Opportunities And Threats Force Organizations Commerce Essay

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New technologies, opportunities and threats force organizations to acquire adaptive capacities in order to remain relevant, competitive and survive in an increasingly complex business environment. Organizations and individuals have to embrace change initiative programmes in order to ensure organisational long-term success. In this paper, we look at the main theories of innovation and change, whilst maintaining a general view on how an organization goes about its change management decisions. We will describe one successful, one less successful change initiative and the impact of these two on the organizational culture. We also come to the conclusion that for a successful implementation of change, a company must be more transparent and listen to every employee's opinions.

Then, an integrated approach to my own personal performance as a leader and what is still lagging to acquire the skills necessary change development will be covered.


Change, innovation, and even creativity are not new concepts in the framework of organizational development. The past few decades have witnessed the development of several theoretical models aiming to improve the way organizations function. Social scientists have focused on the analysis of innovation and its consequences on society. Many believe that the beginning of the 21st century marks a transitional period with particularly dramatic changes in how commerce and work life are organized. Concepts such as a "knowledge society" (Senge, 1990) have been used to described this period of transition.

In order to respond to the increasing market demands and face new competitors, many companies have been forced to introduce new organizational concepts involving a whole set of changes. Hughes states that managing change is one of the major challenges that face not only the organizations, but also the individuals who should accompany the organizations in their processes of change (Hughes, 2006). Organizational change is related to organizational strategy, which will guide organizational direction and activities (Thornhill, Lewis, Millmore and Saunders, 2000).

As individual change is pivotal part of organization change, change management need to be adopted at individual level in order to initiate the change and consequently obtain successful organization change (Hughes, 2006).

Beer and Noria (2000) explain that due to, heightened competition, globalisation, advancements in communications and information technologies, inter-alia, change initiatives have interested the majority of leading organisations. Organizational change initiatives can maximize shareholder value (i.e. economic value theory) and develop organizational capabilities (i.e. organizational capability theory). This paper explores the theories behind innovation and change, evaluating one successful and one less successful innovation/change initiative related to the relevant theories. It also offers a reflection on Graan Jaff's own performance as a leader of innovation and change, including the development of an action plan for further practicing the relevant skills in innovation and change.

Theories of Innovation

According to the OECD, innovation is the development of a product or service that provides new or improved consumer experience (Oslo manual, 2005).Innovation is therefore described as a product or a service that is characterized by its innovative dimension.

Mulgan and Albruy (2003) define innovation as "the creation and implementation of new processes, products, services and methods of delivery which result in significant improvements in outcomes efficiency, effectiveness or quality". They further elaborate this concept by linking the idea of creation to a source of value both for the individual consumer and companies.

According to Joseph Schumpeter (1912), innovation is different from invention insofar as the latter covers only aspects related to technical progress while innovation relies on acceptance and marketing. In addition he highlights the importance of innovation for growth and economic development. For example, a technical discovery without a valid product or a service cannot be regarded as an innovation.

Van de Ven (1986) adopts a broader definition of innovation by setting it as the development and implementation of new ideas by individuals who, over time, engage with others in a defined institutional context.

Through these different definitions, innovation could be summarized as a creation, whose application would generate business opportunities meeting existing needs or addressing new needs.

Through Schumpeter (1912), we discover the five major types of innovations: (i) the introduction of a new product; (ii) the introduction of a new method of production, (iii) the opening of new markets; (iv) the conquest of a new source of supply of raw materials; (v) the conception of new organizations.

Also, a great deal of research has been conducted to try to identify what factors affect the rate and extent of adoption of innovation by the markets. A number of characteristics of innovation have been found to affect diffusion (Rogers, 2003):

Relative advantage, (ii) Compatibility, (iii) Complexity, (iv) Trialability, (v) Observability

Innovations may also be classified by their degree of intensity. When an innovation brings an improvement to the processes, it is described as incremental innovation. Christensen (1997) states that "incremental innovation does not change the nature of the product or service but allows the company to strengthen its offer without upsetting its value chains". Conversely, when an innovation is accompanied by a major technological breakthrough that improves the product or service, it is called disruptive innovation (Christensen, 1997).

Tidd (2006) recognizes that shocks trigger innovations and changes occur when a threshold is reached (be it opportunity or threat). Similarly, Schumpeter (1912) identifies the resistance to change when "the resistance manifests itself in the groups threatened by the innovation, then in the difficulty finding the necessary cooperation, finally in the difficulty in winning over consumer."

Change and change models

Human nature is prone to resistance to change. Since the end of 19th century, and more specifically during the 1980's, a revolution in the principles of modern management began. An analysis of some of the works of authors considered "masters" of leadership explains this (Drucker, 1999, Porter, 1999 and Peters, 1998). The reasons for change resistance are essentially within the individuals of the organization and the environment in which they operate. Some changes occur because of the opportunities that arise, while others are planned as in mergers/acquisitions. The onus is then placed on effective change management, which allows people to reorient the organization, achieve its goals, maximize their performance and ensure the continuous improvement in an ever-changing business environment.

Change occurs efficiently only if there is a complete commitment from within the organization. Change happens through people therefore, as part of the process of change it is necessary to know and stimulate their values, their beliefs, their behaviors and their emotions. Kim (1993 p. 37) argues that "organizations learn via their individual members. Therefore, understanding individual learning theories are important for understanding organizational learning."

One often criticized model for change is Levin's model of change, which consists of unfreezing, transforming, and freezing. Unfreezing refers to conditioning individuals' readiness for change, and establishing ownership. It encourages them to unlearn the old and prepare for the changes. Momentum builds when stakeholders introduce change and plan its implementation. Transformation occurs when individuals engage in change initiatives. In the final phase, refreezing, individuals incorporate the change into their daily routine and reestablish equilibrium personally or within the firm. New behaviors solidify and ultimately become the norm (Gilley 2005, pp. 34-36).

Lewin's "Force field analysis" (Lewin 2000) considers that "an issue is held in balance by the interaction of two opposing sets of forces - those seeking to promote change (driving forces) and those attempting to maintain the status quo (restraining forces)". Lewin considers that when there is a balance, there are a number of supporting forces that support this state; but another set of restrictive forces that oppose and counterbalance it. In short, force field analysis is a technique used to manage change using a set of positive and negative forces in a particular situation. Lewin describes five essential steps to managing change:

Define the change you want to see by creating a diagram or table of the future desired state.

Brainstorm and analyze the restraining forces - those that oppose change.

Evaluate the driving and restraining forces and focus on the impact of each on the change initiative.

Create a strategy to strengthen the driving forces or weaken the restraining forces, or both. The result should be an action plan that will achieve the greatest impact.

Lewin's model has limitations in that it fails to address the human side of change and doesn't address the emotional state of people during the change process.

Kotter's (1995) eight steps of change is another linear model for change. It's eight steps are: establishing a sense of urgency, forming a powerful guiding coalition, creating and communicating a vision, empowering others to act on the vision, planning for and creating short-term wins, consolidating improvements and producing still more change, and finally institutionalizing new approaches. However, knowing the required change is the critical question to ask. Those changes with wide-reaching impacts requiring significant unlearning by an individual are the ones that will generate the more resistance to change.

Another model of change is Beer and Noria's approach to change (2000).

Theory E

Theory E focuses on creating value, primarily in the form of shareholder value, and uses formal structures and systems to achieve change. One other reason for turning to big consulting firms is that the CEO might find that workers andlower management are unenthusiastic or even opposed change. A CEO will then turn to consultantssince they are viewed as, what Berra and Noheria describe to be, "allies" in large organizations.



Theory O

In this Theory the goal is to change a company's ways from the ground up so to speak. It focuses onchanging management's, workers' and unions' culture and behavior. It's believed that the changeprocess in a company is not a one man job, but requires the involvement of all the employees and adesire of openness and truthfulness within the company.The goal of firms using Theory O is to create a system which makes employees emotionallycommitted to increasing their performance. You want the employees to become involved in theprocess of "identifying and solving work-related problems."


 Managers that practice Theory O ideas think that having only one goal, as covered in Theory E, is amistake. That said creating value is absolutely one of the things that should be on the "to do list" in acompany. They think that when a top manager is setting simplistic goals it's easy to miss the factorsthat contribute to the overall economic health of the company. Proponents of Theory O believe thatthe best way to make shareholders happy (happy in the sense of economic value) is to shape theorganization into a healthy "learning organization"


and in doing this it is important to look at theeffectiveness and efficiency at every level of production. This is what managers believe is the bestway to create economic value in the long run.



It's believed, due to the fact that top managers are the ones that are farthest away from theconsumers and operations, that it is vital for management decisions to be taken with theinvolvement and collaboration of the employees in order to achieve long term performanceenhancements. This is done because it is felt that when communication in a firm goes strictly fromtop to bottom, obstacles, which present themselves when trying to follow top managements orders,aren't communicated back in a satisfactory way, and therefore hinder the change process.


Focus: Culture

A hallmark of all Theory O change strategies is the focus on value and behavior inside companies.Management sets up a set of values and principles that will guide the employees and inform them of the corporate culture that they want to institute. The goal with this is to create an emotionalattachment which is thought to have great impact on commitment of employees to the companies.To change culture one cannot simply change system and structure to make it happen. You have tochange the values and beliefs that have given the prior systems and structure their legitimacy. AsLarry Hirschhorn puts it "cultural change requires management to engage people emotionally inexamining why the existing structure and systems are not meeting the new challenges confrontingthe organization".





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 M. Antonson, C. Wendels29Hirschhorn calls this examination process "creating a counter structure" which providesopportunities to build new psychological contracts between management and employees and also tobe able to safely attack the current order.


Planning: Emergent 

Karl Weick


believes that organizations change because of and due to local continuousexperimentation and not by the hand of one single CEO implementation of radical system changes.He argues that managers should encourage local experimentation and move mangers from areas,which have shown to be successful into areas or departments that have proven to work in anunsatisfactory way. By doing this you get an emergent, from the ground up, process of change that isseen to be more likely to have long-lasting effects than a more centrally developed plan for change.He also writes, "[…] change is ongoing, continuous and cumulative" and, "emergent, continuouschange, when contrasted with planned change, can be defined as the realization of a new pattern of organization in the absence of explicit a priori intention."


What he means here is that when thingsare repeated, shared, amplified and sustained they give life to organizational change.


Motivation: Financial Incentives or Not 

In Theory O the financial incentives are present but not as the sole motivation for change. It'sbelieved that the way in which management involves the rest of the workforce in the change processis enough to make them motivated. In a sense they feel that their input makes a differs and aretherefore motivated to make things happen. By no means is this to say that financial incentives donot exist. They do, but more as a supplementary mechanism. The thing about money being used as amotivator is that it is viewed as a means by which people are complying with a cause, but notcommitting to the same and therefore it doesn't go well in hand with the Theory O philosophy.


The Use of Consultants in the Change Process

When consultants are brought into the change process of a Theory O-company their involvement isquite different to that which it would have been in a company with a Theory E change process. InTheory O the consultant's role is much more a facilitating one.As it's put in

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"the consultants' role was to facilitate the process and be aresource. […] they did not recommend a corporation-wide program by which top managementshould implement their ideas. They relied on managing a process of discovery and learning". Thiscould be said to be the core use of consultants. People who come from the outside and helpemployees go through a process of analysis, redesign and change.



Combining the Two Theories of Change

Is it possible to combine these two ways of change management? Beer and Nohria say that boththeories are, "[…] two different but equally legitimate perspectives"


and they go on arguing thatchoosing one of them would be the most natural and the easiest way to go, but that these do not ontheir own manage to achieve all the objectives that management has set out reach.



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Berra and Nohria point out that if you set out to have an organization which is quick to adapt, survive and prosper in the long run you will have to combine a Theory E change management with a Theory O change management. They argue for what they call an "and/also" where you get rapid improvements in economic value and also build sustainable advantages by mixing the two. This, they claim, is the hardest approach and requires great "will, skill and wisdom"


to achieve good results.There are two ways of mixing the two approaches together: You can either sequence Theory E andTheory O or simultaneously incorporate them into one single approach.



The Two Ways of Combing Theory E and Theory O



Here you also find two ways of executing the change process. The most effective, regarding the waysin the sequencing method, is to lead with Theory E and follow with Theory O. This could look asfollows; using Theory E methods to downsize and streamline bureaucracy and production and followup with Theory O where the employees have more influence in the change process. This way has themost probability of success according to Beer and Nohria.


 The problem of using the theories in the reverse order is that the trust and commitment established during the Theory O phase will be torn down when people are being laid off and management is acting against promises it previously made. This will lead to disarray and distrust amongst the employees and the change process will most certainly fail. It's therefore strongly recommended, if one chooses to go with a sequencing strategy, to start with Theory O and follow with Theory E rather than the other way around.


 Simultaneously Use

A simultaneously use of Theory E and Theory O is considered to be the most effective approach toorganizational change according to Beer and Nohria.


They claim it's crucial that one doesn't getemotionally conflicted about demanding both of them. When starting the change process it isimportant to both have the goal of creating economic value in mind and at the same time creating aneffective human organization.Leadership should be driven from the top-down but also give space to information travelling in theopposite direction. Focus should lie on changing organization design and culture, the process shouldboth be planed which includes such tasks as putting "the right man in the right place" and have themexperimenting, redesigning, and also make the workforce commit to the changes proposed on anemotional level and thereby make them give 110 percent.Motivation in the form of money should only be used to attract and keep good employees but not asthe driving force of change under a synthesis of Theory E and Theory O. Compensation is somethingwhich lags behind and that's given as a reward or as recognition after good performances motivatedby involvement and commitment rather than just the prospect of cash- in-hand down the line.



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 The use of consultants in a combined Theory E and Theory O change strategy is important. Externalparties may have a different view of what needs to be done and they can bring in expertise,knowledge and technical skills that people inside the company may lack. However, it is importantthat the consultants only act as supporting players in the change processes and assist managementand employees in their efforts rather than to try and push their own prepackage acronym bearingsolutions.

Leadership and Leading change

Characteristics of a good leader, (sources, 2010;) French, Bell and Zawacki, 2005; Goleman, Boyatzis, and McKEE, 2005; Kotter, 1997; Pfeffer, 2005; Robbins, 2004; (Soto, 2001):

• Communicator, engaged involved, rational, humane, makes consulted decisions, assumes responsibilities, visionary and holistic, capacity for analysis and synthesis, think global and act local, innovative, anticipated changes, and handles up to date information.

However, theorists give greater importance to the leadership and communication skills that allow influencing the behavior of employees towards business objectives.

Successful change

Change failure

Graan Jaff's development as a leader of change and action plan.