Management, 11ce Instructor’s Manual

Management Canadian 11th

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Chapter 6
Innovation and Adaptability
Change is a constant for organizations and thus for managers. Because change can’t be
eliminated, managers must learn how to manage it successfully. Innovation is often
closely tied to an organization’s change efforts; thus, managers must know how to
manage it as well. Focus on the following learning outcomes as you read and study this
chapter.

LEARNING OUTCOMES

6.1 Understand the importance of building an innovative and adaptable organization.

6.2 Describe the forces that create the need for change, innovation, and adaptability.
6.3.Compare and contrast views of the change process.
6.4 Classify types of organizational change.
6.5 Describe techniques for stimulating innovation and adaptability.

CHAPTER VIGNETTE

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Research In Motion (RIM) is used as the chapter vignette to illustrate the need to deal
with massive disruption that is typical of the marketplace today, in particular in the
technological industry. It further illustrates that the company had to plan for a future that
was largely unknown and in many ways unpredictable. It amplifies other chapter
concepts such as the importance of having the design and structure of the organization
support its ability to be adaptable. At the same time, recruiting and retaining employees
who would thrive in such an environment was core to Blackberry’s success. It was vital
to build a corporate culture that embraced change and cherished innovation and
adaptability as core organizational values.

CHAPTER OUTLINE

1. INTRODUCTION
Big companies and small businesses, universities and colleges, and
governments at all levels are being forced to significantly change the way
they do things. Although change has always been a part of the manager’s
job, it has become even more important in recent years. In this chapter, we
describe why change is important and how managers can manage change.
Since change is often closely tied to an organization’s innovation efforts,
we also discuss ways in which managers can stimulate innovation and
increase their organization’s adaptability. Then, we conclude by looking at
some current issues in managing change.

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2. THE CONTEXT OF INNOVATION AND ADAPTABILITY

A. Why Build an Adaptable Organization?
Successful organizations are not only efficient (getting the most output
from the least amount of inputs; referred to as “doing things right.”) and
effective (completing activities so that organizational goals are achieved;
referred to as “doing the right things.”) They are adaptable rather than
simply flexible. (Recall that being flexible means reacting to events, while
being adaptable means being proactive.) They create a culture within
their organizations that enables them to continuously recognize new
problems, identify the potential impact of these problems, and offer
solutions in advance of the impacts on their organizations or to their
customers.
B. Innovation
Innovation means doing things differently, exploring new territory, and
taking risks. Innovation isn’t just for high-tech and technologically
advanced organizations. In today’s world, organizational managers—at all
levels and in all areas—need to encourage their employees to be on the
lookout for new ideas and new approaches, not just in the products or
services the organization provides, but in everything that is done.
C. Adaptability
It is becoming increasingly important for managers to build a capacity for
adaptability within their organizations in light of today’s wicked
problems. The term wicked problem was first used in social planning in
the 1960s to describe one that is impossible to solve because each
attempt to create a solution changes the understanding of the problem.
Wicked problems are a continuing work in progress: They cannot be
solved step by step because they are complex, and each possible
solution may create a new problem. All of these have an impact on how
organizations do their business.
3. FORCES FOR CHANGE
A. External forces creating the need for change come from various sources:
1. The marketplace
2. Government laws and regulations
3. Technology
4. Labour markets
5. The economy
B. Internal forces creating change usually originate from the internal
operations of the organization or from the impact of external changes.
These internal forces include:
1. Changes in strategy
2. Changes in the workforce
3. New equipment
4. Changes in employee attitudes
4. TWO VIEWS OF THE CHANGE PROCESS
A. Two very different metaphors can be used to describe the change
process.
1. The calm waters metaphor characterizes the process of change as
being like a ship crossing a calm sea. The calm waters metaphor
can be illustrated by Lewin’s 3-step process for change.
(See Exhibit 6-1)

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a. Unfreezing the equilibrium is the first step. Unfreezing the

equilibrium can be accomplished in one of three ways.
1. Increasing driving forces, which are forces that direct
behaviour away from the status quo.
2. Decreasing restraining forces, which are forces that hinder
movement from the existing equilibrium.
3. Combining the two approaches.
b. The next step is to implement the change itself.
c. The final step is to refreeze the situation.
B. The white-water rapids metaphor describes change that takes place in
uncertain and dynamic environments. To put the two views into
perspective, it is helpful to note that not every manager constantly faces a
world of chaotic change. However, the number of managers who do not
face this type of environment is rapidly dwindling!
5. MANAGING ORGANIZATIONAL CHANGE
A. What is organizational change? Organizational change is defined as
any alteration of people, structure, or technology in an organization.
Instead of trying to eliminate change, managers must realize that change
is always present and that they should seek ways to manage change
successfully.
B. Types of Change
What can a manager change? A manager may make changes in three
categories: structure, technology, and people. (See Exhibit 6-2)
1. Changing Structure
a. Managers can alter one or more structural components of
the organization, such as work specialization,
departmentalization, chain of command, span of control,
centralization and decentralization, and formalization.
b. Frequently, the design of the organization’s structure is
changed in order to meet new demands.
2. Changing Technology
a. Competitive factors or new innovations often require
introduction of new equipment, tools, or operating
methods.
b. Automation is a technological change that replaces certain
tasks done by people with machines.
c. Computerization has probably been the most visible
technological change in recent years.
3. Changing People
a. Organizational development (OD) involves techniques or
programs to change people and the nature and quality of
interpersonal work relationships.
b. Exhibit 6-3 provides descriptions of the most popular OD
approaches. We now operate in a global environment and
managers need to remember that the organizational
development (OD) tools that work in the home country may
need to be modified in other countries where they operate.
C. Global Organizational Development
Much of what we know about OD practices has come from North
American research. However, managers need to recognize that although

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there may be some similarities in the types of OD techniques used, some

techniques that work for North American organizations may not be
appropriate for organizations or organizational divisions based in other
countries. Before using the same techniques to implement behavioural
changes, especially across different countries, managers need to be sure
that they have taken into account cultural characteristics and whether the
techniques “make sense for the local culture.”
D. Managing Resistance to Change
Managers are motivated to initiate change when they are committed to
improving organizational performance.
1. Why do People Resist Change
a. Resistance to change is a natural event in organizations
and occurs for three main reasons including: uncertainty,
habit, concern about personal loss, and the belief that the
change is not in the organization’s best interest.
2. Techniques for Reducing Resistance to Change
a. Organizations can build up inertia that actually motivates
employees to resist change. The techniques for reducing
resistance are listed in Exhibit 6-4. They are:
1. Education and communication
2. Participation
3. Facilitation and support
4. Negotiation
5. Manipulation and co-optation
6. Coercion
6. STIMULATING INNOVATION AND ADAPTABILITY
A. Winning in business today demands innovation.” Such is the stark
reality facing today’s managers. In the dynamic, chaotic world of
global competition, organizations must create new products and
services and adopt state-of-the-art technology if they are to compete
successfully.
B. Creativity vs. Innovation
Creativity refers to the ability to combine ideas in a unique way or to
make unusual associations between ideas. An organization that
stimulates creativity develops unique ways to work or novel solutions to
problems. But creativity by itself is not enough. Creative ideas need to be
turned into useful products, services, or work methods; this process is
defined as innovation. The innovative organization is characterized by its
ability to channel creativity into useful outcomes. When managers talk
about changing an organization to make it more creative, they usually
mean they want to stimulate and nurture innovation. However, creativity
and innovation are also not enough to sustain growth. Organizations must
also create a culture of adaptability whereby they proactively identify
disruptive innovations, new problems and challenges and actively
develop novel approaches and solutions to these challenges before they
are impacted by these changes. Adaptability requires forward-thinking
leadership within organizations.
C. Stimulating and Nurturing Innovation and Adaptability
In Chapter 1 we discussed the value proposition for building
adaptable organizations, in Chapter 2 we examined the building of

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an adaptable culture and in Chapter 3 we discussed the opportunity

obsessed behaviour of successful entrepreneurs. These
understandings form the foundation stimulating and nurturing
innovation. Exhibit 6-5 uses the systems framework to identify the
innovation process as inputs, transformation and outputs. Exhibit 6-
6 identifies 3 types of innovation variables
1. Structural variables can be summarized as follows:
a. Organic structures positively influence innovation.
b. The easy availability of organizational resources provides
a critical building block for innovation.
c. Frequent communication among work units helps to break
down barriers to innovation.
d. Minimize time pressures on creative activities.
e. Provide explicit support for creating work and non work
sources.
2. Cultural variables show that an innovative culture is likely to have
the following characteristics:
a. Acceptance of ambiguity
b. Tolerance of the impractical
c. Low external controls
d. Tolerance of risk
e. Tolerance of conflict
f. Focus on ends rather than means
g. An open systems focus
h. Positive feedback
3. Human resource variables indicate the important role that people
play in innovative organizations.
a. Innovative organizations actively promote the training and
development of their employees so that their knowledge
will be current.
b. Innovative organizations offer employees high job security.
c. Innovative organizations encourage individuals to become
idea champions—that is, individuals who actively and
enthusiastically support new ideas, build support,
overcome resistance, and ensure that the innovations are
implemented.
D. Adaptive Organizations
In a adaptive organization, employees continually acquire and share new
knowledge and apply that knowledge in making decisions or doing their
work. Some organizational theorists even go so far as to say that an
organization’s ability to do this—that is, to learn and to apply that
learning—may be the only sustainable source of competitive advantage.
What structural characteristics does an adaptable organization need?
Employees throughout the entire organization—across different functional
specialties and even at different organizational levels—must share
information and collaborate on work activities. Such an environment
requires minimal structural and physical barriers, allowing employees to
work together in doing the organization’s work the best way they can and,
in the process, learn from each other. Finally, empowered work teams
tend to be an important feature of an adaptive organization’s structural
design. These teams make decisions about doing whatever work needs

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to be done or resolving issues. With empowered employees and teams,

there’s little need for “bosses” to direct and control. Instead, managers
serve as facilitators, supporters, and advocates.
E. Innovation and Design Thinking
A strong connection exists between design thinking and innovation.
"Design thinking can do for innovation what Total Quality Management
(TQM) did for quality." Just as TQM provides a process for improving
quality throughout an organization, design thinking can provide a process
for coming up with things that don't exist. When a business approaches
innovation with a design thinking mentality, the emphasis is on getting a
deeper understanding of what customers need and want. It entails
knowing customers as real people with real problems—not just as sales
targets or demographic statistics. But it also entails being able to convert
those customer insights into real and usable products.
F. Changing Organizational Culture
1. Culture is resistant to change because:
a. Culture consists of relatively stable and permanent
characteristics.
b. Culture is formed over a long period of time.
c. Strong cultures have highly committed people.
2. Understanding the Situational Factors
Some situations can facilitate culture change, including:
a. A dramatic crisis
b. A change in leadership
c. A young organization that is small in size
d. A culture that is weak
3. How Can Cultural Change Be Accomplished?
There is a need for a comprehensive, coordinated strategy for
managing cultural change.
G. Understanding the Situational Factors
What “favourable conditions” might facilitate cultural change? The
evidence suggests that cultural change is most likely to take place when
most or all of the following conditions exist:

A dramatic crisis occurs. This can be the shock that weakens the
status quo and makes people start thinking about the relevance of the
current culture. Examples are a surprising financial setback, the loss
of a major customer, or a dramatic technological innovation by a
competitor.
● Leadership changes hands. New top leadership, who can provide an
alternative set of key values, may be perceived as more capable of
responding to the crisis than the old leaders were. Top leadership
includes the organization’s chief executive but might include all senior
managers.
● The organization is young and small. The younger the organization, the
less entrenched its culture. Similarly, it’s easier for managers to
communicate new values in a small organization than in a large one.

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● The culture is weak. The more widely held the values and the higher
the agreement among members on those values, the more difficult it will
be to change. Conversely, weak cultures are more receptive to change
than are strong ones.
H. Making Change Happen Successfully
Managers can increase the likelihood that change will be successful in
their organization by:
1. Focusing on preparing the organization for change.
(See Exhibit 6-7 for mistakes managers can make when leading
change and Exhibit 6-8 for characteristics of an adaptable
organization.)
2. Recognizing the important role they themselves play in the
change process.
3. Involving every organizational member in the change.

ANSWERS TO REVIEW AND DISCUSSION

QUESTIONS

1. What is meant by innovative and adaptive organizations?

Creative ideas need to be turned into useful products, services, or work methods;
this process is defined as innovation. The innovative organization is
characterized by its ability to channel creativity into useful outcomes. When
managers talk about changing an organization to make it more creative, they
usually mean they want to stimulate and nurture innovation. However, creativity
and innovation are also not enough to sustain growth. Organizations must also
create a culture of adaptability whereby they proactively identify disruptive
innovations, new problems and challenges and actively develop novel
approaches and solutions to these challenges before they are impacted by these
changes. Adaptability requires forward-thinking leadership within organizations.

2. Define organizational change.

Organizational change is any alteration in people, structure, or technology.

3. What are the external and internal forces for change?

Externally, the marketplace, government laws and regulations, technology,
labour markets, and economic changes all put pressure on organizations to
change. Internally, organizations may decide to change strategies. As well, the
introduction of new equipment and/or changes in the composition and attitude of
the workforce may also lead an organization to make changes.

4. Explain Lewin’s three-step model of the change process. How is it different from
the change process needed in the white-water rapids metaphor of change?
In Lewin’s model, successful change usually occurs in three steps: unfreezing,
change and refreezing. For unfreezing to occur, the organization must plan a
move away from the status quo. To move away from this equilibrium, the
organization undergoes an increase of the driving forces, which are forces
pushing for change and/or a decrease in the restraining forces, which are forces
that resist change. After unfreezing, the change itself can be implemented. To

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make the change permanent, the new situation needs to be refrozen. On the
other hand, the change process needed in the white-water rapids metaphor of
change requires than change that takes place in uncertain and dynamic
environments such that there is no real status quo per se, and thus the
opportunity to plan to move away from it does not exist.

5. What can be done to promote innovative and adaptability within organizations?

In an adaptive organization, employees continually acquire and share new
knowledge and apply that knowledge in making decisions or doing their work.
What structural characteristics does an adaptable organization need to promote
innovation and adaptability? Employees throughout the entire organization—
across different functional specialties and even at different organizational
levels—must share information and collaborate on work activities. Such an
environment requires minimal structural and physical barriers, allowing
employees to work together in doing the organization’s work the best way they
can and, in the process, learn from each other. Finally, empowered work teams
tend to be an important feature of an adaptive organization’s structural design.
These teams make decisions about doing whatever work needs to be done or
resolving issues. With empowered employees and teams, there’s little need for
“bosses” to direct and control. Instead, managers serve as facilitators,
supporters, and advocates.

6. Discuss what it takes to make change happen successfully.

Managers can attempt to make change happen successfully by: 1) focusing on
making the organization read for change, 2) understanding their own role in the
change process, and 3) encouraging employees to be change agents.

7. “Innovation requires allowing people to make mistakes. However, being wrong

too many times can be fatal.” Do you agree? Why or why not? What are the
implications for nurturing innovation?
This question offers an opportunity to set up a debate in class. Have half of the
class argue that being wrong can be fatal, and have the remaining half of the
class argue that being wrong does not have to be fatal. Students must, however,
understand and be able to incorporate the relationship between nurturing
innovation and “punishing” failure. If an organization punishes employees for
failing, the employees will cease to “take the chance” on a new innovation, and
innovative activity will dry up.

ETHICS DILEMMA TEACHING SUGGESTIONS

Think of something that you would like to change in your personal life. It could be your
study habits, your fitness and nutrition, the way you interact with others, or anything else
that is of interest to you. What values and assumptions have encouraged the behaviour
that currently exists (that is, the one you want to change)? What driving and restraining
forces can you address in order to make the desired change?
Teaching Suggestions:
In this particular exercise, students’ responses will obviously be very personal and
unique to them. Given that this is the case, you may want to suggest that they pair up

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with someone in the class that they know and feel comfortable with to discuss it with
them, rather than asking them to report back to the class. Then, engage the class in a
full group discussion, focusing on the values and assumptions that have encouraged the
behaviour that currently exists, and what driving and restraining forces had to be
addressed in order to make the desired change.

WORKING TOGETHER —
TEAM-BASED EXERCISE TEACHING
SUGGESTIONS

A company’s future depends on how well it is able to learn.

Students were asked to form small groups of three to four individuals and undertake the
following: Your team’s “job” is to find some current information on learning organizations.
You’ll probably be able to find numerous articles about the topic, but limit your report to
five of what you consider to be the best sources of information on the topic. Using this
information, write a one-page bulleted list discussing your reactions to the statement set
in bold at the beginning of this exercise. Be sure to include bibliographic information for
your five chosen articles at the end of your one-page bulleted list.

Teaching Suggestions:

The premise behind the exercise is that a company’s future depends on how well it is
able to learn. After hearing about what the students’ research revealed about learning
organizations, you may want to ask the class what characteristics learning organizations
have in common, and ask them whether they agree with the premise of the exercise or
not, and why.

CASE APPLICATION 1 – ANSWER

SUGGESTIONS

In Search of the Next Big Thing

1. What do you think of UA's approach to innovation? Would you expect to see this type
of innovation in an athletic wear company? Explain.
UA should be admired for not standing pat in spite of its massive success. It seems
unusual that an athletic wear company would emphasize innovation to this degree
given the relatively simple nature of their products.

2. What do you think UA's culture might be like in regards to innovation?

Its innovation culture is likely very intense to reflect its motto that, "We have not yet
built our defining product."

3. Could design thinking help UA improve its innovation efforts? Discuss.

Design thinking could help UA improve its innovation efforts because when a
business approaches innovation with a design thinking mentality, the emphasis is on
getting a deeper understanding of what customers need and want. It entails knowing
customers as real people with real problems—not just as sales targets or

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demographic statistics. But it also entails being able to convert those customer
insights into real and usable products.

4. What’s your interpretation of the company's philosophy posted prominently over the
door of its design studio? What does it say about innovation?
A telling sign of the company's philosophy is found over the door of its product design
studios: "We have not yet built our defining product." It serves the company well by
strongly indicating that it needs to continue to innovate in spite of its success, and
that it should never become complacent.

5. What could other companies learn from the way UA innovates?

Other companies could learn the importance of listening to the customer, maintaining
intense focus on the key to their success, and constantly striving to add value to the
customers’ athletic experience.

CASE APPLICATION 2 – ANSWER

SUGGESTIONS

The Anti-Hierarchy

1. Do you think it’s possible for an organization to deliberately create an “anti-

hierarchy” to encourage employees to engage in acts of creative deviance? What
steps might a company take to encourage creative deviance?
Yes, assuming the leaders in the organization support it and are visibly seen to
support it by all. To encourage a culture of creative deviance, the leadership should
either engage in it themselves or reward those who do so in a tangible, visible way.

2. What are the drawbacks of an approach that encourages creative deviance?

The drawbacks are that time may be wasted on ideas that lack real commercial
promise, and it may create conflict within the organization between those who have
officially rejected the ideas and those who continue to pursue them.

3. Why do you think a company like Apple is able to be creative with a strongly
hierarchical structure, while other companies find hierarchy limiting?
The hierarchical structure can work if the organization is placing reliance on a
“creative genius” at the top of the organization. Conversely, those companies who
take a more decentralized approach to innovation may find hierarchy limiting since a
good idea may be rejected and thus abandoned when it has some real merit.

4. Do you think Apple's success was entirely dependent on Steve Jobs in his role as
head of the hierarchy? What are the potential drawbacks when a company is so
strongly connected to the decision making of a single individual?
It does appear that Apple's success was entirely dependent on Steve Jobs in his
role as head of the hierarchy. The drawbacks are that the organization becomes too
dependent on him or her and will suffer if he or she can no longer fulfill this role. In
addition, others in the organization who have good ideas may feel frustrated that
they do not have the opportunity to pursue them with this approach to innovation.

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