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Organizational Theory,
Design, and Change

Fifth Edition
Gareth R. Jones

Chapter 13

Innovation,
Entrepreneurship,
and Creativity
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Learning Objectives
1. Describe how innovation and
technological change affect each
other
2. Discuss the relationship among
innovation, intrapreneurship, and
creativity
3. Understand the many steps involved
in creating an organizational setting
that fosters innovation and creativity

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Learning Objectives (cont.)
4. Identify the ways in which
information technology can be used
to foster creativity, and speed
innovation and new product
development
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Innovation and Technological
Change
Innovation: process by which new
goods and services or new production
and operating systems are developed
Enables better response to customer
needs
Quantum technological change: a
rare, fundamental shift in technology
that revolutionizes products or the way
they are produced
Quantum innovation: new products or
operating systems that incorporate
quantum technological improvement
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Innovation and Technological
Change (cont.)
Incremental technological
change: technological change that
represents a refinement of some base
technology
Incremental innovations: products or
operating systems that incorporate
refinements of some base technology
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Innovation and Technological
Change (cont.)
Technology cycle
Quantum innovations occur rarely
Technological discontinuity
Dominant design emerges
Era of incremental change and innovation
during which competition is based on
technology
Technological discontinuity may occur
again and the process starts all over
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Figure 13-1: The Technology
Cycle
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Innovation and Technological
Change (cont.)
Product life cycle: the changes in
demand for a product that occur over
time
Demand for most successful products
passes through four stages:
The embryonic stage
The growth stage
The maturity stage
The decline stage
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Innovation and Technological
Change (cont.)
Product life cycle (cont.)
Embryonic stage: a product has yet to
gain widespread acceptance
Minimal demand
Growth stage: a product has been
accepted by customers
Demand increases
Mature stage: market demand peaks
because most customers have already
bought the product
Decline stage: occurs if and when
demand for a product falls

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Innovation and Technological
Change (cont.)
Determinants of the length of the
product life cycle
Rate of technological change
Faster the rate of change, the shorter the
product life cycle
Role of fads and fashion
Determine the attractiveness of products to
customers
Creative destruction: new companies
use new global and technological
opportunities to make better products that
drive old, inefficient companies out of
business
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Figure 13-2: Technological
Change and Product Life Cycle
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Innovation, Entrepreneurship,
and Creativity
Intrapreneurs: leaders of innovation
and new product development in
established organizations
Notice opportunities
Manage product development
May leave organization if their ideas are
not supported
Become entrepreneurs
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Innovation, Entrepreneurship,
and Creativity
Creativity: ideas going beyond the
current boundaries, whether those
boundaries are based on technology,
knowledge, social norms, or beliefs
Most people are creative at some time
May involve combining and synthesizing
new things
Knowledge-creating organization:
an organization where innovation is
going on at all levels and in all areas
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Managing The Innovation
Process
Project management: the process
of leading and controlling a project so
that it results in the effective creation
of new or improved products
Project: a subunit whose goal centers
on developing the products or service on
time, within budget, and in conformance
with predetermined performance
specifications
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Managing The Innovation
Process (cont.)
Project management (cont.)
Effective product management often
begins with a clearly articulated plan
Takes a product through the concept, initial
test, modification, and manufacturing phases
Project managers tasks are different from
regular managers
Manage high proportion of highly skilled and
educated professionals
Plan to deal with top corporate executives
Must keep project on track
Often quantitative modeling is used
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Managing The Innovation
Process (cont.)
Quantitative modeling (cont.)
Examples include PERT/CAM network of
Gantt Chart
Flowcharts of a project that can be built
with many proprietary software packages
These software packages focus on:
Modeling the sequence of actions necessary to reach
a projects goal
Relating these actions to cost and time criteria
Sorting out and defining the optimal path for
reaching the goal

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Managing The Innovation
Process (cont.)
Quantitative modeling (cont.)
Critical path method
Goal is to determine:
Which particular tasks or activities of the many that
have to be performed are critical in their effect on
project time and cost
How to sequence or schedule critical tasks so that
a project can meet a target date at a minimum
cost
Optimal sequencing of tasks is often worked
out by a team
Analysis is an important learning tool
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Figure 13-3: CPM Project
Design
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Managing The Innovation
Process (cont.)
Stage-gate development funnel
A structured and coherent innovation
process that improves control over the
product development effort
Forces managers to make choices among
competing new product development
projects so that resources are not spread
thinly over too many projects
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Managing The Innovation
Process (cont.)
Stage-gate development funnel (cont.)
Stage 1: Funnel has a wide mouth to
encourage as many new product ideas as
possible from both new and established
project managers
Stage 2: Specify all of the information
required to make a decision about
whether to go ahead with a full-blown
product development effort
Plans are either accepted, revised, or rejected
Stage 3: Proceed to development phase
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Figure 13-4: A Stage-Gate
Development Funnel
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Managing The Innovation
Process (cont.)
Cross-functional teams
Coordinating R&D function with other
functions is critical but often difficult
New product development teams
Marketing, engineering, and
manufacturing need to be core members
of product teams
Core members: refers to a nucleus of
three to six people who bear primary
responsibility for the product
development effort
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Figure 13-5: Innovation as a
Cross-Functional Activity
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Managing The Innovation
Process (cont.)
Team leadership
Having cross-functional teams is not
sufficient for innovation they have to be
managed properly
Lightweight team leader: a mid-level
functional manager who has lower status
than the head of a functional department
Heavyweight team leader: a true
project manager who has higher status
within the organization
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Managing The Innovation
Process (cont.)
Skunk works: a temporary task force
that is created to expedite new
product design and to promote
innovation by coordinating the
activities of functional groups
An island of innovation located away from
the organization
Dissolved when the product is brought to
market

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Managing The Innovation
Process (cont.)
New venture divisions: a new
division that is allocated a complete
set of value-creating functions to
manage a project from beginning to
end
Assumes full responsibility for the
commercialization of the product
Normally an independent division
Balance of control between the division
and the corporate center is problematic
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Managing The Innovation
Process (cont.)
Joint venture: a strategic alliance
among two or more organizations that
agree to jointly establish and share
the ownership of a new business
Allows organizations to combine their
skills and technologies and pool their
resources to embark on risky projects
Partners may disagree over future
development plans

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Managing The Innovation
Process (cont.)
Creating a culture for innovation
Organizational structure
Creating the right setting is important to
fostering innovation
Increasing organization size, age, and
complexity may slow innovation
Organic structures tend to promote innovation
People - organizations need to guard
against too much similarity
Property rights create career paths to
show that success is closely linked with
future promotion and rewards
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Innovation and Information
Technology
Information efficiencies: the cost
and time savings that occur when IT
allows employees to perform current
tasks at a higher level
Enables employees to assume additional
tasks
Enables employees to expand their roles
in the organization due to advances in
the ability to gather and analyze data
also allows information efficiencies

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Innovation and Information
Technology (cont.)
Information synergies: the
knowledge-building created when
individuals or subunits pool their
resources and collaborate across
boundaries
Boundary-spanning activity: the
interactions of people/groups across
the organizational boundary to obtain
valuable information and knowledge
from the environment
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IT and Organizational
Structure and Culture
IT affects the innovation process
through its many effects on
organizational structure
IT gives lower level employees more
detailed and current knowledge of
consumer and market trends and
opportunities
IT can produce information synergies
Facilitates increased communication and
coordination between decentralized
decision makers and top managers
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IT and Organizational
Structure and Culture (cont.)
IT means that fewer levels of
managers are needed to handle
problem solving and decision making
IT provides lower level employees
with more freedom to coordinate
their actions
Information synergies may emerge as
employees experiment and find better
ways of performing their tasks
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IT and Organizational
Structure and Culture (cont.)
IT facilitates the sharing of beliefs,
values, and norms
Allows for the quick transmission of rich
and detailed information between
people and subunits