MGTO120s Managing Change and Innovation

1
MGTO120s Managing Change and Innovation

• Jian Liang
• MGTO, HKUST

2
Where We Are

• Management

Basic Concepts (Ch1)
Basic Concepts (Ch1)
Organize (Ch 10, 11,12,13)
Context (ch3,4, 5)
Retrospect (ch2)
Plan (ch6, 7,8, 9)
Organize (Ch 10
Lead
Control
Context (ch3,4, 5)
Retrospect (ch2)
Plan (ch6, 7,8, 9)
Lead
Control
Innovation (Ch13)
Managing Change Innovation (Ch13)
3
Learning Objectives

• What Is Change?
• Define organizational change.
• Understand how managers are affected by change.
• Forces for Change
• Discuss the external and internal forces for
  change.
• Contrast internal and external change agents.
• Two Views of the Change Process
• Contrast the calm waters and white-water rapids
  metaphors of change.
• Explain Lewins three-step model of the change
  process.
• Discuss the environment that managers face today.

4
Learning Objectives (contd)

• Managing Change
• Explain how managers might change structure,
  technology, and people.
• Explain why people resist change and how
  resistance might be managed.
• Contemporary Issues in Managing Change
• Explain why changing organizational culture is so
  difficult and how managers can do it.
• Discuss how to make change happen successfully.

5
Learning Objectives (contd)

• Stimulating Innovation
• Understand why innovation isnt just creativity.
• Explain the systems view of innovation.
• Describe the structural, cultural, and human
  resource variables that are necessary for
  innovation.

6
Lets start with a news report !

• http//www1.chinesenewsnet.com/gb/MainNews/SinoNew
  s/Hongkong/2006_6_20_21_16_12_484.html

7
Why good companies go bad?


(Donald N. Sull 1999)

• It is not paralysis, not unawareness, not
  inaction.
• The inability to take appropriate action
• Active inertia tendency to follow established
  patterns of behavior, even when environment
  changes.

8
Where the world changes

• Change or die

And change IS happening, at a pace that makes it
tough to keep up. Technological innovation is
changing the world! Where is change happening?
Everywhere, INCLUDING here in Asia
9
(No Transcript)
10
Why study all this? Where is innovation
happening? HERE, Asia, China
11
Reports in South China Morning Post
12
What Is Change?

• Organizational Change
• Any alterations in the people, structure, or
  technology of an organization
• Characteristics of Change
• Is constant yet varies in degree and direction
• Produces uncertainty yet is not completely
  unpredictable
• Creates both threats and opportunities
• Managing change is an integral partof every
  managers job.

13
Forces for Change

• External forces
• Marketplace
• Governmental laws
• and regulations
• Technology
• Labor market
• Economic changes

• Internal Forces
• Changes in organizational strategy
• Workforce changes
• New equipment
• Employee attitudes

14
Change Process Viewpoints

• The Calm Waters Metaphor
• The environment is stable and predictable, so
  change can be planed.
• White-Water Rapids Metaphor
• The environment is uncertain and dynamic. It
  requires that managers and organizations
  continually adapt (manage change actively) to
  survive.

15
Kurt Lewins Model

• Successful change can be planed and achieved
  through three steps
• Unfreezing the status quo
• Changing to a new state, implementing the change
• Refreezing to make the change permanent
• Change is a break in the organizations
  equilibrium state. The status quo has been
  disturbed and change is necessary to establish a
  new equilibrium state.

16
The Change Process
17
Small Thinking

• Which view does Lewins model reflect?
• Which one of the two views would you prefer?

18
Types of Change

• Workforce
• Changing attitudes, expectations, perceptions,
  and behaviors of the workforce
• Organizational development (OD) to change
  people and the quality of interpersonal work
  relationships.

• Structural
• Changing the organizations structure or its
  structural components
• Technological
• Adopting new equipment or operating methods that
  displace old skills and require new ones
• Automation
• Computerization

19
Three Categories of Change
20
Fortune Magazine, April 2005

• People around here agree we need to change, but
  90 of them do not want to change themselves
• -Ex-CEO Nobuyuki Idei, who picked Howard
  Stringer, photo on right, as new Sony CEO, to
  SHOCK the culture into change

21
Managing Resistance to Change

• Why People Resist Change?
• The ambiguity and uncertainty that change
  introduces
• The comfort of old habits
• A concern over personal loss of status, money,
  authority, friendships, and personal convenience
• The perception that change is incompatible with
  the goals and interest of the organization

22
Figure 1. Manifestation of resistance to change.
Adapted from King Anderson (1995)
23
The Institutionalization in Cultural Persistence

• Take 5 monkeys in a cage, and place a banana in
  the cage. One of the monkeys takes the banana.
  Next do the same, but when the monkey takes the
  banana throw freezing water on the monkeys.
• Now remove one of the monkeys and replace with a
  new monkey. Repeat process. The new monkey will
  attempt to get the banana, but the other monkeys
  will attack it to stop it. The new monkey doesnt
  understand why, but it doesnt go for the banana.

24
The Institutionalization in Cultural Persistence
(contd)

• Again replace an existing monkey with a new
  monkey. Repeat process. The other monkeys,
  including the monkey that doesnt know why, will
  attack the new monkey when it goes to take the
  banana.
• Continue process until none of the original
  monkeys is left. Even though they dont know why,
  they will attack any monkey going for the banana.
• Why? Thats the way things are done around here
• Zucker, 1977, ASR, 42 726-743.

25
How to Change Organizational Culture

• To utilize comprehensive and coordinated strategy
• unfreeze the current culture
• implement new ways of doing things
• reinforce those new values
• To understand situational factors which make
  cultural change more likely
• dramatic crisis occurs
• leadership changes hands
• organization is young and small
• culture is weak

26
Stimulating Innovation

• Creativity
• The ability to combine ideas in a unique way or
  to make an unusual association.
• Innovation
• Turning the outcomes of the creative process into
  useful products, services, or work methods

27
Systems View of Innovation
28

• Mistakes will be made, but if a person is
  essentially right, the mistakes he or she makes
  are not as serious in the long run as the
  mistakes management will make if it is
  dictatorial and undertakes to tell those under
  its authority exactly how they must do their job.
  Management that is destructively critical when
  mistakes are made kills initiative, and it is
  essential that we have many people with
  initiative if we are to continue to grow.
• William
  L. McKnight

29
Which can kill innovation and creativity?

• Thats impossible!
• We dont do things that way around here.
• We tried it before.
• I wish it were that easy.
• Its against policy.
• When youve been here longer, youll see why.
• The experts say
• Who gave you permission to change the rules?

30
Which can kill innovation and creativity?

• Lets get real, okay?
• thats not logical
• whats the evidence?
• the right answer
• avoid ambiguity
• to err is wrong
• please do not screw up again!
• quit horsing around and get to work
• follow the rules
• Im not creative

31
A Small Test

• How creative are you??

32
Looking Around

• How creative are Hong Kong people?

33
How to stimulate innovation?
34
Creating the Right Environment for Innovation

• Structural Variables
• Adopt an organic structure
• Make available plentiful resources
• Engage in frequent inter-unit communication
• Minimize extreme time pressures on creative
  activities
• Provide explicit support for creativity

35
Characteristics of Mechanistic and Organic
Organizations

• Mechanistic
• Hierarchical structure, with stable
  divisions/departments based on functions
• Vertical communication
• Rigid job definitions
• Power and authority based on seniority in
  hierarchy

• Organic
• Flat structure, with temporary work groups/teams
  based on projects
• Lateral communication
• Flexible job definitions, defined by individuals
  through interaction with colleagues
• Power and authority changing with individual
  skills and abilities

From Burns Stalker (1961)
36
Creating the Right Environment for Innovation
(contd)

• Cultural Variables
• Accept ambiguity
• Tolerate the impractical
• Have low external controls
• Tolerate risk taking
• Tolerate conflict
• Focus on ends rather than means
• Develop an open-system focus
• Provide positive feedback

37
Creating the Right Environment for Innovation
(contd)

• Human Resource Variables
• Actively promote training and development to keep
  employees skills current.
• Offer high job security to encourage risk taking.
• Encourage individual to be champions of change.

38
3M
Vision is the engine that drives our
enterprise.
--- Dr. William E. Coyne
Senior vice president, research and
development

39
The 3M Model for Innovation

• One of the ten most admired corporations
  Fortune annual poll of American CEOs.
• The 3M model
• Continuous technological innovation
• Institutionalized individual entrepreneurship
• Market responsiveness

40
3M A Brief History

• Minnesota Mining and Manufacturing Company
• Established in 1902, producing abrasives and
  adhesives products.
• The McKnight era, 1929-1966
• Organizational design for continuous changes
• The Lou Lehr era, 1980-1985
• Reorganization and reorientation
• The Jake Jacobson era 1986-1991
• The orientation to competition in existing
  markets

41
Example Innovations in 3M

• Laptop
• How to balance the conflicting demands of longer
  battery life with the size and weight
  consideration
• Power problem?
• No! it is screen brightness.
• Post-it
• Transparent

42
3M Way for Innovation Structural

• Decentralization
• Locus of decision at lower lab units. Divisional
  autonomy response to customers need
• Organizational design to facilitate lateral
  communication
• 3Ms Technical Forum
• The strategy of growth through new products,
  rather than competition in existing markets.
• 30 of all sales MUST from products that had been
  no longer than 4 years

43
3M Way for Innovation Cultural

• Innovation is the center of organizational
  culture
• Resistance to bureaucratic intervention is
  encouraged
• The 15 percent solution
• Contribution to innovation is greatly
  respectedlegends, institutional memories,
  ceremonies.
• Carlton Society Honorary organization for
  extraordinary contribution.

44
3M Way for Innovation HR

• Rewards for innovation
• Salary increase and promotion Golden Step Award
  (teamgt5 million) Technical Cycle of Excellence
  
• Dual track of promotion and recognition
• Genesis Grants for technicians
• Alpha Grants for administrative, marketing and
  other non-technical areas
• Tolerance of well-intentioned failures
• Regard failure as an opportunity to learn rather
  than an occasion for punishment

45
Final Presentation

• Hong Kongs Can-do Spirit

46
Further readings

• Harvard business review on innovation HD58.8
  .H3694 2001 
• Innovation Breakthrough thinking at 3M, DuPont,
  GE, Pfizer, and Rubbermaid HD45 .I53726 1997
• HKUST Forum on the Future Development of Hong
  Kong HC470.3 .H625 2002 sess 2 (media resource)

47
Summary

• Understand the two views about organizational
  change
• Explain Lewins model
• Why people resist change
• Understand creativity and innovation
• Discuss how to stimulate innovation