MGTO120s Managing Change and Innovation

1. MGTO120sManaging Change and Innovation Jian Liang MGTO, HKUST

2. Where We Are Management Basic Concepts (Ch1) Basic Concepts (Ch1) Organize (Ch 10, 11,12,13) Retrospect (ch2) Retrospect (ch2) Context (ch3,4,& 5) Context (ch3,4,& 5) Plan (ch6, 7,8,& 9) Plan (ch6, 7,8,& 9) Organize (Ch 10 Lead Lead Control Control Innovation (Ch13) Managing Change & Innovation (Ch13)

3. Learning Objectives • What Is Change? • Define organizational change. • Explain 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 Lewin’s three-step model of the change process. • Discuss the environment that managers face today.

4. Learning Objectives (cont’d) • 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 what it takes to make change happen successfully.

5. Learning Objectives (cont’d) • Stimulating Innovation • Explain why innovation isn’t just creativity. • Explain the systems view of innovation. • Describe the structural, cultural, and human resource variables that are necessary for innovation.

6. 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 manager’s job.

7. 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 How is the situation in HK?

8. 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.

9. Kurt Lewin’s Model • Successful change can be achieved through three steps • Unfreezingthe status quo • Changingto a new state • Refreezingto make the change permanent • The limitation of this model • Lewin described the change process as a break in the organization’s equilibrium state • It is impossible in a dynamic period

10. The Change Process

11. Three Categories of Change

12. Structural Changing the organization’s structure or its structural components Technological Adopting new equipment or operating methods that displace old skills and require new ones Automation: Computerization 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.

13. 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

14. Figure 1. Manifestation of resistance to change. Adapted from King & Anderson (1995)

15. 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

16. 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 doesn’t understand why, but it doesn’t go for the banana. Again replace an existing monkey with a new monkey. Repeat process. The other monkeys, including the monkey that doesn’t know why, will attack the new monkey when it goes to take the banana.

17. The Institutionalization in Cultural Persistence (cont’d) • Continue process until none of the original monkeys is left. Even though they don’t know why, they will attack any monkey going for the banana. • Why? That’s the way things are done around here • Zucker, 1977, ASR, 42: 726-743.

18. 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

19. 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

20. Systems View of Innovation

21. 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

22. Which can kill innovation and creativity? “That’s impossible!” “We don’t do things that way around here.” “We tried it before.” “I wish it were that easy.” “It’s against policy.” “When you’ve been here longer, you’ll see why.” “The experts say…” “Who gave you permission to change the rules?”

23. Which can kill innovation and creativity? “Let’s get real, okay?” “that’s not logical” “what’s 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” “I’m not creative”

24. How to stimulate innovation?

25. Creating the “Right” Environment for Innovation • Structural Variables • Adopt an organic structure • Make available plentiful resources • Engage in frequent interunit communication • Minimize extreme time pressures on creative activities • Provide explicit support for creativity

26. Creating the “Right” Environment for Innovation (cont’d) • 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

27. Creating the “Right” Environment for Innovation (cont’d) • 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.

28. 3M “Vision is the engine that drives our enterprise. ” --- Dr. William E. Coyne Senior vice president, research and development

29. 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

30. 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

31. 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

32. 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 • 3M’s Technical Forum • The strategy of growth through new niches, rather than competition in existing markets. • 30% of all sales MUST from products that had been no longer than 4 years

33. 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 respected—legends, institutional memories, ceremonies. • Carlton Society: Honorary organization for extraordinary contribution.

34. 3M Way for Innovation: HR • Rewards for innovation • Salary increase and promotion; Golden Step Award (team>$5 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

35. Final Presentation Hong Kong’s Can-do Spirit

36. 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)

37. Summary • Understand the two views about organizational change • Explain Lewin’s model • Why people resist change • Understand creativity and innovation • Discuss how to stimulate innovation