Chapter 6: Innovation and Change

Introduction

Companies may sometimes offer either higher value or lower cost products in order to attract customers’ attention. For this, companies need to be competent in innovation and change. Innovative companies can offer interesting and unusual products to their customers and/or can produce standardized products at lower cost by the help of new technologies.

Innovation

Innovation, which refers to the implementation of a new or a significantly improved product, or process, or a new organizational method, is an important element of organizational performance and longer-term survival. There are three types of innovation: process innovation, product innovation, and organizational innovation.

Process innovation refers to a company’s effort to refine and improve its current processes. Process innovation, which is designed to reduce manufacturing costs and increase product quality, is quite important.

Product innovation is the new knowledge seen in a new product and it has two dimensions: the degree to which it involves a change in technical competencies and the degree to which it involves a change in business model. Each dimension suggests four quadrants, or categories, of innovation:

• Routine (incremental) innovation (based on having the existent business model, exploiting the existing technical knowledge base and small improvements of existent products).
• Radical innovation (based on having the existent business model and exploring new technical knowledge, and development of new and different products).
• Disruptive innovation (based on having the existent technical knowledge base and exploring a new business model).
• Identify alternatives that will solve the problem (Care must be taken to ensure that alternatives satisfy requirements).
• Architectural innovation (based on combining new business models with new products that are based on new technical knowledge).

Organizational innovation refers to the implementation of a new organizational method that has not been used before in the company, and that is the result of strategic management decisions in the company context. There are three types of organizational innovation:

• Organization innovation in business practice, which contains the implementation of new methods for organizing routines and procedures.
• Innovation in workplace organization, which includes the implementation of new methods for distributing responsibilities and decision-making among employees for the division of work
• Innovation in organization methods for external relationships, which involves the implementation of new ways of organizing relationships with other firms or public institutions.

Innovation process has three stages: invention, development, and implementation.

Invention, which is based on exploration, means the emergence of an idea and its key mechanism of invention is exploration. Search, variation, risk-taking, experimentation, play, flexibility, and discovery are parts of this exploration process. During this process, insights are generated triggering four behaviors; questioning, observing, networking, and experimenting.

When questioning “why” and “why not” questions are important. This will help to power new associations and insights. Then, innovators gather new ideas by observing the environment. They get out of their offices to watch the world around them to activate unique ways of doing things. Next is the networking behavior; innovators talk with people to find problems and communicate with people who do not look, act, or think as they do. Finally, innovators generate insights by experimenting. They test new experiences wherever they go.

Development refers to the elaboration of the idea. After identifying a customer problem worth solving, innovators search broadly for a variety of solutions and then use a series of prototypes (A prototype is a full-scale working model that is being tested for design, function, and reliability). On the other hand, there can be barriers to the development of new ideas in some companies;

• Cognitive barriers, which emerge when managers cannot recognize the need for change.
• Behavioral barriers, which arise when the core competencies of companies can become “core rigidities” as organizations’ operational contexts shift
• Structural barriers, which stem from companies’ structures and information processing procedures.

In order to get rid of barriers, some projects are needed. For more different the idea, autonomy and the project, team will require.

Implementation, whose key mechanism is exploitation, refers to the widespread acceptance of the innovation. Exploitation contains refinement, choice, production, efficiency, selection, and execution.

All employees of the company play essential roles in implementation; engineers by advising on the feasibility of putting new concepts into production, accountants by advising on the cost and human resource by advising on the availability and training needs of the people.

Organizational Change

Organizational change includes alterations in how people’s responsibilities, tasks, and relationships are organized. Political changes, economic changes, demographic changes, changing technology, changing governmental laws or regulation, change in competition, change in supplying conditions, and changing consumer needs and wants are important external triggers of organizational change.

Organizational change is usually oriented to improving effectiveness and efficiency at one or more of four different targets:

• Strategy
• Technology
• Structure
• People and/or the culture

Strategic change includes alterations in a company’s corporate, business-level, and/or functional strategies. Corporate strategy is about the answer to the question of where to compete. Business level strategy deals with the answer to the question how to compete. Functional level strategy is about the answer to the question how to implement business-level strategies

Structural change refers to any change in the patterned or regularized aspects of the relationships among participants in the organization. It has three main benefits. First, it gets people to start forming new networks, making the organization as a whole more creative. Second, it also disrupts all the routines in an organization. Finally, the structural change scatters the out-of-date power structures.

Technological change refers to changing the hardware of the work and skills and knowledge of employees. It includes the introduction of new equipment or methods such as using 3-D printing, automation, and computerization.

Cultural change refers to changes in beliefs and values, and/or basic underlying assumptions.

There are two types of organizational change:

• Prescribed change
• Planned change

Prescribed change includes a non-arbitrary sequence of stages and activities over time.

Planned change includes a repetitive sequence of goal formulation, implementation, evaluation, and modification of a pictured end state, and it is rapid and dramatic.

The researchers have developed a model of change that managers can follow to implement change successfully to increase efficiency and effectiveness of the organization.

Managers sense a need for change through the appearance of a performance gap. Once managers have identified the source of the problem or need, they must decide where they would like their organization to be in the future.

Any organizational change is likely to meet with some resistance. Education and communication, participation, facilitation and support, negotiation, manipulation and cooptation and coercion (the use of threats or orders) can be used by the managers to deal with resistance to change.

After deciding the change to make, managers decide whether the change will be top-down or bottom-up. Topdown change is implemented by managers at a high level in the company.

Bottom-up change is implemented by employees at low levels in the company and gradually rises until it is felt throughout the organization. A particular bottom-up change technique is organizational development. Organizational development is a special bottom-up change technique which is designed to improve an organization’s long-term health and performance.

The final step in the change process is to evaluate how successful the change effort has been.

Using measures such as changes in market share, in profits, or the ability of scientists to innovate new drugs, managers compare how well an organization is performing after the change with how well it was performing before.