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The Importance of Innovation and Change within an Organization
In today's constantly changing world, change and innovation play an extremely important role within any organization. New technologies like faster software and hardware and improved manufacturing systems are increasing production and changing the way we do business across the globe. Newly advancing markets such as China and India are becoming more and more capitalistic, opening the door for corporations to come and do business. There are multiple elements when dealing with innovation and change within an organization. The first element is how an organization can change successfully which consists of the steps that are needed and the process that makes change happen. The next element is technological change, which is how organizations adapt and implement new technology. From new technology, organizations come up with our next element, new products and services. As these organizations become larger and larger there is the need for strategy and structure change as well as cultural changes. These two elements often go hand in hand and can be some of the most difficult to change.
There are five key factors when looking at what is necessary for successful change. The first is ideas. In order to bring about change you need to have a new idea or thought. Creativity, innovation and outside-the-box thinking play a huge role here. Often times some of the best ideas can come from the least likely places. A study conducted by Daniel Tzabbar and his team, found that "high levels of collaboration promotes innovation, as it encourages a free flow of ideas among people who must work together to discover new solutions to problems." (Tzabbar 17) With this being said, many new ideas come from the collaborations of groups and individuals within an organization.
The second factor is need. There must be a perceived need for change. Constantly changing structures, strategies, or culture can actually be a bad thing if overused. If a specific change is going to take place, there needs to be an identifiable reason in order to make that specific change necessary. On the other hand, an organization that fails to realize the need for change is doomed for failure. It is the responsibility of upper management to be responsive and aware of when change is needed but not so sensitive that change becomes excessive.
An article entitled Change for Change's Sake offers and interesting view on the topic of knowing when to change. According to the article, an organization periodically needs to "shake itself up" regardless of the external environment. The authors argue that a few things happen when an organization does not change enough. First, companies that are organized around a single criterion such as function, product, or market, tend to only communicate with themselves and not with the other units thus making them slow to adapt to changes in the environment. Next organizations are likely to get entrenched in a routine way of thinking, failing to realize new opportunities and the possibility of threats. Finally, organizations become extremely inefficient at allocating resources. In order to combat these factors, organizations should change structures every so often to keep itself ready to react quickly to its environment. (Vermeulen et. al. 70-76)
The third factor is adoption. After the new ideas have been thought of on how to change and there is a perceived need for that change, a new idea is chosen. Now that an idea has been chosen it is time to put that idea into practice. This brings us to our next factor, implementation. According to Scott Sonenshein of Rice University "Implementing strategic change is one of the most important undertakings of an organization. Successful implementation of strategic change can reinvigorate a business, but failure can lead to catastrophic consequences." (Sonenshein 477). Management must have a rock solid plan on how they want to implement change. A project management approach is the most successful approach when implementing such change, with the definition of clear success measures being important. (Oakland, Tanner 2)
The final factor is resources. Through human energy and activity the idea is implemented and kept alive. People are the most important resource and the essential contributors to successful change, without them, change cannot happen. It is important that your employees are thoroughly trained and understand what is being changed and why. Empowering them with this knowledge will only enhance and increase the possibility of successful implementation of the changes set forth.
Within an organization there is always the need for developing, acquiring, and adopting new technology. New technologies are always coming about and have a tremendous impact on organizations. The main approach to technological change is the ambidextrous approach. This combines both the organic and mechanistic structures. Under the ambidextrous approach there are numerous options of how to bring about new technology. Switching structures brings people from different areas of an organization together to share ideas and technology with each other. Creative departments consist of a research and development department. The sole duty of this department is to come up with new technology and test new technologies to ensure they will be useful for the organization. Another popular option is the use of venture teams. Venture teams are essentially their own organization within an organization. They often have their own separate location and structure in order to develop new technologies.
In addition to R&D and venture teams, another way to increase technological knowledge and bring about technology change is to acquire technology from external sources. Procter & Gamble provides an excellent example of interorganizational technology transfer. Roughly half of new product development projects involve key ideas from external sources. Procter & Gamble also uses an active licensing strategy of their own technological advances to generate millions in annual licensing revenue. Pharmaceuticals are notorious for using this type of strategy to bring about technological change within their organizations. (Lichtenthaler 2) Despite the great amount of success achieved by these firms, most organizations are still timid about sharing their own technological advances. They fear that by doing so, it will allow their competitors access to their own competitive advantage. While this may be true in some instances, it appears that interorganizational technology transfer can actually benefit organizations and ultimately consumers.
While there are certain exceptions, new products and services are usually the direct result of new technology and coming up with new products and services is vital for success in today's markets. As markets evolve so should your products or services. The question of how to create and present new products now arises. Michelle Karas offers 11 steps that help organizations answer this complex and challenging question. Step one is to analyze the situation. Evaluate your environment and current product position and then identify your strengths, weaknesses, opportunities and threats. The next step is to explore and research product needs. Brainstorm ideas, have an open mind and write down all ideas. Figure out what your customer's needs are and your competitor's limitations. Step three is to determine usage and identify what market you want to target with your product. Step four calls for developing a prototype. This entails converting an idea into an actual product and determining the product's specifications, features and benefits. Step five is to determine the price based on your objectives. Testing the product or service is the next step and is absolutely crucial to its success. It is also important to ensure that all operations within your business can fully support the product. (Karas 32-34)
After the product has been thoroughly tested, it is time to establish sales goals. Identify target sales goals, and whether or not these goals are realistic and obtainable. The next step involves developing a marketing plan for both internal and external markets that achieves the goals set forth earlier. Step nine is training and educatin employees. Ensure employees/salespeople understand all aspects of the product. Characteristics like price, description, how the product works, and sales goals should all be thoroughly understood. The final two steps involve actually introducing the product to the market and evaluating the results. Record how the product performs and how the customers respond. (Karas 32-34) While these steps are quite simplified, these are the basics concepts that organizations utilize, regardless of size.
A great example of products that have just recently been introduced is Sony's Move and Microsoft's Kinect gaming systems. Both of these systems allow users to make use of their own bodies to become more active and involved in the gaming experience, very similar to the Wii. When the Nintendo Wii debuted, it was the first gamming system of its kind to offer an interactive gaming experience. It was a tremendous success and both Sony and Microsoft realized the opportunity to have their piece of the pie too. Rather than come up with a completely new gamming system, through the use of new technology, Sony and Microsoft designed a device that would simply be used in conjunction with users Playstation 3 and X-Box consoles. As time goes by it will be interesting to see what effects theses systems have on Wii sales and whether or not they are profitable for both Sony and Microsoft.
Going along with the "video game theme", Sega, which offered very popular gaming consoles in the 90's failed to innovate and offer a product strong enough to compete with Sony's Playstation and Nintendo's N64. The result was Sega removing itself entirely from the hardware side of gaming and focusing solely on video game software. While Sega failed in one area, they were able to make a successful change and become profitable selling software. These two examples offer evidence to the power that new products and services hold within an organization. Once again failing to change and innovate successfully will most likely spell disaster for an organization.
As an organization becomes larger the need for strategy and structure change becomes apparent. "Strategic change involves altering employees' construction of meanings by using a discourse that sets a new direction for a firm." (Sonenshein 505). All organizations need to make changes in their strategies, structures, management processes and administrative procedures. Many organizations go about this change using a dual core approach, which is a balance between the technical side and the management side of an organization. The technical side refers to the employees who actually produce the product or service that the company offers while the management side ensures that the day to day operations of the company are being fulfilled and the performance objectives are being met. While the two sides may have very different ideas of what changes need to take place, it is imperative that both sides be on the same page and working toward the same goal.
In addition to becoming larger, there are also some other reasons why organizations must change their strategies. The first reason is the persistent pressure from shareholders for greater profitability. This requires business leaders to continually update their strategy. Theses updates are necessary to remain aligned with customers' changing needs and priorities, while generating the necessary profits. This demands that strategies must be executed successfully within increasingly shorter time-periods. (Franken 49-73)
The second reason relates to the increased complexity of organizations. In many organizations the activities performed to create products and services cross multiple functional, organizational, and geographical boundaries. Consequently, any strategic change program is likely to affect the people, processes, structures, technologies, suppliers, and business partners that work both within and across these boundaries. Hence, strategic change programs are becoming highly complex, resulting in increased risk of failure due to oversight. (Franken 49-73)
The third reason is the difficult challenge faced by managers to balance the demands of successfully executing complex change programs with the demands of managing today's business performance. In situations where management is strongly tied to reward schemes based on today's performance, it is challenging to achieve active participation for the creation of tomorrow's organization. However, as a result of the relentless pressure from stakeholders for repeated performance, managers cannot afford to dedicate their time, effort and resources to one set of demands exclusively. This balance is particularly challenging during the high-risk period when a business transitions to a new strategy. (Franken 49-73)
The fourth reason is the low levels of involvement of a large number of managers across all functions at an early stage of strategy execution. The mechanics of involving large numbers of people in complex discussions leads organizations to restrict involvement in the quest for urgency. Often managers see these early stages as bureaucratic, unnecessary, and delaying real action. However, such involvement is required to obtain commitment to change and for the development of effective implementation plans.
The fifth reason is the difficulty of securing the required resources to execute the strategy. Often, as a result of the large number of concurrent change programs, many of the organization's resources will already be allocated. Furthermore, as such resources are limited, managers will compete for them, and, once within their control, will endeavor to "own them" to secure their own goals.14 (Franken 49-73)
According to Paul Sabbah, president of Stamford International, new strategies should focus on innovation, productivity and risk management. Productivity can be as easy as having employees working longer hours, implementing new technologies in order to speed up product development, or simply reducing inventory and using effective communication. Firms also need to look to international expansion as another potential strategy. By doing so, they open themselves up to new markets and new customers while being exposed to new ways of doing business and new retail concepts. Business is also all about managing risk. In difficult times, effectively managing risks like political instability, currency fluctuations, transportation costs, and rising energy costs has a direct effect on an organizations ability to survive in a struggling economy. (Sabbah)
The final element and the most difficult to change is a change in organizational culture. This is often the most difficult to change because you are affecting people core values and daily routines. Eric Van Der Steen has shown that organizations have a tendency, over time, to develop the same set of beliefs and values. This happens through two mechanisms. People who share the same beliefs would rather work with those who share their beliefs than someone that does not. People also share experiences, which in turn leads to a set of shared beliefs. These shared beliefs and values directly impact the core culture of an organization. (Van Der Steen 26)
To help explain the difficulties of culture change, think of a factory worker who has been assembling ball bearings a specific way over the past 20 years. This worker comes in every day, goes to their station and performs their duty over and over again for the duration of their shift. They have their routine down and never deviate from the steps they take. Now imagine someone coming up to them and telling them that the routine they have done over the years is inefficient and they have a better, more efficient way of performing their duty. In addition to this, there will be new policies and procedures to follow to ensure that the changes take place. That worker is obviously going to be skeptical and very resistant to changing. They may even feel that this person has no right to come and tell them how to do their job which they have been doing for so long. This is what must be overcome when dealing with cultural change.
There are a few different ways to implement cultural change and each process has its own unique advantages and disadvantages. One way is by large group intervention. This entails having everyone in the organization go through a seminar, explaining to them what changes are going to be made. While this allows everyone to hear and hopefully understand the message, there may be some specific questions about the change that go unanswered. For instance a specialized department may wonder how certain changes will be affecting their culture. It is imperative that cultural change is led from upper management. Managers need to set the standard and lead by example especially when it comes to cultural change. In support of this, Lance Ewing states that "companies without cultural leadership are always going the wrong way." (Ewing 88)
Changing culture within an organization is never an easy task yet it is necessary and critical to change a culture when leadership transforms. "Starting cultural change is like cooking in a Crock-Pot. Adding the right ingredients and turning the heat up with the right measure of enthusiasm for positive consumer change makes everyone want what is in the cultural pot." (Ewing 88)
When dealing with change in any area, there will always be barriers to overcome. Resistance to change is now seen as a natural, acceptable incident. When it occurs, resistance may cause problems within the organization. However, depending on the nature of the change, the surrounding atmosphere and how the change takes place, resistance is not always a bad thing (Dent and Galloway Goldberg 27). According to Bauer, resistance to change, like pain, can be an alarm signal and serve as a warning that something is failing in the change process. (Bauer) Klein argues that resistance is a needed factor of flourishing change and if properly managed, can provide a beneficial response to the changes taking place. (Klein)
Resistance is also a resource. It can provide valuable feedback to managers if they are willing to listen. Considering resistance as failure will overlook opportunities to strengthen operational outcomes. By paying attention to this feedback, managers can see a different perspective to the change they plan on initiating. Sometimes employees resist change for no reason, but often times, the employees most resistant to change are the ones who care enough to make sure the plan succeeds. People are also very aware of the past, and thoughts of changes that have utterly failed will constantly be running through their heads. In order to convince these people it is necessary to explain to them why and how you plan to implement change. Giving them the chance to voice their own questions and concerns will only enhance your plan to change. (Ford 100-103)
In conclusion, the world is constantly changing and change and innovation play an extremely important role within any organization. As an organization if you fail to change and adapt to the rest of the world and your environment the world will pass you by. There are many elements for successful change, but your people will always be the most important in order for that change to take place. New technologies are always being introduced and it is important to stay up to date and take advantage of technology that will greatly benefit your organization. As an organization it is imperative that new technology is used to constantly come up with new and innovative products and services. While this is a major undertaking for any organization it is necessary for sustainability. As new products and services are being offered and an organization grows the strategy and structure used must also change. This gives way to cultural change where there is almost always some kind of resistance. Using that resistance as a tool to overcoming problems is a key step in successfully implementing change. Ultimately, the whole purpose of change is to increase profitability by making changes to the strategy, structure, technology and culture of an organization. While there will always be problems and other "bumps along the road" it is imperative that these obstacles are overcome in order to increase the odds for success.