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Managing Innovation and Change

Dr Larry Stapleton Millikin University

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Invention: Creating something that does not currently exist

Innovation: the process of bring an invention to market or

introducing a radical step change

Continuous Improvement: making incremental changes to a product, service or

process

Invention, Innovation and Continuous Improvement?

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A new way of doing something◦ Method Process Technology◦ Product Service

◦ Level of Innovation New Product Significant Improvement to a product or process New Application of current product/service

◦

What does Innovation look like?

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External Forces

◦ Technology Changes

◦ Globalized Markets

◦ Fragmented Markets

◦ Government Regulation / Deregulation

◦ Social Change

What Drives our need to Innovate?

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Efficient time to take a new product to market

How to apply resources to increase a product portfolio

There is a need to promote and succeed in an area that you are not familiar.

Adapting a culture that understands that individual failure is probable but overall success is the goal to achieve.

What are the Challenges to Innovation?

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Discontinuous Innovation ◦ Breakthrough : High Risk; Misreading the market

Dynamically Continuous◦ dramatic improvement over an existing state-of-the- art solution◦ lower risk as market demands are better understood

Continuous Innovation◦ Incremental change; step at a time◦ Low risk as focus is on slight changes to product or process

Imitation◦ Copying/adapting from another firm◦ May not be necessarily the same◦ Level of risk depends on the speed of the market demand

Types of Innovation

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CEO involvement in innovation Defining innovation as critical for long term success Emphasis on concept of managing change Innovation and Creativity in Mission statement Demonstrated openness to outside ideas Formal programs for idea generation and problem solving Strong emphasis on cross- function communications\ Encourage employee communications with customers Increased level of R&D, strong product development focus Providing rewards for individual creativity and innovation Creating budgets exclusively to innovation

What are the Characteristics of Companies that Innovate well?

Synectics study (1993)

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Can you Manage Innovation?

Idea Generation

Concept Testing

Technical Feasibility Assessment

Product Testing

Financial Assessment

Test Marketing

Launch

Life Cycle Management

Is Innovation systematic or by chance?

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Depends on the level of Innovation

How to structure our company to promote innovation?

Dedicated Team, ad hoc or hybrid

Keys factors to consider

• Level of Communication

• Expertise required: Specialist or Generalist

• Control: Centralized vs Decentralized

• Autonomous or Integrated

• Full or Part time team members

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Recognition that the success and failure of a single project is not as important as the success of the whole.◦ May drive a different way of managing and rewarding employees

Develop Portfolio of projects that coincide with company’s current lifecycle.

Promote a product maturity and market diversified portfolio

Recognize that a flexible and adaptive structure is key to Innovation◦ General structure is necessary to guide the process

Portfolio should contact High, Medium and Low risk projects

Strategy & Portfolio Development

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Companies are guided to innovate based upon a new technology, new market or a change in the market.

Technology Pull: Likely a break through product or process ◦ does the market desires the new product.◦ moving the product from the design stage to product launch

Market Pull: based on perceived market changes◦ Assumes customer knows what they want◦ May not know until they see product◦ Many focus on continuous improvement

Technology vs Market Drivers

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Aspects of a good Portfolio:

◦ Portfolio must be company wide with Management involvement

◦ Focus on current products or new diversified markets

◦ What type of technology will be of focus.

◦ Type of market including maturity

◦ Planned level of resource commitment. % of revenue

◦ Is innovation thru internal or external sources

Strategy & Portfolio Development

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Goals are necessary to see if we got where we wanted to go.

Financial Metrics alone do not work◦ they focus on short term gains while innovation is strategic

Innovation metrics we prefer:◦ % of revenues gained from new products in 3-5 years◦ Holding a team and individual accountable

difficult to schedule innovation Look at Idea generation, development of portfolio, understanding

of lifecycle.

Setting Goals and Measuring Performance

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Products in development at any one point (11)◦ New Products (4)◦ Product Revisions (4)◦ Product Support (3)

New Product Launches per year (4) Average Development Cycle

◦ New products and Product Revisions (18 & 6 months) Average Development Costs

◦ New products and Product Revisions ($2M, $1.1M) Company revenue, by %, innovations over last 3 years (35%) Managers time spent on innovation activity (10%) Average ROI on new product development (30%)

Innovation Metrics

Morris & Kuratko, 2002

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How do we create a culture that fosters Innovation

◦ What do we need to allow Innovation to occur? Requires gathering the right people, money, materials, machines,

processes, methods and procedures

Requires a group action and is managed

Create a culture that fosters individuals that are willing to take a risk and are success driven.

How do we create a culture of change?

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Corporate Culture

Represented by a set of key values, beliefs, understanding and norms shared by members of an organization.

• Typically generated from Top Management • Successful if communicated by a strong focused leader.

Means of Communication• Symbols• Stories• Heroes• Slogans• Ceremonies

Focus on customers and internal people and processes that bring about useful change towards attainment of organizational goals.

Def: The adoption of a new idea or behavior by an organization.

• Change is common aspect of current business environment• Adaptation to change is central point of learning organization• For success, adaptation to change must exist in current workforce• Change includes redefining of roles, processes, values and removal of barriers

Model for Planned Change

1. Both internal and external forces contribute to change

2. Organizations must monitor the forces of change and determine when

there is a need for change.

3. Initiate search for response to the change

4. Implement the response to the change

Organizational Change

Forces of Change

Environmental (External) Forces• Customers• Competitors• Technology• Economic• International arena

What are examples of these forces?Internal Forces

• Goals• Employees• Labor Unions• Production efficiencies• Company performance

What are examples of these forces?

Need For Change

How does a manager determine a need for change?

• Disparity between existing and desired performance levels ( Performance Gap).

Is this gap due solely to non-performance?

How does the sense of urgency enter into the identification of the need for change?

Management’s responsibility is to: a. Monitor threats and opportunities in the external environmentb. Identify strengths and weaknesses in the organization.

Initiating ChangeDef: To search for or create ideas that solve perceived needs are developed.

Search: process of learning about current developments inside or outside the organization that can meet the perceived need.

Creativity: Generating novel ideas with the potential of meeting the perceived need or opportunity.

Characteristics of a Creative individual1. Conceptual Fluency2. Originality3. Open mindedness4. Less authority, Independence5. Playfulness, Curiosity, Undisciplined exploration6. Persistence, commitment, focused approach

Idea Champion: Passionate , committed to the idea despite rejection by others.Inventor: Develops the idea but does not have the ability or interest to promote.Sponsor: High-level manager who approves, protects and removes major barriers.Critic: Challenges the concept and provides reality checks.

1. Open channels of communication2. Contact with outside sources3. Brainstorming, suggestion systems4. Eccentricity allowed5. Use of teams6. Decentralization, loosely defined positions7. Acceptance of mistakes, risk taking8. Freedom to pursue and choose problems9. Playful culture10. Freedom to discuss ideas, long time horizon11. Resources allocated to creative personnel and

projects without immediate payoff12. Reward system that encourages innovation

Development of a Creative Organization

Implementing Change

Why do we resist change?

• Self Interest: Perceived loss of power, prestige, pay, or benefits.

• Lack of Understanding and Trust: purpose unknown.

• Uncertainty: Lack of information.

• Different Assessments of goals: Goals conflict, differ in perceived

outcome.

Force Field Analysis

To implement a change requires an analysis of the driving forces and the restraining forces. Removal of restraining forces allows driving forces to implement change.

What is meant by this statement?

Implementation TacticsCommunication and Education

• Change is technical• Users need accurate information and analysis to understand change.

Participation• Users need to feel involved• Design requires information from others• Users have power to resist

Negotiation• Group has power over implementation• Group will lose out in the change

Coercion• A crisis exists• Initiators clearly have power• Other implementation techniques have failed

Top Management support• Change involves multiple departments or reallocation of resources• Users doubt legitimacy of change

Examples?Examples?

Types of Planned Change

Technology changesRelated to the organization’s production process. (efficiency)Technology change is from the bottom up.Lower level techs act as idea champions. WhyWhat type of Implementation tactic would you use and Why?

Structural ChangesInvolves the hierarchy of authority, goals, structural characteristics, administrative procedures and management systems.

Accomplished thru a Top - Down approach. Why?

Champions are Top level and Middle management

Why would the Preferred Implementation Tactics be Education, Negotiation & Participation?

• Change in the organization’s product or service output

• Primary way that organizations adapt to changes in markets, technologies and competition.

• Implemented more along a Horizontal line

• Horizontal Linkage Model shows that a new product must be developed simultaneously by marketing, research & manufacturing.

What roles do these depts play in a successful development of new product?

(Marketing, Technical specialists, research, manufacturing)

How does time play into the new product strategy?(Time Based Competition)

New Product Changes

Cultural / People ChangesA change in values, norms, attitudes, beliefs and behaviors of employees.• Way people think, Mindset rather than technology, structure or products

Training is the most frequently used tool.

Organizational Development: promotes improvement of internal relationships and increased problem solving capabilities to improve an organization’s effectiveness.• Team building Survey feedback activities Large group intervention

OD Steps:1. Unfreezing: participants become aware of problems and then increase willingness to change (Change Agent)

2. Changing: Experiment with new behavior and learn new skills.3. Refreezing: New behaviors are evaluated and reinforced by individuals who have newly acquired attitudes or values and are rewarded by the organization.