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Innovation and Change


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Copyright (C),  Micro-Touch & Consult (TM), 2015

St Mary's University College - Stanford Transformation and Innovation


Keywords

Innovation - Creativity - Change - Incremental change - Revolutionary Change - Reactive Change - Anticipatory Change - Hard and Soft Changes - Theory O and E Type of Change - Leading CHange - Role of the Leader - Change Models - Lack in the models of Change - Analyze Change Needed - Leadership Style - Relating Styles - Winning Support for Change - Recognizing the need for Change - Analyzing Required Change - Skills of Leaders of Change - Change to Systems and Processes - Successful Change

Produced by: Micro-Touch & Consult, 2012
Innovation
Organizations are changing their view on the definition of change. Innovation is increasingly seen as something that can help organizations work in new ways, enter new categories or channels and produce new products and services. This view on innovation makes the active and creative role of innovation very clear (Isaksen and Tidd, 2006). Innovation can be seen as the capacity to change that can help organizations define new things on different fronts. This capacity will only change reality though, when it enters the active phase of applicability. 

Innovation can be called the capacity to change. Innovation without change has no true meaning for an organization.  It  would  be innovation  without  a  result  (Carnall,  2007).  Although  innovation  involves changes, not every change involves innovation (Boak, 2010). Innovation has to leave the theoretical phase to make change occur. 

Process innovation is the challenge of using often scarce resources more effectively or becoming faster and  more  flexible  in  their response  to  a  diverse  environment.  Product  innovation  is  about  using combinations  of  new  and  existing  knowledge  to deliver  new  or  improved  ‘product  concepts’. Discontinuous innovation is comparable with disruptive innovation in that it interrupts the normal way of doing things (Isaksen and Tidd, 2006). Opposite to disruptive innovation is routine innovation that is found where the market is familiar with the product class but the technology is new (Meyers and Tucker, 1989).  

These  different  kinds  of  innovations  all  demand  a  different  approach  and  use  of  it.    Disruptive innovation should be managed differently from routine innovation. They demand different resources and organization. The most benefit for organizations comes from a combination of process and product innovation. This is when the innovation of products is done within optimized and innovative processes (Isaksen and Tidd, 2006). 

Continuous improvement can be an element of organizational innovation. The delicate balance between risk and stability is important within organizational innovation. A key factor to organizational innovation is having a clear image of the desired results, a clear vision and a stable strategy and product innovation charter (Holbeche, 2006).  

Incremental, safe and widespread innovation may be better for internal considerations. This can often be related to small changes. Novel and disruptive innovations may be better for market considerations (Isaksen and Tidd, 2006). When the business strategy is not well aligned to these different kinds of innovation, failure is almost unavoidable. 

Creativity
Creativity has to do with coming up and expressing new ideas and perspectives. Creativity stands for creating outside the normal rules of convention or defined boundaries (Mackay, 2010). Besides artistic creativity there is business creativity. Business creativity can by definition be described as a pragmatic art.  It  creates  environments  in  which  innovative  ideas  can  emerge. Creativity  can  be  related  with breaking rules, but it is not about breaking the business (Hall, 2010). 

Due  to  these  different  aspects  of  creativity  it  is  important  to  give  it  a  rightful  place  within  the organization.  It needs  to be placed  within well-defined boundaries  to  be  useful  and  safe.  Creativity within organizations should be encouraged to make innovation happen. Leaders within organizations have an important role in the process of encouraging creativity. It is their attitude, personal qualities and skills that can make a difference (Adair, 2007).  

Not all new ideas coming from inventive thinking are actually developed. In order for the ideas to be realized and put to work, the process of innovation has to occur. Inventing as a process of being creative is a passive process in the sense that it does not produce something on itself. Invention needs the active process of innovation to eventually be productive (Adair, 2007). 

Change 
Whatever their sector, today’s organizations are operating in  a  fast-changing marketplace.  Change is  everywhere  (Holbeche, 2006).  Change  happens  at  different  paces  and  at  different  levels.  Change involves dissolving existing patterns of behavior, establishing new behaviors and making them the norm (Hayes, 2010). 

Incremental changes 
There are ‘varieties of change’. The first is ‘smooth incremental change’ which is change that evolves slowly  in  a  systematic  and predictable  way.  The  second  is  ‘bumpy  incremental  change’  which  is characterized by periods of relative tranquility punctuated by  acceleration in the pace of change. The third is ‘discontinuous change’ which is defined as marked by rapid shifts in strategy, structure or culture or in all three (Senior and Fleming, 2006). 

Revolutionary changes 
Revolutionary  changes  tend  to  be  more  radical.  Revolutionary  changes  are  also  known  as  frame-breaking because they usually make huge changes in existing structures. Transformational change is highly a political process that threatens different interest groups and is characterized by conflict. These changes have a radical character and are discontinuous in nature (Senior and Fleming, 2006). 

Reactive and anticipatory changes 
Reactive and anticipatory changes are changes that are made in direct response to some external event. Anticipatory changes can occur when organizations believe that change and anticipation of events still to  come  will  generate  greater  competitive advantage  (Dive,  2004).  Planned  change  is  a  deliberate, intentional change. They take place in the form of improvement projects, such as development of a new product, purchase of new equipment or reorganization of formal structure (Yukl, 2002 and 2006).  

Hard and soft changes 
Hard changes concerns technical issues that can be analyzed to produce the right answer for the change. Soft changes are more complex because they tend to have more possible viewpoints. Hard changes such as corporate structure and systems should be carried out, while making ‘soft’ changes to the dynamic of the corporate workplace and its culture (Senior and Fleming, 2006). Organizational  development  practitioners  are  increasingly  working  with  organizations  to  facilitate system-wide  planned change  processes  (Holbeche,  2006).  These  change  processes  are  products  of conscious reasoning and actions (Iles and Sutherland, 2001). Successful  organizational  transformation  and  managing  change demand both leadership and management as well as creativity and innovation (Isaksen and Tidd, 2006).  

Theory O and E Type of Change
Two  theories  about  change  are  Theory  O  and  Theory  E  type  of  changes.  Theory  E  has  a  focus  on increasing shareholder value in the short run and Theory O change initiatives focus on transforming organizational culture. In practice Theory O is  often more difficult to predict and less exact in nature then Theory E changes (Essentials, 2005).  

Theory O is change based on organizational capabilities and can be related to the Soft changes. The goal is  to  develop  corporate culture  and  human  capability  through individual  and  organizational learning (Holbeche,  2006).  Theory  O  aims  at incremental  performance  improvement  through  incremental changes to the organizational culture, capability and the promotion of organizational learning.  

Theory E change pursues the maximization of shareholder value through financial incentives, downsizing and  divestment.  It is about tough  choices  driven  by  financial  imperatives  and financial  performance (Carnall, 2007). These types of changes are often characterized as revolutionary or hard changes. It can also be related to structured and planned changes  (Boak, 2010). When setting goals, an organization should embrace the paradox between economic value (Type E) and organizational capabilities (Type O). 

Leading Change
Role of the leader
Leadership is the process of influencing others to understand and agree what needs to be done and how it can be done effectively. It is the process of facilitating individual and collective efforts to accomplish the shared objectives. How effective the leader is depends in part on how the game is played to resolve role conflicts, cope with demands, recognize  opportunities and overcome constraints (Yukl, 2002 and 2006). 

New  ways  of leadership  styles  and  skills  are  needed  for future  organizations.  There  are  two  broad conceptions of what leaders do – they motivate their followers and they design organizational context to enable their followers to function effectively (Munshi, 2005).  

In  the  future  hierarchical  management  structures  will  be  less  evident.  Management  of  intellectual capital will require skills that nurture creativity and innovation in workforces rather than compliance in the past. Regimes of control and command will no longer suffice. In a world of outsourcing and contract working, managers will need skills to plan and coordinate ‘associates’, who are working in different parts of the world (Senior and Fleming, 2006). 

Change models 
Change is about working together. It is unwise to act alone as a leader. Putting more executives at the top does not work either. It is better to build a coalition of people who have position power, expertise, credibility and leadership. The members of this “guiding coalition” need management and leadership qualities to make it work (Kotter, 1996).  

There are two important models of change. The five staged model of Hayes (2010) and the eight step model of Kotter (1996). They see change as a process that goes through a series of stages. Their steps give us a guideline for handling change within organizations. Hayes talks about people management as an overall process guiding his steps. Kotter talks about the guiding coalition, the supporting team.  

One of  the  elements of  the people management  of  Hayes is  communicating  the  change  and  this  is strongly related to the communication of the vision in the steps of Kotter. Hayes talks about motivating others to change and this is what the guiding coalition of Kotter is all about. Hayes emphazise people management and place it as an umbrella over the steps, but the steps themselves are quite analytical. It would be better when the people part was integrated in the steps in the first place. That is where the steps of Kotter (1996) are stronger. 


Lack in the models of change 
The  model  of  Kotter  (1996)  does  miss  some  important  apects.The  steps  suggest  that  the  need for change and the expected change are already known. This is not always the case. The model of Hayes (2010)  does  take  this  into  account  and  address  the issue  of  choosing  the  change  to  follow  after recognizing the need for it. Sometimes the stage models are an over-simplification of the situation. Change processes in reality are messy and untidy, unfolding in an iterative fashion (Buchanan and Storey, 1997). 

What  appears  to  be  cause  and  effect  may  actually  be  ‘coincidental’  symptoms  (Carnall,  2007).  Any organization is a balance of forces built up and refined over a period of time (Senior and Fleming, 2006). Consequently, proposed change of any significance will inevitably change this balance. Stage models often do not take these interwoven processes and relations of changes into account and are not useful for every change situation. 

It is not always clear if all changes follow the stages of Kotter (1996) or Hayes (2010) for that matter. Different kind of opposition is also missing, for example the ‘nay sayers’. Kotter (1996) seems to talk about the visionary leadership style while there are other forms of leadership and maybe the model is difficult to use with other styles. Leadership is not the only succesfactor of change and other elements of success are difficult to find in the stage models (Boak, 2010).  

 
Analyze change needed 
It is important to first analyze which kind of change is needed. The stage models of Kotter (1996) and Hayes (2010) are based on a typical kind of leadership. The opposite is that it can be advantageous to start with an analyzing phase. Not all changes are worth the time and effort. Therefore the feasibility of the planned change should be analyzed (Isaksen and Tidd, 2006) . 

When analyzing the change needed it is important to know how the organization handled change in the past or what the current changes are the organization faces. What kind of resources are needed for the change or how is the power devided when taking action are valuable questions. Analyzing the needed change before implementing or choosing a model for the implementation is important (Isaksen and Tidd, 2006). 

Leadership Style
Leadership styles have a great influence on how the change is handled and indirectly how successful the change process will be. Three main leadership styles are important; autocratic, consultative and group oriented. These three styles can yield different levels of effectiveness based on the three criteria of quality of solution, time required to arrive at it and acceptance of it by subordinates (Isaksen and Tidd, 2006). 

Another popular leadership model is an outwardly practical approach to Situational Leadership.  The ‘readiness’ of followers is a key factor in deciding on an appropriate leadership style. The leader’s task behavior (providing guidance and direction) and relationship behavior (team building, providing socio-emotional support) should accord with the readiness of followers (Carnall, 2007). This is definitely a more  human  oriented  approach  to leading  change  then  the  stage  models  described  earlier  (Hayes,
2010). 

Relating Styles
Theory E type of change has different leadership needs then the Theory O type of change. A top down, directive and coercive type of change is needed for Type E, which can be related to the more autocratic type of leadership. A participative, empowering and facilitative type of leadership is needed for Theory O type of change (Isaksen and Tidd, 2006).  

Hard system changes concern the less complex changes which can be handled by effective analysis, planning and implementation. Soft system changes concern the more complex changes which require more participative approaches and a greater engagement in managing the views and expectations of these stakeholders (Boak, 2010). 

There is a clear relationship between both the Theory E and Theory O Type of changes and the hard and soft system change. The Theory O Type of change can be related to the soft system changes because they  both  need  a  more  participative,  empowering and facilitative  type  of  leadership  and  are  more complex in nature then Theory E type of changes or the hard system changes (Boak, 2010).  

Theory E type of changes can be related to the hard system type of changes  that are more direct of nature and are a more top down, directive and coercive type of change which need a more autocratic and hierarchical type of leadership. Theory E and O Type of changes are often related to organizational wide changes and the hard and soft system changes are related to smaller types of change (Boak, 2010). 

Winning support for change
Winning support for change from stakeholders is important. For the adaptive, the supportive Theory O Type of change or the soft system changes, it is important to identify the key stakeholders. Once new concepts  and  ideas  are  developed,  the  next  logical focus  of  attention  is  to  prepare  them  for  the marketplace and acceptance from key stakeholders (Isaksen and Tidd, 2006).  

Important changes can be blocked by key stakeholders (Carnall, 2007). It is imperative to identify those key  stakeholders  to formulate  a  plan  to  get  those  stakeholders  on  board  of  acceptance.  Identify stakeholders who will be affected by the change to neutralize or persuade those who could block it, and mobilize those with the power to make it happen (Hayes, 2010). 

One way  to  identify  key stakeholders is  to map  them in  a matrix. Key stakeholders   may   include  owners,  executives, other members  of the  organization, customers,  investors, joint  venture  partners, and labor unions. They all play their role and have different kinds of interests and influence on the change. Stakeholders can be internal and external (Yukl, 2002 and 2006). 

It is important to get an insight on the power and interest of the stakeholders. Stakeholders can have a positive,  neutral  or negative  interest  in  the  change.  Stakeholders  differ  in  terms  of  their  power. Managers may pay careful attention to some powerful stakeholders but they may completely overlook others (Hayes, 2010).  

To make the change really successful, you have to align the change to as many stakeholders as possible. Proper  stakeholder analysis  in  relation  to  the  change  is  needed.  Effective  collaboration  of employees/stakeholders is more likely if they are involved at all stages of the change process and not just its implementation (Senior and Fleming, 2006). Constantly analyze the state of the change and the role of the stakeholders during that specific state. Stakeholder analysis must be an ongoing process to 
be really successful. 

The individual attitudes of key stakeholders should be assessed (or guessed at). Their communication preferences should be identified if possible. What are their formal and informal networks? What are their emotional needs, such as whether they would prefer to be involved, how they like to be ‘handled’? All these aspects should be identified, along with any known personal agendas that might indicate that one type of communication may work better than another (Holbeche, 2006). 

Recognizing the need for change
Before change can happen the need for change must be recognized. This stage can be related to  the Unfreezing  part of  the  three-stage  model of  change  from  Lewin  (1947).  In  the  unfreezing stage  the people  involved  come  to  recognize  that  something must  change.  This  is  something  else  then implementing the change. It is important to know how  ready  the  individuals,  teams and  organization  are to  take  on  the  needed changes  (Isaksen and Tidd, 2006). If they are not ready to accept the changes, then it is important to first create a sense of urgency for the needed change (Kotter, 1996). 

There are factors that can help to indicate that change is needed. Regular interview may reveal a need to change. It can discover what behaviors to unfreeze or unlock. Identify unproductive current behavior and try to lift up the organization to a new level and then refreeze the new situation and behavior. Be aware of external forces and limits when evaluating your organizations need for change (Hayes, 2010).  

One of the pitfalls of the trap of success is turning the focus inside the organization and forgetting the dynamic changing world outside the organization. Analyze the stage where your organization is in now (Kotter, 1996). Monitoring the environment is important to  keep informed of competitors’ activities, new legislation, change in the market and other factors. Fail to do so make the risk of missing the need for change higher (Mintzberg, 1980).  

Needed change can still stall because of inwardly focused cultures, paralyzing bureaucracy, parochial politics,  a  low  level  of trust, lack  of  teamwork,  arrogant  attitudes,  a  lack  of  leadership  in  middle management, and the general human fear of the unknown. To be effective, a method designed to alter strategies, reengineer processes, or improve quality must address these barriers and address them well (Kotter, 1996).  

People may fail to recognize the need for change because they were excluded from relevant discussion, were too busy with other things or were simply resistant to the notion of change for all kind of personal reasons. Often the latter happens when the change might threaten their own power base (Holbeche, 2006). 

Management support is essential to innovation and change. But despite this support many blocking elements can occure. Some of these blocking elements can be divided into several areas. They are  - perceptual blocks, we see what we want to see, - emotional blocks, our emotions dictated our reality, - cultural  block,  our  culture  learned  us  what  we  believe,  -  environmental  blocks, something  in  our environment is blocking the change, and the cognitive blocks, when we do not try to see past the things we know the learning and change process will be seriously delayed (Carnall, 2007). 

Single-loop learning can be used as a means of monitoring the performance of organizational systems and subsystems in relation to the objectives set for them (Senior and Fleming, 2006). If an organization fell into the trap of success then single-loop learning will be done without the needed view on the environment in which these systems must compete (Nadler, Shaw and Walton, 1994). Monitoring and evaluation are important means of following through with change seeking further improvement. When an organization does not monitor the right values, it risks missing important moments of change (Carnall, 2007).   

Analyzing required change
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Before choosing the type of change to implement, it is important to first analyze which type of change is needed. Often the first, quick-fix solutions are rarely the right ones. The cure can become worse than the disease. Repeated problems are often signs that the real solutions have not been found (Boak, 2010). 

Reviewing  the  present  state  can  help  identify  the  required  change  by  diagnosing  the  cause  of  the problem, identify current deficiencies or clarify opportunities. It can also help establish a baseline so  that it is clear what is changing and will be changed in the future and it can help define the future direction.  

Although it depends on the kind of change needed to identify the future  state, it can be of help to disconfirm the view of the people involved that all is well with the existing state of affairs and create a sense of urgency which could lead to recognizing the need to change (Kotter, 1996). It can also be of help to make a gap analysis between the current and future state which can be of help to identify the needed type of change to make the future state a reality. 

If the required change is very complex and difficult to communicate, the initial style of influence might involve a high level of explanation and education.  Once people understand the problem and what is required, other means of influence might be more effective. Similarly, a change that is compatible with the change target preferences and offers relative advantage over current practice might lend itself to a persuasive strategy. In other cases negotiation or high levels of involvement might be the most effective way forward. Where the change is divisible and where quick action is required it might be decided to direct a part of the organization to adopt a small-scale trial before making a decision about how to proceed (Hayes, 2010). 

Skills of Leaders of Change

There are three things a leaders should be good at. The first is business competence. They must know the business, its complexities and must stay on top of it. The second is personal effectiveness. They must keep themselves in shape with mind, body and spirit. The third is relationships; they must be good in the needed politics and invest in stakeholder relationships (Holbeche, 2006). 

Different  type  of  change  and  different  context may  require  different  styles  and skills  of  leadership. Theory E Type of change for example demands a different kind of leader than a Theory O Type of change. Hard system changes prosper well in hierarchical organizations but this is not the case for soft system change. Incremental changes need a more managerial type of leadership where the bumpy changes, the more radical changes need more than just a managerial type of leadership (Boak, 2010).  

There has been little research on the relative advantage of training, development and self-help activities for different types of leadership skills. Likewise, little is known about the best way to combine training, development,  and  self-help  activities  to maximize  their  mutual  effects.    There  is  need  for  a  more systematic approach to the study of leadership development activities (Yukl, 2002 and 2006). 

Change to Systems and Processes
Change has to do with altering systems and processes. There are several ways to make changes. Two largely dominant ways to treat changes are Total Quality Management (TQM) and Business Process Re-Engineering (BPR), which involves process Improvements. 

TQM  is  an  organization-wide,  long-term  change  effort  designed  to  orient  all  of  an  organization’s activities around the concept of quality. It has also a relationship with increasing productivity, improving customer service, responsiveness and saving costs (Hayes, 2010).  

BPR requires management to reorganize around horizontal processes including the institution of cross-functional and self-managed teams. Where TQM has a more hierarchical oriented approach to change, BPR is centered on the responsibilities of self-managed teams (Senior and Fleming, 2006).  BPR places the customer at the center of the process, where TQM places the organizational culture, employees and inside quality at the center of the process.  

BPR involves a fundamental rethink and radical redesign of business processes to achieve a step change in performance. TQM on the other hand involves more the theory O Type of change or soft systems change. Their focus is the real difference between the two. TQM is more focused on the culture and processes of the people in it. BPR is more focused on the self-managerial characteristics of smaller units of employees and focused on smaller processes (Hayes, 2010). 

Successful Change
Successful change is often a subjective experience. The subjective side of the success of change  is often related to the soft system change where culture and politics play a key role. Subjectivity can also be related to the hard system changes, the Theory E Type of change. One of the characteristics of the hard system changes on the other hand is that it consists out of metrics, graphs and formulas that can be controlled and are hard facts. These hard facts seem to play a secondary role in changes that are more related to people, culture and politics (Holbeche, 2006). 

Successful change has to take into account a wider range of stakeholder needs than was done in earlier times where short-term hard facts played the biggest part of the change focus. The focus went from redesigning, restructuring and re-engineering to getting the best out of the people who were left in the organization and on whose continued efforts the future success depended (Holbeche, 2006). 

Identifying the key stakeholders early in the process should be a top priority. Who is involved in the change process, what is their role and what are their expectations? It is important to anticipate on these factors and make them part of the change strategy. The hard facts are still important, although in what way depends on the change at hand, but it is all driven by people and when the people are against the change, the change will not be successful after all (Kotter, 1996). 

Successful change occurs when people are willingly to change their behavior in relation to the changed circumstances. Theorists debate whether it is necessary to stimulate people to change and they say that this can be done through articulating a crisis situation or through creating some other ‘burning platform’ as a way of mobilizing an organization to change (Holbeche, 2006). This is what is called creating a sense of urgency (Kotter, 1996).  It is about recognizing the need and start the change process. It seems that these are important steps to create a fertile soil for successful change (Hayes, 2010).  


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