Organizational Change

Group E13
A summary for Session 9, Organizational Dynamics

Session 9: Organizational Change Group E13 This summary explores how organizations change and how managers drive and direct the innovation and change process. (Please refer Daft Pgs. 370-380 for more details) Outline: Innovate or perish Strategic types of changes Elements for successful change Technology change Exploration vs. exploitation: The ambidextrous approach Techniques for encouraging technology change

Innovate or perish: Change is more the norm than the exception these days. A number of powerful forces, such as technological advances and international economic integration, drive the need for organizational change. These forces create both threats and opportunities, which companies must adapt to in order to survive. Companies react to change in various ways, such as adopting horizontal structures to enhance communication, using IT solutions to bridge space-time gaps, and innovating new processes and technology, in order to gain a competitive advantage. Companies which have embraced change, such as FedEx and Boeing, have been far more successful than companies, such as US car makers, which have failed to do so.

Global Changes, Competiton, and Markets

Threats

Opportunities

Large Scale Changes in Organization

Strategic types of change: Managers usually focus on four types of change to achieve strategic advantage: 1. Technology changes: Changes in the organizations production process, including its knowledge and skill base, which enable distinctive competence. Changes in technology are changes to the techniques used in making products or services, such as work methods, equipment and workflow, which make production more efficient or allow for greater volume of production. 2. Product and service changes: New products include minor changes to existing products or entirely new products. New products are required to increase market share or develop new markets. 3. Strategy and structure changes: These changes are made in the administrative domain of the organization, and include changes to the organizational structure, policies, rewards systems etc. 4. Culture change: These refer to changes in how employees think, and include changes in the values, beliefs, attitudes, expectations, abilities and behaviour of employees. Organizations are interdependent systems, so changes to one portion of the organization often mandates changes to other parts as well. Elements for successful change: Organizational change: The adoption of a new idea or behaviour by an organization. Organizational innovation: The adoption of an idea or behaviour that is new to the organizations industry, market or general environment.

The first organization to adopt a new change is considered an innovator, whereas organizations that copy it are termed change adopters. From the view of change management, however, both terms can be used interchangeably, as change processes within an organization are the same regardless of whether it is a late or early adopter with regards to other organizations in the environment. The following elements are vital for any change process: 1. Ideas: An idea is a new way of doing things. Change is the outward expression of those ideas. An idea can be a new product or service, management concept, or a procedure for working together in an organization, and can come from either outside or within the organization. Creativity is the generation of novel ideas that may meet perceived needs or respond to opportunities. In order to spur creativity, organizations attempt to increase the diversity of their staff, make sure people have sufficient time to interact with people different from themselves, give employees ample time and freedom for experimentation, and support risk taking and making mistakes.

2. Needs: Ideas are usually not considered until there is a need for change. A perceived need is created when managers see a gap in the current and desired behaviour of the organization. In these cases, managers must identify the need and communicate it to others. Sometimes, managers attempt to create a sense of urgency so that others will understand the need for change. A crisis is also one way of communicating urgency. 3. Adoption: Adoption occurs when decision makers choose to go ahead with a proposed idea. Key managers and employees are required to be in agreement to support the change. 4. Implementation: Implementation occurs when organization members actually use a new idea, technique or behaviour. This is usually the toughest part of the change process. Implementation may require the acquisition of new materials and equipment and the training of workers. Until people use the new idea, no change has happened, and all the previous steps are wasted. 5. Resources: Human energy and activity are required to bring about change. For both creating the idea and implementing it, time and resources are required. Typically, employees are first required to provide energy to see both the need and the idea to address it. Someone must then create the proposal and provide time and effort to implement it. Either need recognition or idea creation can occur first, with the other being recognized immediately afterwards. Technology change: Organizations face a contradiction when dealing with technology changes, as conditions which generate new ideas are frequently poor for implementing those ideas for routine production. The flexibility of an organic organization is attributed to peoples freedom to be creative and introduce new ideas. These organizations encourage a bottom up approach to innovation. A mechanistic organization, in contrast, stifles creativity by rules, but is often the best structure for efficiently producing routine goods. Therefore, managers must find a way to create both organic and mechanistic conditions within an organization. Exploration vs. exploitation: The ambidextrous approach Organizations are now beginning to implement structures and management processes that encourage both the creation and implementation of innovation. Exploration: Encouraging creativity and developing new ideas. Exploitation: Implementing those ideas to produce routine products.

Organizations need to be designed to behave in an organic way in order to explore new ideas, and a mechanistic way in order to exploit these ideas. Research shows that organizations which follow the ambidextrous approach perform better and are significantly more successful at introducing innovative ideas.

Techniques for encouraging technology change: Some of the techniques used by companies to maintain an ambidextrous approach are: 1. Switching structures: Organizations can create an organic structure when such a structure is needed for the implementation of ideas. These structures exist for a short period of time, during which idea generation takes place, after which employees return to their standard roles. 2. Creative departments: In some organizations, the initiation of innovation is assigned to specific creative departments. Staff departments like R&D and design create changes for adoption in other departments. Some organizations have adopted the concept of an idea incubator, where employee ideas can be developed without interference from politics and bureaucracy. 3. Venture teams: A venture team is like a small company within the larger company. Venture teams are usually given separate locations and facilities so that they are not constrained by organizational procedures and are free to be creative. An example of a venture team is a skunkworks, which is a small, secretive and informal group that focuses on breakthrough ideas. Another variation of venture teams is the new venture fund, which provides financial resources for employees to develop new ideas, products or businesses. 4. Corporate entrepreneurship: This technique seeks to develop an internal entrepreneurial spirit, philosophy, and structure that will encourage innovation. Corporate entrepreneurship may include some of the measures mentioned above, but also attempts to release the creativity of each employee. An important outcome of this technique is to create idea champions. Idea champions provide the time and energy to make things happen. They fight against inertia and convince others of the merit of a new idea. Companies encourage idea champions by providing freedom and slack time to creative people. Known as bootlegging, this unauthorized research often has productive results. 5. Collaborative teams: Most innovations are created by groups of people working together. Therefore, many companies encourage people to communicate and collaborate across boundaries.