Bài giảng Principles of Management - Chapter 18 Managing Innovation and Change

chapter 18Managing Innovation and ChangeMcGraw-Hill/IrwinPrinciples of Management © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.Learning ObjectivesExplain how paradigm shifts occur and describe their consequences.A. Identify the major sources of organizational inertia.Outline what is required to change the strategy and organization of an established enterprise.Explain why many organizational change efforts fail and identify what managers can do to avoid failure.Discuss what managers can do to increase the ability of their organization to produce commercially successful innovations.Paradigm ShiftsOccurs when a new technology or business model comes along that dramatically alters the nature of demand and competitionDisruptive technology – A new technology that gets its start away from the mainstream of a market and then, as its functionality improves, invades the main marketPunctuated equilibrium – A view of industry evolution asserting that long periods of equilibrium are punctured by periods of rapid change when industry structure is revolutionized by innovationTechnology S-CurvesProbability of paradigm shift increases as technology approaches natural limit.Natural limit of technologyDiminishing returnsInflection pointIncreasing returnsAccumulated R&D effortPerformance/functionality of desired attributesEstablished and Successor TechnologiesSuccessor technology automobilesParadigm shift T1 T2 TimePerformance/functionality of desired attributesEstablished technology: horse and cartSwarm of Successor TechnologiesSwarm of successor technologiesDiscontinuity TimePerformance/functionality of desired attributesFive Steps to a Creative CompanyTechnology and information become commoditized and globalizedWith commoditization, core advantages can be shipped abroadDesign strategy begins to replace Six Sigma as a key organizing principleCreative innovation becomes the key drive of growthThe successful Creative Corporation emerges, with new Innovation DNASource: Business Week, August 1, 2005Top 5 Innovative Companies in the WorldCompanyApple3MMicrosoftGESonySource: Business Week, August 1, 2005Responses24.84%11.77%8.53%8.53%5.94% 2005 Poll of 940 senior executives in 68 countries by Boston Consulting GroupNew Business ModelThe way in which an enterprise intends to make money Can rapidly alter the competitive playing field/create a paradigm shiftCan be created due to technological innovation, or the absence of technology all togetherDrivers of Change in Business SchoolsDoctoral faculty shortage 52%Emergence of new competition 47%Shifts in funding sources 46%Rapid changes in the economy 38%Changes in how business organizations function 33%Drivers %YesSource: Biz Ed, March/April, 2002Punctuated EquilibriumIndustry becomes more consolidates again, but different firms now lead the market.Change is triggered by the emergence of new technology. New entry results in a more fragmented industry.t0 t1 t2 TimeConsolidated FragmentedIndustry structure Stable Period Stable Period of Change PeriodOrganizational InertiaInternal and external forces that make it difficult to change the strategy or organization architecture of an enterpriseCognitive SchemataExternal Institutional ConstraintsCommitments & CapabilitiesOrganizational CultureInternal Political Constraints In the 1980s, International Videos (IV) had major global investments in the video cassette and video cassette recorders (VCR) business. When the market shifted toward CDs and DVDs, IV was stuck with significant assets in the declining VCR business. This is an example of which inertia force?Cognitive schemataInternal political constraintOrganizational cultureCommitments and capabilitiesQuestionThe Process of Organizational ChangeRequires: *Shock therapy *Compelling case for change *Compelling visionRequires: *Decisive action *Committed mgmt team *New strategy *Asset disposals *New org. architect *Cultural change effort *Employee involvementRequires: *Multi-year perspective *Constant pressure *Ongoing socialization *Consistent application of new organization architectureRefreezing the organizationMoving the organizationRequires: *Outside or “inside-outsider” *Leading by exampleUnfreezing the organizationLeadership committed to changeFailed Change Efforts & the Secrets of SuccessThey do not establish a great sense of urgencyThey do not create a powerful enough coalition to push through the changeThey lack a compelling visionIf they do have a vision, they poorly communicate it to othersFailed Change Efforts & the Secrets of SuccessThey fail to remove obstacles to the change effortThey fail to plan for or create short-term winsThey declare victory too soonThey fail to empower employees and lower-level managers to implement the changeDriving InnovationQuantum innovations – Innovations that incorporate new technology and disrupt competition, shifting the dominant paradigmIncremental innovations – innovations that represent improvements in product functionally within an established technologyAlways Something New PepsiCo and its Frito-Lay unit offer products for every taste and ethnic marketNumber of new products in PepsiCo portfolio last yearIncrease in PepsiCo earnings in 2003 over previous year 200+ 19%Source: Business Week, June 14, 2004New Product FailuresNew products fail because:The demand for innovations is inherently uncertainThe technology is poorly commercializedPoor strategy, including inappropriate pricing, weak promotion, or poor distribution strategyCompanies often market a technology for which there is not enough demandInnovation’s Dismal Success RateSource: Business Week, August 1, 2005Industry Success RateToys >1%Groceries >2%Music >2%Airlines 2%Mobile telephony 3% All industry innovation initiative success rate is 4.5%A Formula for FailureFormalize forums for failureMove the GoalpostsShare personal storiesBring in outsidersProve yourself wrong, not rightCelebrate smart failures“It’s innovation’s great paradox: Success—that is, true breakthroughs—usually comes through failure.”Source: Business Week, July 10, 2006Generating Successful InnovationsBuild skills in basic and applied scientific researchDeveloping a good process for project selection and project managementUsing cross-functional integrationCreating product development processesImplementing partly parallel development processesPlacing a radically new technology in an autonomous organization unitA Development FunnelPhase 1: Idea GenerationMarketGate 2Phase 2: Project RefinementPhase 3: Project ExecutionGate 1Cross Functional IntegrationProduct development projects are driven by customer needsNew products are designed for ease of manufactureDevelopment costs are kept in checkTime to market is minimizedProduct Development Teams To function effectively:A heavyweight project manager should lead the team and be dedicated primarily to the projectThe team should have at least one member from each key functionThe team members should be physically collocated to create a sense of camaraderie and facilitate communicationHave a clear plan and clear goals , particularly for critical development milestones and development budgetsEach team needs to develop processes for communication and conflict resolutionA Sequential ProcessOpportunity identificationProduct designConcept developmentProcess designCommercial productionA Partly Parallel ProcessOpportunity identificationConcept developmentCommercial productionProduct designProcess designQuestion When a firm develops a quantum innovation — one that might usher in a technological paradigm shift in the industry — it should not be introduced to the market because of the certainty of self-cannibalization. Do you agree? Explain.