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MGT504 - Organization Theory and Design - Lecture Handout 30

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Regardless of the type or scope of change, there are identifiable stages of innovation, which generally occur as a sequence of events, though innovation stages may overlap. In the research literature on innovation, organizational change is considered the adoption of a new idea or behavior by an organization. Organizational innovation, in contrast, is the adoption of an idea or behavior that is new to the organization’s industry, market, or general environment. The first organization to introduce a new product is considered the innovator, and organizations that copy are considered to adopt changes. For purposes of managing change, however, the terms innovation and change will be used interchangeably because the change process within organizations tends to be identical whether a change is early or late with respect to other organizations in the environment.

Innovations typical are assimilated into an organization through a series of steps or elements. Organizations member first become aware of a possible innovation, evaluate its appropriateness, and then evaluate and choose the idea. The required elements of successful change for a change to be successfully implemented; managers must make sure each element occurs in the organization. If one of the elements is missing, the change process will fail.

  1. Ideas. Although creativity is a dramatic element of organizational change, creativity within organizations has not been widely and systematically studied. No company can remain competitive without new ideas; change is the outward expression of those ideas. An idea is a new way of doing things. It may be a new product or service, a new management concept, or a new procedure for working together in the organization ideas can come from within or from outside the organization.
  2. Need, ideas are generally not seriously considered unless there is perceived need for change. A perceived need for change occurs when a manger see a gap between actual performance and desired performance in the organization. Managers try to establish a sense of urgency so that others will understand the need for change. Sometimes a crisis provides an undoubted sense of urgency. For example, Midwest Contract Furnishings, a small firm that designs and fabricates hotel interiors, faced a crisis when its largest customer, Renaissance Hotels, was sold to Marriott, which did interior designing in – house. Midwest lost 80 percent of its revenues virtually overnight. In many cases, however, there is no crisis, so managers have to recognize a need and communicate it to others. In addition, although many ideas are generated to meet perceived needs, innovative companies encourage the constant development of new ideas that may stimulate consideration of problems or new opportunities.
  3. Adoption, Adoption occurs when decision makers choose to go ahead with a proposed idea. Key managers and
    employees need to be in agreement to support the change. For a major organizational change, the decision might
    require the signing of a legal document by the board of directors. For a small change, adoption might occur with
    informal approval by a middle manager. When RAY Kroc was CEO of McDonald’s, he made the adoption decision about innovations such as the Big Mac and Egg McMuffin.
  4. Implementation. Implementation occurs when organization members actually use a new idea, techniques, or
    behavior, Materials and equipment may have to be acquired, and workers may have to be trained to use the new
    idea, implantation is a very important step because without it, previous steps are to no avail, implementation of
    change is often the most difficult part of the change process. Until people use the new idea, no change has actually
    taken place.
  5. Resources. Human energy and activity are required to bring about change. Change does not happen on its own; it requires time and resources, for both creating and implementing a new idea. Employees have to provide energy to see both the need and the idea to meet that need. Someone must develop a proposal and provide the time and
    effort to implement it.

Needs and ideas are listed simultaneously at the beginning of the change sequence. Either may occur first. Many organizations adopted the computer, for example, because it seemed a promising way to improve efficiency. Today’s search for a vaccine against the AIDS virus, on the other hand, was stimulated by a severe need. Whether the need or the idea occur first, for the change to be accomplished. At the New York law firm of Cadwalader, Wicker sham, and Taft, the change process was triggered by a compelling need; improve service and profits or fail


In today’s business world, any company that isn’t constantly developing, acquiring, or adapting new technology will likely be out of business in a few years. However, organization faces a contradiction when it comes to technology change, for the conditions that promote new ideas are not generally the best for implementing those ideas for routine production. An innovative organization is characterized by flexibility, empowered employees and the absence of rigid work rules. An organic, free flowing organization is typically associated with change and is considered the best organization form for adapting to a chaotic environment.
The flexibility of an organic organization is attributed to people’s freedom to crate and introduce new ideas. Organic organization encourages a bottom – up innovation process. Ideas bubble up from middle - and lower – level employees because they have the freedom to propose ides and to experiment. A mechanistic structure, on the other hand, stifles innovation with its emphasis on rules and regulations, but it is often the best structure for efficiently producing routine product, the challenge for organizations is to create both organic and mechanistic condition within organizations to achieve both innovation and efficiency. To achieve both aspects of technological change, many organizations use the ambidextrous approach.


Recent thinking has refined the ideas of organic versus mechanistic structures with respect to innovation creation versus innovation utilization. For example, sometimes an organic structure generates innovation ideas but is not the best structure for using those ideas. In other words, the initiation and the utilization of change are two distinct processes. Organic characteristics such as decentralization and employees freedom are excellent for initiating ideas; but these same conditions often make it hard to use a change because employees are less likely to comply. Employees can ignore the innovation because of decentralizations and a generally losses structure.

How does an organization solve this dilemma? One approach is for the organization to be ambidextrous – to incorporate structure and management processes that are appropriate to both the creation and use of innovation. The organization can behave in an organic way when the situation calls for the initiation of new ideas and in a mechanistic way to implement and use the ideas.

An example of the ambidextrous approach is the Freedenberg NOK auto parts factory in Ligonier, Indian. Shifting teams of twelve, including plant workers, managers, and outsiders, each spend three days crating ideas to cut costs and boost productivity in various sections of the plant. At the end of the three days, team members go back to their regular jobs, and a new team comes in to look for even more improvement, over a year’s time, there are approximately forty of these GRWOTH ( get Rid of Waste Through Team Harmony) teams roaming through the sprawling factory. management has promised that no one will be laid off as a result of suggestions from GROWTH teams, which further encourages employees to both creates and use innovations.


Freedenberg – NOK has created both organic and mechanistic conditions in the factory. Some of the techniques used by many companies to maintain an ambidextrous approach are switching structures, separate creative department, venture teams, and corporate entrepreneurship.

Switching Structures: Switching structures mean an organization creates an organic structure when such as structure is needed for the initiation of new ideas. Some of the ways organizations have switched structures to achieve the ambidextrous approach are as follow.

  • Phillips Corporation, a building materials producer based in Ohio, each year creates up to 150 transient team – made up of members from various departments—to develop ideas for improving Philips products. After five day of organic brainstorming and problem solving, the company reverts to a more mechanistic basis to implement the changes.
  • Gardetto’s a family – run snack – food business, sends small teams of workers to Eureka Ranch, where they may engage in a Nerf gun battle to set the tone for fun and freedom, then participate in brainstorming exercises with the idea of generating a s many new ides as possible by the end of the day. Doug Hall, who runs Eureka Ranch, uses cans of baked beans, bags of cookies, and competitors’ snack foods to stimulate ideas. After two and a half days, the group returns to the regular organizational structure to put the best of the ideas into action.
  • Xerox Corporation’s Palo Alto Research Center (PARC) is purposely isolated from the corporation’s bureaucracy and is staffed with mavericks not afraid to break the rules, John Seely Brown, Xerox’s director of research, encourages his researchers to make trouble and upset conventional thinking. Xerox, which counts on the free thinkers at PARC for new insights, new solutions, and sometimes even entirely new businesses, knows that it is easy for maverick ides to get trampled in the traditional organization.
  • The NUMMI plant, a Toyota subsidiary located in Fremont, California, creates a separate, organically organized cross- functional subunit, called the Pilot. Team to design production processes for new car and truck models. When the model they are preparing moves into production, workers return to their regular jobs on the shop floor.

Each of these organizations found creative ways to be ambidextrous, establishing organic conditions for developing new ideas in the midst of more mechanistic conditions for implementing and using those ideas.

Creative Departments: In many large organizations the initiation of innovations is assigned to separate creative departments. Staff departments such as research and development, engineering, design, and systems analysis; create changes for adoption in other departments. Departments that imitate change are organically structured to facilitate the generation of new ideas and techniques. Departments that use those innovations tend to have a mechanistic structure more suitable for efficient production. Example indicates how one department is responsible for creation and another department implements the innovation.

Raytheon’s New Products Center, in operation for thirty years, illustrates how creativity and entrepreneurial spirit can coexist with discipline and controls. The center has been responsible for many technical innovations, including industry leading combination ovens, which added microwave capabilities to conventional stoves. The New Products Center Provides autonomy and freedom for staff to explore new ideas, yet staff must also establish a working relationship with other departments so that innovations meet a genuine need for Raytheon departments.

Venture Teams: Venture teams are a recent technique used to give free rein to creativity within organizations. Venture teams are often given a separate locations and facilities so they are not constrained by organizational procedures. Dow Chemical created an innovation department that has virtually total license to establish new venture projects for any department in the company. Data Card Corp, which makes products that are critical to the creation of bank card, ID cards, and smart cards, provides teams with the autonomy and resources to develop start – up business plans, which are then presented to the board of directors for venture funding. At 3M, described in the opening case, venture teams are referred to as action teams, an employee with a promising new product idea is allowed to recruit team members from throughout the company. These people may end up running the newly created division if the idea is successful. Action teams and ventures teams are kept small so they have autonomy and no bureaucracy emerges.

A venture team is like a small company within a large company. Monsanto, Levi Strauss, and Exxon have all used the venture team concept to free creative people from the bureaucracy of large corporation. Most large companies that have successfully crated e- commerce divisions have set them up like venture firms so they have the freedom to explore and develop emerging technologies. For example, Provident American Life & Health CEO Al Clements set up a separate online company called Health – Axis.com.., which became the Web’s first full service insurance agency. The venture was so successful that Provident American eventually shed its bricks – and – mortar operations and moved its entire business into cyberspaces. Large, established organizations have difficult unless they create autonomous units that can focus time and resources on the new technology.

A variation of the venture team concept is the new – venture fund, which provides financial resources for employees to develop new ideas, products, or businesses, in order to tap into its employee’s entrepreneurial urges, Lockheed Martin allows workers to take up to two years’ unpaid leave to explore a new idea, using company labs and equipment paying company rates for health insurance. If the idea is successful, the corporation’s venture fund invests around $ 250,000 in the start – up company. One successful star t – up is Genase, which created an enzyme that “Stonewashes” denim.

Corporate Entrepreneurship: Corporate entrepreneurship attempts develop an internal entrepreneurial spirit, philosophy, and structure that will produce a higher than average number of innovations. Corporate entrepreneurship may involve the use of creative department and new venture teams as described above, but it also attempt to release the creative energy of all employees in the organization. The most important outcome is to facilitate idea champions which go by a variety of names, including advocate, entrepreneur, or change agent. Idea champions provide the time and energy to make things happen. They fight to overcome natural resistance to change and to convince others of the merit of a new idea. Peter Drucker suggests that idea champion need not be within the organization, and that fostering potential idea champions among regular customers can be highly successful approach. At ANGLIAN water, every innovation project has a sponsor or champion who is a customer seeking a solution to a specific problem. The importance of the idea champion is illustrated by a fascinating fact discovered by Texas Instruments; when TI reviewed fifty successful and unsuccessful technical projects, it discovered that every failure was characterized by absence of a volunteer champion. There was no one who passionately believed in the ideas, who pushed the idea through all the necessary obstacles to make it work. Texas instruments took this finding so seriously that now its number one criterion for approving new technical projects is the presence of a zealous champion.

Companies encourage idea champions by providing freedom and slack time to creative people; IBM and General Electric allow employees to develop new technologies without company approval. Known as bootlegging, the unauthorized research often pays big dividends. As one IBM executive said, “we wink at it. It pays off; it’s just amazing what a handful of dedicated people can do when they are really turned on.” Idea champions usually come in two types. The technical or product champion is the person who generators or adopts and develops an idea for a.

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