have to
persuade enough other peple that the matter is serious enough to earn the
place on the management agenda.
The need for change is subjective. People can propose changes in the way
things are done to improve working conditions.
13.3 The interaction of context and change
Interaction model - theory of change that stresses the continuing interaction
between internal and external contexts of an organisation, making the
outcomes of change hard to predict.
People introduce change to alter the context
Management attempts to change elements of its context to encourage
behaviours that close the performance gap.
Example: Tesco; for introduction of online shopping, management needed at
least to change technology, structure, people and business processes to enable
staff to deliver new service.

When people plan and implement a change they are creating 'new rules'. As
people begin to work in new circumstances, they make small adjustments to
original plan. They decide which aspects to ignore, use or adapt.
The context affects the ability to change
Context within which people work will help or hinder them when they aim to
change it.
Prevailing culture - shared values, ideals and beliefs - influences how people
view
change. Members are likely to welcome a project that they believe fits their
culture, and resist one that threatens it. Culture is powerful influence on the
success or failure of innovation. Cultural beliefs are hard to change.
Receptive contexts - those where features of the organisation appear likely to
help change.
Non-receptive contexts - those where combined effects of features of the
organisation appear likely to hinder change.
The context has a history and several levels
The present context is the result of past decisions and events. Management
implements change against a background of previous events that shaped
context.
Beliefs about the future also affect how people react (optimistic and pesimistic
view).
There are several levels at which context occurs: operating, divisional,
corporate. Acting to change an element on one level will have effects at that
and other levels, and elements may change independently.
13.4 Four models of change
Lifecycle
It view change as an activity which follows a logical, orderly sequence of
activities that can be planned in advance.
Labels vary, but common themes are:
1) define objectives
2) allocate responsibilities
3) fix deadlines and milestones
4) set budgets
5) monitor and control

This approach reflects the idea that people can identify smaller tasks within a
change and plan the order in which to do them. It predicts that people can
make reasonably accurate estimates of the time required to complete each
task.
People can use tools such as bar charts (showing all tasks required, and their
duration).
Disadvantages: not necessarily sufficient in itself since people may confuse in
choosing ending point, it may make little sense to plan the outcomes in too
much detail in uncertain conditions.
Emergent
It emphasises that in uncertain conditions a project will be affected by unknown
factors, and that planning has little effect on the outcome.
Idea of how some strategies have emerges from chance events or external
conditions, rather than from a formal planning process.
Mintzberg's point: managers should not expect rigid adherence to a plan.
Projects take place in the same volatile, uncertain environment in which
organisation operates. People with different interests and priorities influence
the means and ends of a project.
Participative
It is the belief that if people are able to take part in planning a change they will
be more willing to accept and implement the change.
This model emphasises the benefits of personal involvement. It is also possible
that since participation allows more people to express their views, the outcome
will be better. Furthermore, in this way, people were more likely to view the
issues from the perspective of the organisation, rather than their own position
or function.
Disadvantages: takes time and effort, may raise unrealistic expectations. It may
be inappropirate when:
scope for change is limited (decisions made elsewhere)
participants know little about the topic
decisions must be made quickly
there are fundamental disagreements
management decided what to do and will do so whatever view people
express
Political models

It reflects the view that organisations are made up from groups with separate
interests, goals and values, and that these affect how they respond to change.
Change requires political as well as rational skills. Reasonable people may
disagree about means and ends, and fight for the action they prefer. Successful
change managers create a climate in which people accept the change as
legitimate.
The political perspective recognises the messy realities of organisational life.
Major
changes will be technically complex, pulled in different directions and pursue
personal as well as organisational goals. To manage these tensions managers
need political skills.
13.5 Forms and sources of resistance to change
Most managers are expected to implement change by using their power to
influence others to act in a particular way. People at all levels will sometimes
resist (either because they see change as a threat to their interests or because
they believe it will damage organisation).
Forms of resistance
Delaying tactics come from anywhere in the organisation:
making no effort to learn
not attending meetings to discuss the project
excessive fault finding and criticism
saying it has been tried before and did not work then
protracted discussion and requests for more information
linking the issue with pay or other industrial relations matters
not releasing staff for training
Sources of resistance
Sources include self-interest, lack of trust and misunderstanding (seeing more
costs than benefits). Also, reward systems that do not reward desired
behaviour and poor fit between change and culture. These views can be
enlarged by using elements of the organisation; people can base their
resistance on any of those contextual elements.
13.6 Forms and sources of innovation
Creativity and innovation

Creativity - ability to combine ideas in a unique way or to make unusual

associations between ideas.
Managers need to create a context which encourages both creative people
and then the application of creative ideas into goods and services that people
want to buy. In the business context, it is useful to think of innovation as the
process through which new
ideas, objects, behaviours and practices are created, developed and
implemented into a product or service.
Degrees of innovation - radical and incremental
The effects of an innovation depend on how they are used, what they are
replacing and
who is evaluating them.
Incremental innovation - small changes in a current product or process which
brings a
minor improvement.
Radical innovation - large game changing developments that alter competitive
landscape.
Example: Using hydrogen-fuelled engines instread of fossil-fuelled ones is a
very useful technological innovation. It will have little effect on how people
drive cars - from the
driver's perspective it is an incremental innovation. However, it will have a very
large environmental effect - from the point of view of someone who cares
about environment it is radical innovation.
Organisational impact of innovations
Managers have to decide whether to invest possibly large sums to develop an
innovation - when they cannot know whether it will succeed in the market.
An incremental innovation will use existing skills, processes, equipment and
infrastructure. It requires few internal changes, so will be low cost and low risk.
A radical innovation requires significant revision to skills, processes and
equipment. It requires major internal changes, so will be high cost and high
risk.
The soruces od innovation
1) Eureka moments
(blue sky thinking)
'eureka' - associated with the experience of having an idea

2) Knowledge push
Most innovation now comes from the research and development
laboratories of large
companies. They have strong commitment to innovation, reflected in the
systematic
organisation of scientific staff, equipment and facilities to solve specific
problems.
3) Need pull
No matter how innovative a new product might be, it will not make money
unless there
is a market for it. Before investing significant resources in developing a new
product,
managers need a sense of the likely need. It is important to be aware of the
driving
forces in the external environment that may yield an opportunity.
Regulation changes
Regulations often hinder innovation.
But, some regulations can be great chance for innovation (regulations intended
to improve road safety have led to the development of speed cameras and air
bags).
Accidents and the unexpected
Many innovations have been accidental.
Terrorist attacks have led to innovations in safety and security products, such
as the biometric scanning device.
Need to guard against unplanned events developed one of the largest service
industries in the world - personal insurance.
Users as innovators
Users are sometimes the source of ideas for innovation:
a) lead users - people who not only use the product but also help in its
development
(when dissatisfied with products available)
b) user communities - groups of users who congregate around a product, and
find new
innovative ways to use the systems

c) extreme users - push products to their limit, creating a need for improved
performance
13.7 The process of innovation
Organisations which depend on innovation implement deliberate systems to
ensure an adequate flow.
Model of innovation process is seen as a filter through which ideas are
gathered, chanelled and focused before selecting those believed to have most
potential. The steps in this
system are sequential but their duration and complexity vary.
The 4 P's of innovation
Innovations become manifest in one or more of four areas:
Product innovations
An innovation here could be a change in function or feature of product such as
incorporation of a music player within a mobile phone.
Process innovations
An innovation here could be the addition of a self-service checkout at a
supermarket where customers can scan their purchases using a barcode
reader.
Position innovations
These are changes in the target market or customer base for product or
service. Example: lucozade - once aimed at people recovering from illness, it is
now for healthy people enaged in sport.
Paradigm innovations
These are changes in how companies frame what they do. Example: reframing
of a supermarket from a simple seller of food products to a provider of many
more of a family's need such as petrol, clothing and financial products.
Organisational factors in managing innovation
Organisations that depend on innovation aim to create an environment which
encourages all staff to help create and implement a strong flow of successful
new things.
Smith (2008) developed prescriptive model of the organisational features
shaping effectiveness of its innovation proces - 4 S's of innovation:
Strategy - communicating a shared vision and goals, innovation central to
compet.advant.

Style - employees are likely to require resources and time for ideas to emerge
Structure - highly specialised division of tasks is detrimental to innovation
(teams of employees working together are more likely to succeed)
Support - technology can facilitate the transfer of knowledge, enabling staff to
access
information easily