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MGMT7
Chapter 7: Innovation and Change
Pedagogy Map
This chapter begins with the learning outcome summaries and terms covered in the chapter, followed by a
set of lesson plans for you to use to deliver the content in Chapter 7.
• Lesson Plan for Lecture (for large sections)

• Lesson Plan for Group Work (for smaller classes)
• Assignments with Teaching Tips and Solutions
 What Would You Do? Case Assignment––3M

 Self-Assessment––Mind Benders
 Management Decision––Innovation Copycats
 Management Team Decision––Face the Future
 Practice Being a Manager––Supporting Creativity
 Develop Your Career Potential––Spark Your Own Creativity
 Reel to Real Video Assignment: Management Workplace––Holden Outerwear
 Review Questions
 Additional Activities and Assignments
Highlighted Assignments Key Points

What Would You Do? Case 3M must return to its roots by sponsoring innovation
Assignment throughout its organization.
Self-Assessment The self-assessment gives students insights into how
innovative their attitude is.
Management Decision A company that created an innovative line of shoes needs to
figure out how to deal with competitor companies that are
producing counterfeit products.
Management Team Decision Student groups are asked to consider how oil companies can
innovate to address future energy needs.
Practice Being a Manager Students examine the question of creating versus buying new
ideas.
Develop Your Career Potential Resources are given to help students spark their own
creativity.
Reel to Real Video Assignment: Holden Outerwear is a pioneer in active outerwear, as its
Management Workplace products possess features that are inspired by runway brands.
Supplemental Resources Where to Find Them

Course Pre-Assessment IRCD
Course Post-Assessment IRCD
PowerPoint slides with lecture notes IRCD and online
Who Wants to Be a Manager game IRCD and online
Chapter 7: Innovation and Change 154

Test Bank IRCD and online
What Would You Do? Quiz Online
Learning Objectives
7.1 Explain why innovation matters to companies.
Technology cycles typically follow an S-curve pattern of innovation. Early in the cycle, technological
progress is slow, and improvements in technological performance are small. As a technology matures,
however, performance improves quickly. Finally, as the limits of a technology are reached, only small
improvements occur. At this point, significant improvements in performance must come from new
technologies. The best way to protect a competitive advantage is to create a stream of innovative ideas
and products. Innovation streams begin with technological discontinuities that create significant
breakthroughs in performance or function. Technological discontinuities are followed by discontinuous
change, in which customers purchase new technologies and companies compete to establish the new
dominant design. Dominant designs emerge because of critical mass, because they solve a practical
problem, or because of the negotiations of independent standards bodies. Because technological
innovation is both enhances and destroys competence, companies that bet on the wrong design often
struggle, while companies that bet on the eventual dominant design usually prosper. When a dominant
design emerges, companies focus on incremental change, lowering costs, and making small but steady
improvements in the dominant design. This focus continues until the next technological discontinuity
occurs.
7.2 Discuss the different methods that managers can use to manage innovation in their
organizations effectively.
To successfully manage innovation streams, companies must manage the sources of innovation and learn
to manage innovation during both discontinuous and incremental change. Since innovation begins with
creativity, companies can manage the sources of innovation by supporting a work environment in which
creative thoughts and ideas are welcomed, valued, and encouraged. Creative work environments provide
challenging work; offer organizational, supervisory, and work group encouragement; allow significant
freedom; and remove organizational impediments to creativity.
Discontinuous and incremental change require different strategies. Companies that succeed in periods
of discontinuous change typically follow an experiential approach to innovation. The experiential
approach assumes that intuition, flexible options, and hands-on experience can reduce uncertainty and
accelerate learning and understanding. A compression approach to innovation works best during periods
of incremental change. This approach assumes that innovation can be planned using a series of steps and
that compressing the time it takes to complete those steps can speed up innovation.
7.3 Discuss why not changing can lead to organizational decline.
The five-stage process of organizational decline begins when organizations don’t recognize the need for
change. In the blinded stage, managers fail to recognize the changes that threaten their organization’s
survival. In the inaction stage, management recognizes the need to change but doesn’t act, hoping that the
problems will correct themselves. In the faulty action stage, management focuses on cost cutting and
efficiency rather than facing up to the fundamental changes needed to ensure survival. In the crisis stage,
failure is likely unless fundamental reorganization occurs. Finally, in the dissolution stage, the company is
dissolved through bankruptcy proceedings; by selling assets to pay creditors; or through the closing of
stores, offices, and facilities. If companies recognize the need to change early enough, however,
dissolution may be avoided.

7.4 Discuss the different methods that managers can use to better manage change as it occurs.
The basic change process is unfreezing, change, and refreezing. Resistance to change stems from self-
interest, misunderstanding and distrust as well as a general intolerance for change. It can be managed
through education and communication, participation, negotiation, top management support, and coercion.
Knowing what not to do is as important as knowing what to do to achieve successful change. Managers
should avoid these errors when leading change: not establishing urgency, not creating a guiding coalition,
lacking a vision, undercommunicating the vision, not removing obstacles to the vision, not creating short-
term wins, declaring victory too soon, and not anchoring changes in the corporation’s culture. Finally,
managers can use a number of change techniques. Results-driven change and the GE workout reduce
resistance to change by getting change efforts off to a fast start. Organizational development is a
collection of planned change interventions (large system, small group, person-focused), guided by a
change agent, that are designed to improve an organization’s long-term health and performance.
Terms
Change agent Multifunctional teams
Change forces Organizational change
Change intervention Organizational decline
Coercion Organizational development
Compression approach to innovation Organizational innovation
Creative work environments Product prototype
Creativity Refreezing
Design competition Resistance forces
Design iteration Resistance to change
Discontinuous change Results-driven change
Dominant design S-curve pattern of innovation
Experiential approach to innovation Technological discontinuity
Flow Technological lockout
General Electric workout Technological substitution
Generational change Technology cycle
Incremental change Testing
Innovation streams Unfreezing
Milestones
Lesson Plan for Lecture (for large sections)
Pre-Class Prep for You: Pre-Class Prep for Your Students:

• Review the chapter and determine what • Bring the book.
points to cover.
• Bring the PPT slides.
Warm Up Begin Chapter 7 by giving your students a brainteaser to solve. The game Mind Trap offers
several, as do any number of Mensa puzzle books on the market.
Content Lecture slides: Make note of where you stop so you can pick up at the next class meeting.
Delivery Slides have teaching notes on them to help you as you lecture.

Topics PowerPoint Slides Activities
7.1 Why Innovation 1: Innovation and Change Launch your lecture with
Matters 2: Learning Outcomes your brainteaser and
7.1a Technology Cycles 3: Technology Cycles prompt students to think of
7.1b Innovation Streams 4: S-Curves and what a brainteaser has to do
Technological Innovation with innovation. (New
5: Innovation Streams: problems or new ways of
Technology Cycles over thinking about old
Time problems lead to innovation
6: Emergence of Dominant and new technology.)
Design
7.2 Managing 7: Managing Innovation

Innovation 8: Components of Creative
7.2a Managing Sources of Work Environments
Innovation 9: Experiential Approach
7.2b Experiential 10: Compression Approach
Approach: Managing
Innovation during
Discontinuous Change
7.2c Compression
Approach: Managing
Innovation during
Incremental Change
7.3 Organizational 11: The Risk of Not The text uses General
Decline: The Risk of Not Changing Motors as an extended
Changing example of organizational
decline. It might be
interesting in class to do an
“intensive care” review of
General Motors’ situation.
7.3 Managing Change 12: Forces

7.4a Managing Resistance 13: Resistance to Change
to Change 14: Organizational Change
7.4b What Not to Do Process
When Leading Change 15: Managing Resistance to
7.4c Change Tools and Change
Techniques 16: Mistakes Managers
Make
17: Change Tools and
Techniques
18: General Steps for
Organizational
Development Intervention
19: Different Kinds of
Organizational
Development Interventions
Reel to Real Videos 20: Holden Outerwear Launch the video in slide
20. Questions on the slide
can guide discussion.

Adjust the lecture to include the activities in the right column. Some activities should be
done before introducing the concept, some after.
Conclusion Assignments:
and 1. Give students some experience in developing their own innovative thinking.
Preview Assign the Develop Your Career Potential exercise, or adapt the Ideation activity
in the Additional Activities and Assignments section for homework. To do so,
require students to assemble the disparate items and create a hat, vehicle, animal,
or other item you determine. Have them submit a photo of their item along with a
written piece on how their innovation process evolved, the challenges of the
assignment, and their reaction to the assignment in general.
2. Assign students to review Chapter 7 and read the next chapter on your syllabus.
Remind students about any upcoming events.
Lesson Plan for Group Work (for smaller classes)
Pre-Class Prep for You: Pre-Class Prep for Your Students:

• Review the material to cover and modify the • Bring the book.
lesson plan to meet your needs.
• Set up the classroom so that small groups of
4 to 5 students can sit together.
Warm Up Begin Chapter 7 by asking your students to work a brainteaser that you bring to class.
The game MindTrap is full of examples, as are the numerous Mensa and Mensa-style
puzzle books on the market.
Content Lecture on Why Innovation Matters and Managing Innovation (Sections 7.1 and 7.2).
Delivery
A necessary component of innovation is creativity the creative work environment. To
give your students a break from the traditional tenor of the academic classes they likely
take, use the teaching notes below to do the Develop Your Career Potential in class.
Conversely, break for this group activity:
“Ideation”
Divide the class into small groups of 3 to 4 students and give each group a bag of
disparate items. (Things rescued from the trash like milk jugs and lids, toilet paper
tubes, and broken mechanical items make good resources.) Charge each group with
building something you specify, like a hat or a vehicle, or with first deciding what to
build and then actually doing it. Depending on your resources, consider giving a set
of building materials to each student and even inviting a professor from the industrial
design department (if your university has an engineering and/or design college) to
visit your class that day to help with the activity. After the students have finished, let
them present their design to the class. If time allows, let students critique each design,
making recommendations for improvement or refinement.
Come back together as a class to share results from the group activity.

Segue into the next section by asking students “Does change matter?”
Lecture on Organizational Decline: The Risk of Not Changing (Section 7.3).
Introduce the section on Managing Change (Section 7.4) by lecturing on change forces,
resistance forces, and resistance to change.
Break for the following activity:
“What’s Happening”
Divide the class into groups of 3 to 4 students to map what is happening to at least 2
companies facing significant change forces. For each company, students need to list
what they perceive to be the change and resistance forces at work. General Motors,
Saks Fifth Avenue, Walgreens, Sony, and ExxonMobil are some examples. Consider
letting students pick one company to work with in addition to the one you give them.
Also consider giving each group a different set of companies so that when you come
back together as a class to share information, you’ll have a wide range of forces to
discuss.
Segue into the next section by asking students how they feel about change: embrace it,
take wait-and-see attitude, resist it, sabotage it, etc. You’ll probably get the majority of
hands at the “wait-and-see” or “resist it” probes. Ask students to account for the results:
• “Why do you think that is? I mean, why do people tend to be resistant to change?”
• ‘What problems can that tendency create for managers?”
• “What do you think managers can do to reduce that resistance?”
Lecture on Managing Resistance to Change and What Not to Do When Leading Change
(Sections 7.4a and 7.4b).
Segue into the lecture on Change Tools and Techniques (7.4c).
After presenting the various techniques in the book, simulate the GE Workout by doing
the following group activity:
“GE Workout for Campus President”

As an entire class, brainstorm a list of specific problems at your college or university.
Problems can be related to any aspect of the campus (finances, registration, social
activities, sports, etc.). Divide students into medium-sized groups of 8 to 10 students.
Ask 1 student from each group to volunteer to be the campus president for that group.
Have the managers leave the room (or sit together away from their “department
chairs”) for 5 minutes and let them think of possible solutions their teammates might
put before them. Reintegrate the presidents with their management teams and conduct
the GE Workout. Time this part of the exercise to simulate the rapid nature of the
workout. You don’t want to give the presidents too long to decide on any given item
or to get into debates/discussions with department chairs about the topic.
Conclusion Assignments:
and 1. As an assignment that follows up the Ideation exercise above, have students write
Preview a paragraph about their experience with the design process and one about their
response to the critique process.
2. If you have finished covering Chapter 7, assign students to review Chapter 8 and
read the next chapter on your syllabus.
Remind students about any upcoming events.
Assignments with Teaching Tips and Solutions
What Would You Do? Case Assignment
3M
Minneapolis, Minnesota
With 40,000 global patents and patent applications, 3M, maker of Post-it notes, reflective
materials (Scotch lite), and 55,000 products in numerous industries (displays and graphics, electronics and
communications, health care, safety and security, transportation, manufacturing, office products, and
home and leisure), has long been one of the most innovative companies in the world. 3M codified its
focus on innovation into a specific goal, “30/5,” which meant that 30 percent of its sales each year must
come from products no more than five years old. The logic was simple but powerful. Each year, five-
year-old products become six years old and would not be counted toward the 30 percent of sales. Thus,
the 30/5 goal encouraged everyone at 3M to be on the lookout for and open to new ideas and products.
Furthermore, 3M allowed its engineers and scientists to spend 5 percent of their time, roughly a half-day
per week, doing whatever they wanted as long as it was related to innovation and new product
development.
And it worked, for a while. A decade ago, the Boston Consulting Group, one of the premier
consulting companies in the world, ranked 3M as the most innovative company in the world. In
subsequent years, it dropped to second, third, and then seventh. Today, 3M doesn’t even crack the top 50.
Dev Patnaik, of Jump Associates, an innovation consulting firm, says, “People have kind of forgotten
about those guys [3M]. When was the last time you saw something innovative or experimental coming
out of there?” So, what happened?
When your predecessor became CEO ten years ago, he found a struggling, inefficient, oversized
company in need of change. He cut costs by laying off 8,000 people. Marketing, and research and
development funds, which had been allocated to divisions independent of performance (all divisions got
the same increase each year), were now distributed based on past performance and growth potential.
Perform poorly, and your funds would shrink the next year. Likewise, with U.S. sales stagnating and Asia
sales rising, management decreased headcount, hiring, and capital expenditures in the United States,
while significantly increasing all three in fast-growing Asian markets. Six Sigma processes, popularized
at Motorola and GE, were introduced to analyze how things got done, to remove unnecessary steps, and to
change procedures which caused defects. Thousands of 3M managers and employees became trained as
Six Sigma “black belts” and returned to their divisions and departments to root out inefficiencies, reduce
production times, and decrease waste and product errors. And it worked incredibly well, in part. Costs and
capital spending dropped, while profits surged 35 percent to record levels. But, product innovation, as
compared to the 30/5 goal sank dramatically, as only 21 percent of profits were generated by products that
were no more than five years old.
So, what should 3M do? From inception, 3M has been an innovator, bringing a stream of new
products and services to market, creating value for customers, sustainable advantage over competitors,
and sizable returns for investors. Thanks to your predecessor, 3M has lower costs, is highly efficient, and
much more profitable. But it no longer ranks among the most innovative firms in the world. In fact, the
use of Six Sigma procedures appears to be inversely related to product innovation. If that’s the case,
should 3M continue to focus on using Six Sigma procedures to reduce costs and increase efficiencies, or

should it strive again to encourage its scientists and managers to focus on innovation? Which will make
3M more competitive in the long run?
When people think of innovation, they tend to think of game-changing advances that render
current products obsolete, for example, comparing the iPhone to text-based “smartphones.” Innovation,
however, also occurs with lots of incremental changes over time. What are the advantages and
disadvantages for 3M of each approach, and when and where would each be more likely to work? Finally,
some companies innovate from within by successfully implementing creative ideas in their products or
services. Sometimes, though, innovation is acquired by purchasing other companies that have made
innovative advances. For example, although Google is generally rated as one of the most innovative
companies in the world, most people have forgotten that Google bought YouTube to combine its search
expertise with YouTube’s online video capabilities. Over time, how much should companies like 3M rely
on acquisitions for innovation? Should 3M acquire half, one-third, 10 percent, or 5 percent of its new
products through acquisitions? What makes the most sense and why?
If you were in charge at 3M, what would you do?
Sources:
“The 50 Most Innovative Companies 2010,” Bloomberg Businessweek,
http://www.businessweek.com/interactive_reports/innovative_companies_2010.html [accessed 4 May 2011]; M.
Arndt & D. Brady, “3M’s Rising Star,” BusinessWeek, 12 April 2004, 62-74; M. Gunther, M. Adamo, & B.
Feldman, “3M'S Innovation Revival,” Fortune, 27 September 2010, 73-76; B. Hindo, “3M: Struggle between
Efficiency and Creativity,” BusinessWeek Online, 17 September 2007, 36.
What Really Happened? Solution

In the opening case, you learned that 3M, once the most innovative company in the world, was no longer
considered innovative. While layoffs, allocating research & development funds based on performance
and potential, and Six Sigma processes – the latter of which rooted out inefficiencies, reduced production
times, and decreased waste and production errors – led to significantly reduced costs and record profits,
product innovation, as measured by the percentage of percentage of profits generated by products that
were no more than five years old, dropped to a record low of 21%, dramatically below the company’s
long-term goal of 30%. Let’s find out what happened at 3M and see what steps CEO George Buckley
took to improve 3M’s ability to introduce innovative products and services.
So, what should 3M do? From inception, 3M has been an innovator, bringing a stream of new products
and services to market, creating value for customers, sustainable advantage over competitors, and sizable
returns for investors. Thanks to your predecessor, 3M has lower costs, is highly efficient, and much more
profitable. But, it no longer ranks among the most innovative firms in the world. In fact, the use of Six
Sigma procedures appears to be inversely related to product innovation. If that’s the case, should 3M
continue to focus on using Six Sigma procedures to reduce costs and increase efficiencies, or should it
strive again to encourage its scientists and managers to focus on innovation? Which will make 3M more
competitive in the long run?
In Chapter 6, we learned that organizations can create competitive advantage for themselves if they
have a distinctive competence that allows them to make, do, or perform something better than their
competitors. A competitive advantage becomes sustainable if other companies cannot duplicate the
benefits obtained from that distinctive competence. Technological innovation, however, can enable
competitors to duplicate the benefits obtained from a company’s distinctive advantage. In other words,
innovation can allow companies that fall behind to catch up. And, sometimes, innovation can be so
disruptive that market leaders become market followers as their competitive advantage turns into a
competitive disadvantage.
Consequently, companies that want to sustain a competitive advantage must understand and protect
themselves from the strategic threats of innovation. Over the long run, the best way for a company to do

that is to create a stream of its own innovative ideas and products year after year. When a company does
that, it’s called an innovation stream, that is, a pattern of innovation over time that creates sustainable
competitive advantage. Innovation streams prevent competitors from catching up because new
innovations keep market leaders, one, two, or three-steps ahead of their competition.
While Six Sigma procedures helped make 3M more efficient, reduce costs, and highly profitable, it
also made the company less innovative. In terms of long run competitiveness and profitability, should
3M continue to focus on costs and efficiencies, or should it encourage its managers and scientists to be
more innovative?
In the long run, innovation is likely to be a more profitable strategy than low costs and efficiency.
Why? Because the latter are easier to duplicate, which is another way of saying it’s more difficult to
sustain a competitive advantage based on costs and efficiency. And while innovation is a more profitable
strategy because firms can charge more for innovative, value-added products and services that aren’t
available from competitors, it is difficult, as 3M’s experience has shown, to maintain an innovation
stream, that is, a pattern of innovation over time that creates sustainable competitive advantage.
One sure thing, however, is that while Six Sigma processes increased 3M’s short-run profitability, it
also hurt the company’s ability to innovate. CEO George Buckley observed, “Invention is by its very
nature a disorderly process. You can't put a Six Sigma process into that area and say, well, I'm getting
behind on invention, so I'm going to schedule myself for three good ideas on Wednesday and two on
Friday. That's not how creativity works.” Former 3M employee Michael Mucci said, “We all came to the
conclusion that there was no way in the world that anything like a Post-it note would ever emerge from
this new system [meaning Six Sigma].” Art Fry, the 3M scientist who invented the Post-it Note, one of
3M’s most successful products, said innovation is, “a numbers game. You have to go through 5,000 to
6,000 raw ideas to find one successful business.” Because the point of Six Sigma is to eliminate waste,
that is, all of the ideas it takes to find that one great product or service, Fry believes that Six Sigma was
destroying 3M’s innovation culture. Said Fry, “What's remarkable is how fast a culture can be torn
apart."
When people think of innovation, they tend to think of game-changing advances that render current
products obsolete, for example, such as comparing the iPhone to text-based “smart phones.” Innovation,
however, also occurs with lots of incremental changes over time. What are the advantages and
disadvantages for 3M of each approach, and when and where would each be more likely to work?
“Game-changing advances” in technology are also known as discontinuous change, where old
standards are made obsolete by new technological standards. In other words, new technology displaces
old technology. Discontinuous change is accompanied by uncertainty because no one is sure in periods
of discontinuous change which technological approaches will become the new standard, that is, the new
dominant design. In highly uncertainly environments during periods of discontinuous change, it’s best to
use the experiential approach, which assumes that intuition, flexible options, and hands-on experience can
reduce uncertainty and accelerate learning and understanding. This approach involves frequent design
iterations, frequent testing, regular milestones, creation of multifunctional teams, and use of powerful
leaders to guide the innovation process.
Whereas the experiential approach is used to manage innovation in highly uncertain environments
during periods of discontinuous change, the compression approach is used to manage innovation in more
certain environments during periods of incremental change Whereas the goals of the experiential
approach are significant improvements in performance and the establishment of a new dominant design,
the goals of the compression approach are lower costs and incremental improvements in the performance
and function of the existing dominant design.
With the experiential approach, the general strategy is to build something new, different, and
substantially better. Because there’s so much uncertainty—no one knows which technology will become
the market leader—companies adopt a winner-take-all approach by trying to create the market-leading,
dominant design. With the compression approach, the general strategy is to compress the time and steps

needed to bring about small, consistent improvements in performance and functionality. Because a
dominant technology design already exists, the general strategy is to continue improving the existing
technology as rapidly as possible. In short, a compression approach to innovation assumes that innovation
is a predictable process, that incremental innovation can be planned using a series of steps, and that
compressing the time it takes to complete those steps can speed up innovation.
What are the advantages and disadvantages for 3M of each approach, and when and where would
each be more likely to work? Beyond the issues mentioned above, the primary issue is cost and time
frame. It’s generally more expensive and takes longer to use the experiential approach to compete with
other companies to try to establish a new dominant design. After all, only one, or at best, two companies
will “win.” And, if your company’s design isn’t the “winner,” you’ll lose all of your development costs
with few ways to recoup them in the marketplace.
Cost considerations may be why 3M CEO George Buckley has encouraged 3M’s managers and
scientists to focus on innovating around its core products and services in 3M’s largest markets.
Furthermore, Buckley is encouraging his scientists to use the compression approach to innovation where
they focus on “inventing hundreds of next small things,” that is, making current products a little bit better
year after year. Buckley calls this finding innovations “at the bottom of the pyramid.” And not only is he
encouraging incremental improvements in innovation, he’s also pushing 3M’s people to innovate in ways
that reduce product costs. One example is 3M’s low-cost respirator mask. Buckley said, “I didn't drive
the invention of this, but I said the invention of this is necessary. You have to drive out costs to defend
yourself against competition. I wanted the manufacturing process that made these respirators [to have] a
quadrupling in speed and efficiency.” Says Buckley, “We often think innovation is making a
breakthrough at the top of the pyramid. That's often not where the hardest challenges are. The hardest
challenges are often: How do I make a breakthrough for next to nothing?”
Another example of the incremental approach to innovation using the compression method is when
3M scientists can leverage ideas from other products or scientists in the company. 3M was able to do this
with its Cubitron sanding disks. 3M knew that its sanding disks would work better if each tiny piece of
ceramic “sand” on its sanding disks was identical. That would allow the disks to act more like a razor
blade when sanding off layers of materials. But, the reality was that each piece of ceramic “sand” was a
different shape with a slightly different size. That meant that the sanding disks made uneven contact with
sanding surfaces, which produced “bouncing” that made it more difficult to do a quality sanding job.
Scott Culler, a 3M Scientist said, “The big voila happened." And that “big voila” was realizing that 3M’s
micro-replicating technology, used to create identical reflective materials in reflective roads signs, could
also be used to create identical, tiny pieces of ceramic sand. It took 15 months to perfect the process, but
Culler and his fellow scientists were able to do it and produce substantially better Cubitron sanding disks,
sales of which are now up 30%.
Finally, sometimes companies innovate from within by successfully implementing creative ideas in their
products or services. Sometimes, though, innovation is acquired by purchasing other companies that
have made innovative advances. For example, while Google is generally rated as one of the most
innovative companies in the world, most people have forgotten that Google bought YouTube to combine
its search expertise with YouTube’s online video capabilities. Over time, how much should companies
like 3M rely on acquisitions for innovation? Should 3M acquire half, one-third, 10 percent, or 5 percent
of its new products through acquisitions? What makes the most sense and why?
One way to grow a company is through internal or organic growth. And when your strategy is
innovation, like at 3M, that means innovating with new products and services developed from your
existing businesses. Another way to grow is through external growth, or buying other companies. And
when your strategy is innovation, that means acquiring or buying other companies which have developed
innovative products and services. The question is how much should 3M focus on internal growth and
innovation versus external growth and innovation through acquisitions?

It’s a difficult question to answer. When innovation is your core competency and your company’s
source of competitive advantage, relying too much on acquisitions for innovation is an admission that
you’re failing to generate enough innovative products and services from your existing businesses. And,
while it’s expensive to develop new products and services internally, it’s more expensive to acquire them
by buying other companies. On the other hand, acquiring other companies is a relatively quick way to fill
holes in product and service offerings, or to bring in a critical, already developed technology that can be
leveraged throughout existing businesses. However, there’s also the risk that acquired companies won’t
succeed. A meta-analysis based on 103 studies and a sample of 25,205 companies indicates that, on
average, acquiring other companies actually hurts the value of the acquiring firm. In other words, there is
only a 45 percent chance that growing a company through external acquisitions will work!
If there’s a less than 50% chance that acquired companies will prosper, is there some way to increase
the odds of success when acquiring companies and their technological innovations? The best approach is
probably related diversification, in which the different business units share similar products,
manufacturing, marketing, technology, or cultures. The key to related diversification is to acquire or
create new companies with core capabilities that complement the core capabilities of businesses already
in the corporate portfolio. While seemingly different, most of 3M’s product divisions are based in some
fashion on its distinctive competencies in adhesives and tape (e.g., wet or dry sandpaper, Post-it notes,
Scotchgard fabric protector, transdermal skin patches, and reflective material used in traffic signs).
Furthermore, all of 3M’s divisions share its strong corporate culture that promotes and encourages risk
taking and innovation. In sum, in contrast to a single, undiversified business or unrelated diversification,
related diversification reduces risk because the different businesses can work as a team, relying on each
other for needed experience, expertise, and support. The improvement of 3M’s Cubitron sanding disks
above is an example of the advantages of related diversification.
To what extent will 3M rely on acquisitions as it executives its innovation strategy? According to
CEO George Buckley, 3M will spend about $1 billion a year to buy 15 to 20 companies. Said Buckley,
“We are using these kind of acquisitions to show the art of the possible when it can be done fast.” For
example, 3M paid $810 million to buy Arizant, a medical company whose products keep anesthetized
patients, who lose the ability to regulate their temperatures, warm. Arizant complements other product
offerings in 3M’s health care division, particularly in its infection prevention division.
How successful has CEO George Buckley been at making 3M an innovative company again? After
restoring the 5% rule, which allows 3M engineers and scientists to spend 5% of their time each week on
anything they want, as long at its related to innovation and new product development, and after
significantly increasing 3M’s research and development spending, and after limiting Six Sigma practices
to factories and removing it from the rest of the company, particularly research labs, 3M has rebounded
strongly. 3M’s organic growth rate from products it develops from existing businesses is a healthy 7-8%
a year. As a result, it is introducing 1,000 new products a year. Finally, after dropping to a low of 23%,
new products that are 5 years old or less, now account for 31% of 3M’s sales, surpassing the company
goal of 30% for the first time in years.
Self-Assessment
MIND BENDERS
Because innovation is a key to corporate success in many industries, companies will often hire outside
consultants to help tap the creativity of their work force. Their goal in doing so is to fill any gaps in their
own creative thinking by looking outside the organization.
For managers, being able to think creatively is an important skill. Creativity should be part of a
manager’s conceptual toolkit. The assessment for this chapter is designed to reveal a person’s openness to
innovation and his or her attitude toward creative endeavors. It is not an assessment or indicator of a
person’s level of creativity.
This survey is based on research presented in J. E. Ettlie and R. D. O’Keefe, “Innovative Attitudes,
Values, and Intentions in Organizations,” Journal of Management Studies 19 (1982): 163–182.

In-Class Use
Have students go to cengagebrain.com to access the Self-Assessment activity. Use the Self-Assessment
PowerPoint slides and have students raise their hand as you read off the scoring ranges. Tell students to
keep their hand up until you have counted the responses for each item and entered the count into the
spreadsheet embedded in the PowerPoint presentation. Display the distribution to the class so students can
see where they fit.
Scoring
Add up the numbers associated with your responses to the 20 items. Generally speaking, the higher your
score, the more innovative your attitude. Compare your score to the norm group (consisting of graduate
and undergraduate business school students, all of whom were employed full time) represented in the
table below. Percentile indicates the percent of the people who are expected to score below you.
Score Percentile
39 5
53 16
62 33
71 50
70 68
89 86
97 95
If you are unhappy with your score (meaning you would like to improve it), the Develop Your Career
Potential consists of some fun activities to help you develop your creative side.
Management Decision
Purpose
In this exercise, students are given the opportunity to take on the role of an innovator that is facing serious
competition from counterfeiters. A shoe company that has introduced a novel product line sees
diminished sales because of other companies that are selling unauthorized duplicates. Students must
consider how they are to deal with not only the threat of competitors, but a threat against the company’s
innovation.
Setting It Up
You can introduce this exercise by showing students some recent statistics on the financial impact of
piracy and counterfeiting. For example, a recent article on Dailytech.com shows that shows that
companies around the world lost more than $50 billion due to software and movie piracy. With such a
huge financial impact, then, what steps should a company take to protect its property?
INNOVATION COPYCATS
Until a few years ago, your company, Vibram, was known for making soles for hiking boots. It’s the only
thing your company did for over 75 years. But one day, a member of your design team came up with a
quirky idea—running shoes that look like gloves for your feet. The prototype he showed you was thin,
lightweight, and kind of funny looking, since it had individual sections for each toe. As the designer

explained to you, the shoe would give the wearer the feeling of running barefoot, while protecting his or
her feet from dirt and cuts. Seemingly overnight, the shoe, called FiveFingers, became a sensation. It was
praised by professional athletes, amateur runners, journalists, and even the Harvard Medical School.
Scientists wrote about how your shoes promoted a “barefoot” running-style that produces less stress on
the joints and increased leg, ankle, and foot strength. And consumers could not get enough. Sales for the
current year are expected to top $50 million, up from $11 million in the previous year. To meet demand,
Vibram had to double their warehouse space and expand from one factory to five.
Not all is rosy with Vibram, however. First of all, it faces stiff competition from some of the
biggest names in the athletic apparel industry, as Nike, New Balance, and others are planning to release a
similar product. But even more worrisome are counterfeiters. Over the past few months, you’ve
discovered more than 200 websites that sell fake versions of the FiveFingers shoes. And these websites
aren’t just selling shoes that sort of look like yours—they’re almost exact copies. They have the same
styles, colors, logo, and box design. They have a return label that looks just like yours, and has your
company’s address on it! When consumers want to return the fakes, they end up in your offices, and
customers want you to refund them for shoes they bought from a counterfeiter.
Your company, of course, wants to fight back against the counterfeiters. Not only do the fake shoes
reduce your sales, but they could also hurt your reputation of producing high-quality products. But
fighting counterfeiters is expensive. You have to hire and send inspectors to China, where most of the
factories producing copies of your shoes are located. And for every fake website you find, it costs $2,500
to get the World Intellectual Property Organization to shut it down. How should your respond to
companies that take advantage of a product that your company worked so hard to design and create?
Source:
Jennifer Alsever, “Barefoot Shoes Try to Outrace the Black Market,” CNNMoney.com., August 13, 2010, accessed
http://money.cnn.com/2010/08/13/smallbusiness/vibram_fivefingers/index.htm.
Questions
1. As a manager, would you recommend that Vibram keep paying the costs associated with fighting
counterfeiters? Why or why not?
Students’ responses will vary depending on how they view the costs associated with fighting
counterfeiters. Some may argue that the costs are simply part of being an innovator in the market,
while others may feel that the costs are too excessive, and that it is better for the company to
devote its resources elsewhere.
2. Some Virbram employees might be discouraged by counterfeiters, feeling that the innovations
they worked hard to create are being stolen too quickly. How would you nurture the creative
environment at Vibram in spite of counterfeiters?
The text discusses a number of ways in which companies can create creative work environments.
Creative work environments have six components that encourage creativity: challenging work,
organizational encouragement, supervisory encouragement, work group encouragement, freedom,
and a lack of organizational impediments. Students should also note that creative work
environments require three kinds of encouragement: organizational, supervisory, and work group
encouragement. Organizational encouragement of creativity occurs when management
encourages risk taking and new ideas, supports and fairly evaluates new ideas, rewards and
recognizes creativity, and encourages the sharing of new ideas throughout different parts of the
company. Supervisory encouragement of creativity occurs when supervisors provide clear goals,
encourage open interaction with subordinates, and actively support development teams’ work and
ideas. Work group encouragement occurs when group members have diverse experience,
education, and backgrounds and the group fosters mutual openness to ideas; positive, constructive
challenge to ideas; and shared commitment to ideas.

Management Team Decision
Purpose
This case gives students an opportunity to think about how a company should position itself within a
changing technological environment.
Setting It Up
To introduce this case, ask students if they are familiar with the following list of companies: Emerson,
Philco, Sylvania, Westinghouse. These are all the names of once dominant American companies that once
manufactured televisions, but which went out of business because of their inability to respond to
technological changes in the market. Thus, you can use this brief exercise to remind students that
companies can quickly fade away if they do not evolve with changing times.
FACE THE FUTURE

Times don’t seem to be much better to be in the oil business. Sure, there have been some bumps in the
road the past few years—the tragic oil spill in the Gulf of Mexico and unstable prices and supply due to
political situations. But there’s one piece of news that makes all those obstacles easier to deal with—
profits are up, and not just a little bit either. Profits are positively soaring. Exxon announced that its
earnings for the most recent quarter were up 69 percent from the previous year, to $10.65 billion. Royal
Dutch Shell posted an increase of 30 percent to $6.29 billion, even while experiencing a 2.5 percent
decrease in production, and Occidental Petroleum’s earnings jumped 46 percent to $1.55 billion.
Times certainly seem to be great, but there are many executives in your company who are
pushing for big changes. Sure, they argue, revenues and earnings and profits are sky-high right now. But
what about the future? Consumers and governments around the world are growing more concerned about
oil—about how it impacts the environment and about whether there will be enough to meet fuel demands.
In response to these concerns, there has been much research and development dedicated to alternative fuel
vehicles, from all-electric cars like the Nissan Leaf, to gas-electric hybrids like the Chevy Volt or
hydrogen-powered cars like the Honda FCX Clarity. And consumers have responded quite favorably. In
just four short months, GM sold over 2,000 Volts and Nissan sold over 1,000 Leafs. What’s even a more
encouraging sign is that nearly 20,000 customers have already paid a deposit to be put on a waiting list for
the Leaf, and almost 54,000 are on the Volt waiting list.
The executives pushing for change point to these figures as a sign that the auto industry will soon
experience a dramatic shift. They’re arguing that the age of the gasoline engine (along with gas stations
and gas companies) will soon be over, replaced by a more environmentally friendly method of fueling
cars. In their view, the company should act now, and quickly, to take advantage of this shift by investing
in a nation-wide network of electric charging stations, where consumers recharge their all-electric or
plug-in hybrid cars. That way, when gas-engine technology is eventually surpassed, your company will be
in prime position to provide recharging infrastructure to the entire country.
There are others in the company, however, who doubt that this is the right step to take. Although
they recognize that gas engines may not last forever, they’re not convinced that it’s a technology in
decline. They recognize as well that sales of electric cars and hybrids are on the rise, but these are still
microscopic compared to the 11.5 million conventional cars sold in the United States or the 18 million
sold in China last year. They are also concerned that all-electric cars are just one choice among many
alternative fuels; there are also hydrogen-powered cars, natural gas–powered cars, biofuels, and who
knows what else will be developed in the future. Their great worry is that the company will spend huge
amounts of time and money to develop a recharging network only to have another alternative fuel rise as
the dominant design.
So what should the company do? Should it look the future right now, even as its earnings from oil
are near record highs? Or should it stay the course?
For this Management Team Decision, form a group with three or four other students and answer
the questions below.
Sources:

Nevin Batiwalla, “Nissan's Leaf Sales Spike in April,” Nashville Business Journal, May 3, 2011, accessed May 9,
2011, from www.bizjournals.com/nashville/news/2011/05/03/nissan-leaf-sales-spike.html; “China 2010 Auto Sales
Reach 18 Million, Extend Lead,” Bloomberg Businessweek, January 10, 2011, accessed May 9, 2011, from
www.bloomberg.com/news/2011-01-10/china-2010-auto-sales-reach-18-million-extend-lead-update1-.html; Craig
Trudell “U.S. Auto Sales Probably Rose, Completed 2010 Rebound,” Bloomberg Businessweek, January 3, 2011,
accessed May 9, 2011, from www.bloomberg.com/news/2011-01-03/u-s-auto-sales-may-match-2010-high-
complete-first-annual-gain-in-5-years.html; GM Volt Wait List Data, accessed May 9, 2011, from http://gm-
volt.com/wait-list-data/; Isabel Ordonez, “Exxon, Shell Profits Soar On Higher Oil Prices,” The Wall Street Journal,
April 29, 2011, accessed May 9, 2011, from
http://online.wsj.com/article/SB10001424052748704330404576291350999515650.html; “Sales Update: Nissan
Leaf Hits 573, Chevy Volt at 493 in April,”Autoblog.com, May 3, 2011, accessed May 9, 2011, from
www.autoblog.com/2011/05/03/sales-update-nissan-leaf-hits-573-chevy-volt-at-493-in-april/.
Questions
1. What is your recommendation for how the company should proceed? Should it take action on
developing an alternative fuel network or wait until a dominant design arises?
Students’ responses will vary.
2. What are the advantages and disadvantages of choosing a technology format before a dominant
design arises?
The primary advantage is that the absence of a dominant design means that the company has an
opportunity to establish a significant competitive advantage for itself. The company can act
aggressively to establish itself as the dominant design and thereby establish itself as the
unquestioned leader in alternative fuels. The primary disadvantage is the level of risk involved. If
the oil company develops the “wrong” fuel, or if a competitor’s alternative somehow gains the
upper hand, then the company will have wasted considerable resources, with lithe to show for it.
3. What steps could the company take to help ensure that electric engines become the dominant
design?
Some of the steps that the company could take include: forming alliances or working
relationships with other energy providers; forming alliances with auto manufacturers to insure
that they pursue electric engines as opposed to other alternatives; conducting aggressive
marketing campaigns to highlight the benefits of electric engines; investing in a comprehensive
refueling network so that consumers won’t worry about the difficulty of recharging their cars;
working with government officials to provide manufacturers incentives to produce electric cars
and consumers incentives to buy them.
Practice Being a Manager
SUPPORTING CREATIVITY
Exercise Overview and Objective

This exercise is a basic simulation of the interaction between members of the same organization who
occupy inventor roles, and those who occupy investor roles. Although organizations use cross-functional
teams and other tools to help them synthesize invention and investment perspectives, it is not uncommon
to encounter groups of employees in the same organization who exhibit much greater loyalty to one or the
other of these roles. In such cases, the two groups may find it challenging to work collaboratively. The
purpose of this exercise is to help students feel this basic tension between inventor and investor and then
to discuss its likely impacts on innovation and change.
Preparation
No student preparation is necessary for this exercise. You may wish to ask students to scan the Web site
of a company similar to that described in the exercise—“large clothing and accessories company that
targets college students”—but this is entirely optional. A few companies that fit this description include
The Gap and Abercrombie & Fitch.
You should assign each student to either an Inventor or Investor pair (e.g., 2 students as Inventors)
or small group (e.g., 3 students as Investors). Make sure that you assign equal numbers of pairs/small
groups to each type, so that each Inventor pair/group can work directly with an Investor pair/group. To
speed things along, you may want to assign pairings in advance (e.g., PAIR 1: Investor Group #1 and
Inventor Group #1; PAIR 2: Investor Group #2 and Inventor Group #2).
In-Class Use
Encourage students in each group to carefully read and follow the instructions in Steps 1 and 2. For
example, Investors need to “discuss and agree upon some criteria that should be used by your company to
screen new product and service concepts.”
To streamline this exercise, no specific financial or manufacturing information is included here. But
you should encourage students to think about the types of issues that might be important to people in their
particular role and to discuss them in general terms. For example, investors might be concerned about the
complexity/difficult of a particular design. Although students in the investor condition are not given
manufacturing cost data, they should feel free to use the rough proxy of “greater complexity/difficulty =
higher costs.” Students in the inventor condition likewise must work in the absence of sales data and
marketing research, but they should feel free to argue from observation and anecdotal evidence in support
of, say, a new and innovative backpack design.
The aim of the exercise is to help students feel and experience the mindset of inventor and/or
investor. Technical matters are of little or no importance to the success of the exercise. Assumptions and
evidence on particular technical points are only useful to the degree that they support the aim of engaging
students in the role that they are playing. As mentioned in Step 4 of the exercise, you should rotate roles
as time allows. Ideally each student should have the opportunity to play each role at least once.
Class discussion items are included in Step 6. Question (a) is central to the problem of inventor-
investor tension. Evaluation/rating of new product concepts may be a useful tool for making investment
decisions. Ratings appear more objective than intuitive (gut feeling) approaches. However, students who
played the inventor roles should recognize the potential chilling effect of such ratings. Inventors may
learn to play it safe by making incremental improvements to established products.
The remaining questions (b-d) ask students to use their experience in the exercise to explore some of
the group and organizational dynamics surrounding innovation and investment decisions. Inventor units,
such as a Research and Development lab, may develop a sub-culture that rewards risk taking, meticulous
scientific testing, and independent thinking. A Corporate Finance department, on the other hand, may
develop a sub-culture around such investment elements as numbers-based decision-making, conservative
profile, and checks-and-balances on judgment. Students may suggest a number of means for supporting
healthy innovation and wise investment (question d), including cross-functional teams, matrix
organization, job rotation, as well as fostering informal collaboration and negotiation.
Develop Your Career Potential
SPARK YOUR OWN CREATIVITY
Purpose
To help students reconnect with their innate level of creativity and help it flourish.
Setting It Up
This exercise can be used successfully in or out of class. The additional exercise “Ideation” builds on the
text portion in a way that is also suited to in-class work as well as an assignment. The “Ideation” exercise
takes a decent amount of time, but students will not only enjoy it, they will gain valuable insights into
sources of innovation and the challenges of inventing something new. (See below for teaching tips.)
Another––simpler––way to communicate that same challenge is to assign students to create an
original, closed geometric shape that does not look like anything else. The shape can use curved and
straight lines, but no lines can intersect such that the interior of the shape remains open space. Tell
students to either scan their shape and email it to you or bring it to class on a piece of 11 x 17 paper. You
can then proceed with a class critique of the shapes. What is certain to happen is that someone will say
something like, “That looks like a bird” (or plane, building, tree, coffee cup). The artist of the simulacrum
will probably have been completely unaware that the shape was beginning to look like a familiar item, so
intent was he or she on creating a new shape. Students experience how hard it is to disprove the adage,
“There’s nothing new under the sun.”
The activity encourages students to do three things:
1. Investigate the website for Eureka Ranch and find out how this brain tank thinks of creativity.
Prior designs for the Eureka Ranch website included links from the splash page directly to
information about the three dimensions of creativity. At the time I wrote this, students needed to
go to the Eureka 7.0 white paper. In essence, the three dimensions are brain writing, dialog, and
brainstorming.
2. Research Brain Brew radio on the Eureka Ranch website and tune in to a program. Brain Brew is
a radio program invented by the founder of Eureka Ranch, Doug Hall, who has a best-selling
book titled Jump Start Your Brain. Brain Brew is broadcast weekly on radio stations courtesy of
Public Radio International. Students can find information on Brain Brew at
http://www.eurekaranch.com/.
3. Shop the catalog of Mindware, an innovative toy and game company. Targeted toward parents
who are interested in educational products, Mindware offers “brainy toys for kids of all ages.”
Books of Escher-esque mazes, three-dimensional architectural puzzles, robot invention kits,
chemistry kits, spy kits, and games based on colonial barter systems, geography, Egyptian barter
systems, and learning Shakespeare are only a tiny representation of the catalog’s complete
offerings. For fun, call the company (800-999-0398) to request enough catalogs to hand out to
your students. Most likely, it has been quite a while since your students played a strategic board
game.
Optional Assignment
As an extension to the actual exercise, you could have them peruse the catalog and write a list of the five
most interesting items they see, why they are attracted by those items, and how they think the items
would expand a person’s creativity or innovative thinking skills.
Creativity is a vital part of every organization—and not just the whiz-bang, multimillion-dollar type of
creativity. Even banal tasks can benefit from a new approach: An office assistant may think creatively
about how to manage the company’s filing system or figure out a simple way to keep track of who is in
and out of the office. A Chicago company called Inventables has developed innovation kits—boxes
containing disparate items to spark creativity—which it sells to clients like Procter & Gamble and
Motorola four times a year. The idea is that designers and engineers will be inspired by tinkering with the
contents of the kits.
You don’t need Inventables to become inspired, however. Nor do you have to wait for your company
to develop a creative work environment before you can become creative. You can spark your own
creativity and think “outside the box” on your own. Eureka! Ranch, a Cincinnati-based innovation
consultancy company, uses toys to help adults remember how to be imaginative, and its long client list of
Fortune 500 companies is a testament to founder Doug Hall’s methods. Another company, Mindware,
specializes in educational activities and toys that can help adults regain access to their imaginations. Just
looking through its catalog of erector sets, science sets, puzzle books, strategy games, and tangrams may
be enough to get your juices flowing.
Sources: Julie Schlosser, “Inside-the-BoxThinking,” Fortune, 1 November 2004, 54; http://www.mindwareonline.com;

http://www.eurekaranch.com.
Activities
1. Visit http://www.eurekaranch.com and search for the audio clip of what the company does and how
it does it. Listen to the clip. What do you think of the three dimensions of creativity?
2. At the Eureka Ranch website, find the page on Brain Brew. What is Brain Brew Radio? Is it available
in your area? If it is, consider listening to it once a month to hear the creative ideas that people across
the country are working on.

3. Visit http://www.mindware.com/Home/HomePage.aspx and peruse some of the products the
company sells. Which products do you find most appealing? If it’s in your budget, order one of the
items as a tool to help you develop and refine your creative side.
Reel to Real Video Assignment: Management Workplace

Management Workplace videos can support several in-class uses. In most cases you can build an entire
50-minute class around them. Alternatively, they can provide a springboard into a group lesson plan.
The Management Workplace video for Chapter 7 would be a nice companion to your introduction to the
course on the first day of classes.
Video: Holden Outerwear

Managing Change and Innovation
Summary:
Founded in 2002 by professional snowboarder Mikey LeBlanc, Holden Outerwear has given traditional
baggy outerwear a complete style make-over. Unlike ski-apparel brands that focus on utility at the
expense of looking good, Holden pants and jackets possess features that are inspired by runway brands
like Marc Jacobs and G-Star, as Holden is always looking to bring new elements of style to the slopes.
Holden has the attention of everyone in its industry. Retailers wait anxiously to see LeBlanc’s newest
collections, and competitors from Burton and Salomon to Bonfire and Walmart borrow heavily from
Holden’s collections. LeBlanc doesn’t worry too much about the rampant plagiarism that goes on in his
industry. As he sees it, imitation is the highest form of flattery. Plus, Holden’s business is based on
finding the next big thing. When it comes to style, Holden is the leader, never the follower.
Discussion Questions from Prepcard:

1. Identify the type of change that Holden’s leaders are managing on a daily basis.
Holden is engaged in managing product change, not organizational change or technology change.
Product change and innovation is the primary way in which organizations adapt to competition in
the market.
2. What resistance has Holden encountered while introducing innovative garment designs? How
was it able to overcome that resistance?
Holden is a small company that does not own its own factories or fabric mills. To produce any
garment, the company needs cooperation from outside vendors, which is not always guaranteed.
In the video, designer Nikki Brush says that being highly innovative means doing things
differently. This requires managers to push on outside apparel manufacturers and vendors in ways
that may cause conflict. Owner Mikey LeBlanc states that outside partners often give an “it’s not
possible” response to Holden’s proposed concepts. Elsewhere in the video, Nikki Brush notes
that rising costs throughout the industry make vendor cooperation even more uncertain, as outside
manufacturers don’t want to risk money or resources on untested products. Mikey LeBlanc
identifies a powerful counter to this resistance: the market rewards hot new trends with big sales.
Moreover, Holden has a reliable track record of successful innovation, and Mikey LeBlanc is an
effective idea champion.
Workplace Video Quiz
Video Segment 1
Video segment title Managing Change and Innovation

Start time (in sec) 0:00

Stop time (in sec) 1:43
Quiz Question 1 Holden Outerwear is engaged in the following type of change:

Option a Organizational change
Option b Incremental change
Option c Discontinuous change
Option d Reactive change
Correct option c: discontinuous change
Feedback for option a Incorrect. Discontinuous change occurs when companies use a new
technology to replace older technology.
Feedback for option b Incorrect. Discontinuous change occurs when companies use a new
Feedback for option c Correct. Discontinuous change occurs when companies use a new
Feedback for option d Incorrect. Discontinuous change occurs when companies use a new
Quiz Question 2 Based on the video, Holden Outerwear promotes creative innovation at the
individual employee level by:
Option a Hosting creativity seminars
Option b Hiring open-minded employees who thrive on innovation, change, and
experimentation
Option c Using team-based brainstorming and devil’s advocate techniques
Option d Copying ideas from top competitors
Correct option b: Hiring open-minded employees who thrive on innovation, change, and
experimentation
Feedback for option a Incorrect. A key source of innovation at Holden is the creativity of the
people that it brings on board.
Feedback for option b Correct. A key source of innovation at Holden is the creativity of the
Feedback for option c Incorrect. A key source of innovation at Holden is the creativity of the
Feedback for option d Incorrect. A key source of innovation at Holden is the creativity of the
Quiz Question 3 The primary source of innovation and change at Holden is:
Option a External economic forces
Option b Government regulation
Option c Radical product innovation by top competitors
Option d Creative drive and interests of Holden’s founder and employees
Correct option d: Creative drive and interests of Holden’s founder and employees
Feedback for option a Incorrect. A key source of innovation at Holden is the creativity of the
people that work in the company.
Feedback for option b Incorrect. A key source of innovation at Holden is the creativity of the
Feedback for option c Incorrect. A key source of innovation at Holden is the creativity of the
Feedback for option d Correct. A key source of innovation at Holden is the creativity of the

Video Segment 2

Quiz Question 1 Which one of the following facts results in a distinctive competence and
competitive advantage for Holden?
Option a Holden draws its design inspiration from the world of high fashion, not the
world of ski sports apparel
Option b Holden creates snowboarding garments
Option c Holden offers a line of apparel for women
Option d Holden outsources the manufacture of its garments to mills and
manufacturers in China
Correct option a: Holden draws its design inspiration from the world of high fashion, not
the world of ski sports apparel
Feedback for option a Correct. A distinctive competence allows companies to make, do, or
perform something better than their competitors.
Feedback for option b Incorrect. A distinctive competence allows companies to make, do, or
Feedback for option c Incorrect. A distinctive competence allows companies to make, do, or
Feedback for option d Incorrect. A distinctive competence allows companies to make, do, or
Quiz Question 2 When Holden garment designer Nikki Brush says she likes “taking
something everyone does everyday and doing it slightly different,” she is
describing:
Option a Radical innovation
Option c Reengineering
Option d Reactive change
Correct option b: Incremental change
Feedback for option a Incorrect. Incremental change occurs when companies innovate by
lowering the cost and improving the function and performance of a
dominant design.
Feedback for option b Correct. Incremental change occurs when companies innovate by lowering
the cost and improving the function and performance of a dominant design.
Feedback for option c Incorrect. Incremental change occurs when companies innovate by
dominant design.
Feedback for option d Incorrect. Incremental change occurs when companies innovate by
dominant design.
Quiz Question 3 As part of its dedication to eco-friendly business practices, Holden in 2005
invented the world’s first natural-fiber waterproof breathable fabric for use
in snowboarding outerwear garments. This breakthrough reflects a:
Option a Design competition
Option c Technological discontinuity
Option d Design iteration

Correct option c: technological substitution
Feedback for option a Incorrect. Technological discontinuity occurs when an advance or unique
combination of technologies creates a significant breakthrough.
Feedback for option b Incorrect. Technological discontinuity occurs when an advance or unique
Feedback for option c Correct. Technological discontinuity occurs when an advance or unique
Feedback for option d Incorrect. Technological discontinuity occurs when an advance or unique
Instructions
Video Segment 3

Quiz Question 1 According to owner Mikey LeBlanc and designer Nikki Brush, Holden
Outerwear faces increasing resistance from outside vendors that help
Holden manufacture its highly innovative performance outerwear. Sources
of this resistance include all the following except:
Option a Fear of economic loss
Option b Fear of the unknown
Option c High consumer demand for new fashions
Option d The inertia and comfort of using standard status quo factory processes
Correct option c: Consumers’ unrelenting desire for the latest new fashions
Feedback for option a Incorrect. The primary reason that change efforts at Holden are resisted is
because of the fears of suppliers and contractors.
Feedback for option b Incorrect. The primary reason that change efforts at Holden are resisted is
Feedback for option c Correct. The primary reason that change efforts at Holden are resisted is
Feedback for option d Incorrect. The primary reason that change efforts at Holden are resisted is
Quiz Question 2 Acting as change agents, Holden’s managers can overcome their
manufacturing partners’ resistance to change by:
Option a Educating partners on how innovative new products can be made using
standard factory technologies and processes
Option b Giving partners a share of profits on sales of innovative garments
Option c Giving vendors prominent public recognition for successful product
innovations
Option d All of these
Correct option d: All of these
Feedback for option a Incorrect. All of the above reflect actions that change agents take in
helping to direct change efforts.
Feedback for option b Incorrect. All of the above reflect actions that change agents take in
Feedback for option c Incorrect. All of the above reflect actions that change agents take in
Feedback for option d Correct. All of the above reflect actions that change agents take in helping

to direct change efforts.
Quiz Question 3 Companies that rely on innovation, like Holden, can create a creative work
environment by encouraging all of the following except:
Option a Challenging work
Option b Organizational impediments
Option c Freedom
Option d Work group encouragement
Correct option b: organizational impediments
Feedback for option a Incorrect. A lack of organizational impediments is critical to creative a
creative work environment.
Feedback for option b Correct. A lack of organizational impediments is critical to creative a
Feedback for option c Incorrect. A lack of organizational impediments is critical to creative a
Feedback for option d Incorrect. A lack of organizational impediments is critical to creative a
Review Questions
1. What is the relationship between technology cycles and the S-curve pattern of innovation?
Technology cycles typically follow an S-curve pattern of innovation. Early in the cycle, technological
progress is slow, and improvements in technological performance are small. As a technology matures,
however, performance improves quickly. Finally, as the limits of a technology are reached, only small
improvements occur. At this point, significant improvements in performance must come from new
technologies. In its infancy, then, a new technology exists alongside the old technology until the point
occurs at which the new technology is accepted as dominant (i.e., obtains critical mass or clearly
surpasses the older design in form or function).
2. Explain why innovation matters to companies.
It is obvious that technology is rapidly changing our lives. Products that we used yesterday are
obsolete today and in some cases not even available. Organizations that do not keep pace with these
changes are destined for failure. As Jack Welch said, “If the rate of change outside the organization is
faster than the rate of change inside the organization, the end is in sight.”
3. Describe innovation streams.
Innovation streams are patterns of innovation over time that can create a sustainable competitive
advantage. The four stages of an innovation stream are:
• Technological discontinuity: scientific advance or unique combination of existing
technologies that creates a significant breakthrough in performance or function.
• Discontinuous change: phase of a technology cycle characterized by technological
substitution and design competition.
• Dominant design: a new technological design or process that becomes the accepted market
standard.
• Incremental change: the phase of a technology cycle in which companies innovate by
lowering costs and improving the function and performance of the dominant technological
design.

4. How can companies create creative work environments?
Companies can use a variety of tools to fashion a creative work environment. First, companies can
provide their employees with challenging work that demands attention and focus and is important to
others. Managers can also foster creative work environments by encouraging risk taking and new
ideas and setting clear goals. Another way to create creative work environments is by ensuring that
work group members have a variety of experiences. Finally, when its employees have autonomy over
one’s day-to-day work, a company is more likely to experience the benefits of a creative environment.
5. What is the difference between incremental change and discontinuous change?
Technological discontinuities are followed by a discontinuous change, which is characterized by

technological substitution and design competition. Technological substitution occurs when customers
purchase new technologies to replace older technologies. Discontinuous change is also characterized
by design competition, in which the old technology and several different new technologies compete to
establish a new technological standard or dominant design. Because of large investments in old
technology, and because new and old technologies are often incompatible with each other, companies
and consumers are reluctant to switch to a different technology during design competition. At a
certain point, a dominant design will emerge. That is, a specific design becomes the accepted new
market standard for technology. This can happen because most people use the design (i.e., it has
critical mass), or because it solves a practical problem.
The emergence of a dominant design signals a shift from design experimentation and competition
to incremental change, a phase in which companies innovate by lowering the cost and improving the
function and performance of the dominant design. This focus on improving the dominant design
continues until the next technological discontinuity occurs.
6. Compare the experiential approach to managing innovation with the compression approach.
The experiential approach to innovation assumes that innovation is occurring within a highly
uncertain environment and that the key to fast product innovation is to use intuition, flexible options,
and hands-on experience to reduce uncertainty and accelerate learning and understanding.
The steps to the experiential approach are:
• Design iterations
• Testing
• Milestones
• Multifunctional teams
• Powerful leaders
In contrast, the compression approach to innovation assumes that innovation is a predictable

process, that incremental innovation can be planned using a series of steps, and that compressing
those steps can speed innovation. It is used in an environment that is certain when the firm has
entered an era of incremental change with established technology.
The steps to the compression approach are:
• Planning
• Supplier involvement
• Shortening the time of individual steps
• Overlapping steps
• Multifunctional teams
7. How do change forces work to bring about change? How do resistance forces work against change
forces?
According to social psychologist Kurt Lewin, change is a function of the forces that promote change
and the opposing forces that slow or resist change. Change forces lead to differences in the form,
quality, or condition of an organization over time. By contrast, resistance forces support the status
quo, that is, the existing conditions in organizations.

People resist change out of self-interest because they fear that change will cost or deprive them of
something they value. For example, resistance might stem from a fear that the changes will result in a
loss of pay, power, responsibility, or even perhaps one’s job. People also resist change because of
misunderstanding and distrust; they don’t understand the change or the reasons for it, or they distrust
the people––typically management––behind the change. Resistance may also come from a generally
low tolerance for change. Some people are simply less capable of handling change than others are.
People with a low tolerance for change feel threatened by the uncertainty associated with change and
worry that they won’t be able to learn the new skills and behaviors needed to successfully negotiate
change in their companies.
8. How can companies manage resistance to change?
Employees might resist change because of self-interest, misunderstanding and distrust, and a general
intolerance for change. The five ways to manage resistance to change are:
• Education and communication: When resistance is based on insufficient, incorrect, or
misleading information, managers should educate employees about the need for change and
communicate change-related information to them.
• Participation: Employees who participate have a better understanding of the change and the
need for it.
• Negotiation: Employees are less likely to resist change if they are allowed to discuss and
agree on who will do what after change occurs.
• Top management support: Resistance to change decreases when change efforts receive
significant managerial support. Managers must do more than talk about the importance of
change, however. They must provide the training, resources, and autonomy needed to make
change happen.
• Coercion: This is the last resort to manage resistance to change and should only be used if a
crisis exists or when all other methods have failed.
9. What mistakes do managers commonly make when leading change?
The following are common errors made by managers when managing change: (1) not establishing a
great enough sense of urgency; (2) not creating a powerful enough coalition; (3) lacking a vision; (4)
undercommunicating the vision by a factor of ten; (5) not removing obstacles to the new vision; (6)
not systematically planning for and creating short-term wins; (7) declaring victory too soon; and (8)
not anchoring changes in the organization’s culture.
10. List and describe the four main change tools and techniques.
Managers can use a number of change techniques. Results-driven change and the GE workout reduce
resistance to change by getting change efforts off to a fast start. Transition management teams, which
manage a company’s change process, coordinate change efforts throughout an organization.
Organizational development is a collection of planned change interventions (large system, small
group, person-focused) guided by a change agent that are designed to improve an organization’s long-
term health and performance.

Additional Activities and Assignments
In-Class Activity: “Creative Learning Environments.” Divide the class into small groups (4–5
students). Using the “creative work environment” model in Exhibit 7.3, have each group come up with
ideas for each component of how innovation can occur in higher education. Students should list ideas for
(1) how to make the work challenging, (2) organizational encouragement, (3) supervisory encouragement,
(4) work group encouragement, and (5) freedom. They should also list what organizational impediments
exist. The instructor may adapt this exercise to how to make public education more creative.
“Change Agents.” Go to the website of Patty Hathaway, “the change agent,” at

http://www.thechangeagent.com. This is a commercial website that introduces Patty Hathaway as a
motivational speaker who can (for a fee) come to a company and help make change work. What exactly
does Ms. Hathaway do to accomplish this? What are her qualifications? What are some of the products
and services she offers? Can an outside consultant such as Patty really incite and implement change in an
organization? Why or why not?
“High-Tech Innovation.” Have students draft a response to the following statement: “Egalitarian
companies are more innovative.”
Have students use the Internet to find high-tech companies that are known for innovation and change. Ask
them to identify the characteristics of these companies That make them so adept at innovation.
“Ideation Activity” Divide the class into small groups of 3–4 students and give each group a bag of at
least 10 disparate items (like the Inventables described in the Develop Your Career Potential exercise).
Things rescued from the trash, like milk jugs and lids, toilet paper tubes, and broken mechanical items
make good resources. Also think of things like the items on this list:
Pipe cleaners Magnets Thumbtacks Milk-jug lids

Pom-poms Paper clips Empty cans Plastic chopsticks
String Floral wire Styrofoam balls/cubes Wooden blocks
Fabric scraps Old stapler Keys Rubber bands, all sizes
Binder clips Cardboard scraps Paper tubes Steel wool
Old kitchen utensils Cotton swabs Tweezers Balloons
Unused/old CDs Plastic cups Dental floss Egg cartons
Screws/nuts/bolts/washers Old hand tools Paint sticks Marbles
Funnels Plumbing supplies Happy Meal toys Any small, metal item
Charge each group with building something you specify, like a hat or a vehicle. Or, you can tell groups
that they need to first decide what they’ll build and then actually do it. Depending on your resources,
consider giving a set of building materials to each student and even inviting a professor from the
industrial design department (if your university has an engineering and/or design college) to visit your
class that day to help with the activity. After students have finished, let them present their design to the
class. If time allows, let students critique each design, making recommendations for improvement or
refinement.

Another random document with
no related content on Scribd:
Shortly after the inauguration of the Residency-General last
year, the Korean Government was induced to engage a
number of Japanese experts well versed in agriculture and
dendrology with a view to the organizing and conducting a
school for training young Koreans in the principles and
practice of scientific husbandry and forestry. The
establishment of such a school was absolutely necessary in
order to insure success to the work of improving agriculture
and forestry, to which the Resident-General wisely attached
great importance.
At the suggestion of these experts, it was decided to
establish the school in question at Suwon, on a site adjacent
to the Agricultural and Industrial Model Station there, the
proximity of these two institutions being attended by various
obvious advantages. The school-buildings and dormitories,
together with houses for members of the faculty, were erected
at a total outlay of a little over 44,000 yen, being completed by
the end of 1906.
Pending the completion of the buildings, instruction was, for
the time being, given in the class-rooms of the former
Agricultural, Commercial and Industrial School at Seoul from
the 10th of September, 1906. The last-mentioned school had
been established a few years ago under the control of the
Department of Education. Its organization was too imperfect
to make it possible for it to attain the object for which it was
established.
Early this year the School of Agriculture and Dendrology
removed to its new quarters at Suwon. The post of principal is
filled by the director of the Agricultural Bureau in the
Department of Agriculture, Commerce and Industry. The
teaching staff consists of five professors (Japanese) and two
assistant professors (Koreans).
There are two departments: (1) the Ordinary, and (2) the
Special. The Ordinary Department extends over two years
and the Special Department one year. The latter Department
consists of two separate courses, namely, agricultural and
dendrological. These courses are open to such of the
graduates of the Ordinary Department as may desire still
further to prosecute their studies in their respective special
branches. Besides the above-mentioned departments, there
is a practical training course for giving elementary instruction
in some special subjects connected with agriculture or
forestry. The term is not more than one year.
It may be interesting to tabulate the various subjects taught
in the respective departments. They are as follows:
Ordinary Department:—Morals, Japanese, Mathematics,
Physics and Meteorology, Natural History, Outlines of
Agriculture, Soil and Manures, Crops, Dairy Produce,
Sericulture, Agriculture, Agricultural Manufacture, Outlines of
Dendrology, Outlines of Afforestation, Outlines of Veterinary
Medicine, and Political Economy and Law.
Special Department (Agricultural Course):—Soil, Manure,
Physiological Botany, Diseases of Crops, Injurious Insects,
Dairy Produce, Sericulture and Spinning of Silk Yarns,
Agricultural Manufactures, and Agronomy.
Special Department (Dendrological Course):—
Dendrological Mathematics, Afforestation and Forest
Protection, Forest Economy, Utilization of Forests, Forest
Administration.
Instruction in these subjects is given through the medium of
interpreters, the last-mentioned office being fulfilled by the
Korean Assistant Professors. The number of students fixed
for the respective departments, is 80 for the Ordinary, and 40
for the Special Department, the number for the practical
Training course being fixed each time according to the
requirements. The number of students at present receiving
instruction is 26 in the Ordinary Department, and 12 in the
Practical Training course. It is very satisfactory to learn that
these students are highly commended for obedience, good
conduct, and industry. This promises well, not only for the
success of the school, but for the progress of the nation.
This lengthy account of the founding and progress of the school

and station, whose opening ceremonial was to be celebrated on
Wednesday, May 15, 1907, is given because of the great importance
of the relation which every such enterprise sustains to the lasting
success of the Japanese Protectorate and to the welfare of Korea
under this Protectorate. Hitherto, the considerable sums of money
which have been from time to time obtained from the Korean
Government to found and to foster schemes for improved education
or industrial development have almost without exception been
unfruitful expenditures. The appropriation has either been absorbed
by the promoters of the schemes, or if really spent upon the objects
for which it was appropriated, both interest and care have ceased
with the spending of the money. Even the missionary schools, which
have up to very recent times afforded the only means for obtaining
the elements of a good modern education—valuable as they have
been, especially as means of propagandism—have too often
resulted in sending out graduates who, if they could not get the
coveted official positions, were fit for nothing else. In Korea, as in
India—to take a conspicuous example—the students from these
schools have sometimes become rather more practically worthless
for the service of their nation, or even positively mischievous, than
they could have been if left uneducated. But what Korea now most
imperatively needs is educated men, who are not afraid of honest
work; men, also, who will not accept official position at the expense
of their manly independence and moral character, or gain it by
means of intrigue and corruption. But “honest work” must, for a
considerable time to come, be chiefly connected with the agricultural
and industrial development of the country. Moreover, the institution at
Suwon is demonstrating that the Koreans can make good students
and skilful practitioners in the, to them, new sciences which give
control over nature’s resources for the benefit of man. The Confucian
education hitherto dominant in this country has chiefly resulted in
cultivating scholars who either sacrificed usefulness in service to the
false sentiment of honor, or else subordinated the most fundamental
principles of morality to that skill in official positions which secured
the maximum of squeezes with the minimum of resistance. And,
finally, nothing so undermines and destroys race-hatred as the
prolonged association of the two races in the peaceable relations of
teacher and pupil; or of teachers and pupils with their respective
colleagues.
Six car-loads of invited guests, belonging to all classes of the most
influential people of Seoul and Chemulpo, left the South-Gate
Station on a special train at one and a half o’clock, on that
Wednesday afternoon, for Suwon. Marquis Ito and his staff, and
other Japanese officials, Korean Ministers and their guards, all the
foreign Consuls, the principal men of business, representatives of
the press, and Christian missionaries were of the party. The day was
warm, but fine; the landscape was even more beautiful in its coloring
than usual. On arrival at the station of Suwon, the guests were met
by the Minister and Vice-Minister of Agriculture, Commerce and
Industry, by Dr. Honda, the director of the Model Station, and others,
who escorted them on foot over a newly made road through the
paddy fields belonging to the station. It did not need an expert eye to
see the immense difference, as regards economy of arrangement
and efficiency of culture, between these fields and the relatively
uneconomically arranged and unproductive fields along the railway
by which we had passed as we came to Suwon.
The Agricultural School and Station are beautifully located; the
lake, which has been made by damming a stream, with the plain
under improved cultivation, and the surrounding mountains, all
combine to produce a charming scene. On reaching the Model
Station itself a brief time for rest was allowed; this could be improved
by those who wished to inspect the rooms where the specimens
were displayed, and the laboratories of various kinds. The
ceremonial proceedings were opened by the director, Dr. Honda,
who reported the progress already made and defined the work which
was to be attempted for the future. The work was to consist in the
improvement of the quality of the seeds, the introduction and
acclimatization of new varieties of farm products, the instruction of
the farmers, the supply of manures, the effecting of improved
irrigation, drainage, and protection against inundation, the
improvement of poultry and dairy farming, the introduction and
encouragement of sericulture, and the securing of more by-products
on the farms.
After a few words from Mr. Song, the Korean Minister of
Agriculture, Marquis Ito made a somewhat lengthy address. He
spoke frankly in criticism of the failures which the Korean
Government had hitherto made in its various attempts to accomplish
anything for improving the miserable lot of the toiling millions of the
Korean people. “Not only had nothing been done to ameliorate their
condition, but much had been done to injure their interests and
aggravate their miseries. Let those who boasted of their knowledge
of Chinese philosophy remember the well-known teaching that the
secret of statesmanship consists in securing the contentment of the
people.” His Excellency then referred to the example of the great
Okubo in Japan, who founded an agricultural college there in 1875,
spoke of the brilliant results which had followed this improved
instruction and practice, and hoped that the Korean officials, in
whose charge this well-equipped institution was now placed, would
make it equally useful to the Korean people.
The ceremonial part of the day was closed by an address by Mr.
Kwon, the Minister of War, who had formerly been, although, as he
confessed, without any knowledge of such matters, head of the
Department of Agriculture, Commerce and Industry. It was indeed
fourteen years since a department had been founded for the
improvement of agriculture; but “nothing worth speaking of had been
initiated by that department.” After spending 170,000 yen on the
station, Japan had kindly consented to turn it over to the Korean
Government. He was hopeful that the change already beginning to
be felt in the interests of the farming population of his country would
in the near future result in a large improvement in their condition. [It
does not need to be said to those acquainted with the way in which
such projects for developing the resources of Korea have hitherto
been conducted, that both the grave rebuke of Marquis Ito and the
confessions of the Korean Ministers are amply warranted.]
The ceremony concluded, refreshments were served in and about
an old and historically interesting Korean building, which is situated a
few rods below the farm station and just above the nearer end of the
dam. After this, the whole company walked back to the railway by a
road laid out on the back of the dam, which is shaded with young
trees and made attractive by views of lake, fertile plains, and
hillsides and mountains in the distance on every side. On the plain
below the dam some Koreans were holding a pantomimic
celebration, or merry-making, of the sort which it is their custom to
commit to hired bands of men skilful in affording this species of
amusement. On the hillsides at the end of the dam, and above the
track of the railway, hundreds of other Koreans—adults in glistening
white and children in colors of varied and deepest dyes—were
quietly enjoying the scene. When the train stopped at the point
nearest the end of the pleasant walk, it was, I am sure, a well
satisfied crowd of guests which returned by it to Seoul.
With this ceremony at Suwon another which I had previously
attended in Seoul naturally connects itself. This was the opening of
the Industrial Training School, the initial outlay for which, including
the cost of buildings and apparatus, amounted to a little more than
110,000 yen. The significance of this enterprise will be the better
understood when it is remarked that the native workmen of to-day
make nothing whatever, with the exception of a few cheap brasses
and the attractive Korean chests, that any foreigner would be
inclined to buy. Moreover, their own tools and machinery of every
description are exceedingly crude and old-fashioned. At the
ceremony in Seoul addresses were made similar to those listened to
at the Suwon affair. Mr. Yamada, the principal of the Institute,
reported that out of the eleven hundred applicants who had
presented themselves for examination, fifty students had been
admitted. Marquis Ito and the Korean speakers dwelt upon the same
facts—namely, the deplorable backwardness of the nation in
industrial matters, the unsatisfactory results of past endeavors at
improvement, and the needs and hopes of the future. After the
addresses, the guests visited the different workshops, where the
Korean students were to be given manual training; and then resorted
to the sides of the mountain above, where refreshments were
served. The decorative features of the festivities—consisting of the
Korean crowds on the upper mountain sides, the uniformed officials
in and around the refreshment booths, and the brilliant bloom of the
cherry bushes and plum trees—were even more striking than at
Suwon. On this occasion it was my pleasure to receive a cordial
greeting from some of the Korean officials, among whom was the
Minister of the Interior, the cousin of the Governor at Pyeng-yang. It
was evident that he had heard from his cousin of the assistance
rendered directly by the missionaries and indirectly by me, in the way
of quieting the excited condition of the Korean population at the time
of our visit.
If official corruption can be kept aloof from these enterprises, and
an honest and intelligent endeavor made to carry out the plans of the
Japanese Government under Marquis Ito for the agricultural and
industrial development of Korea, there is little reason to doubt that a
speedy and great improvement will result. That the Korean common
people, in spite of their characteristic air of indifference and their
appearance of indolence, can be stirred with ambition, and that when
aroused they will make fairly industrious and apt learners, there is, in
my judgment, no good reason to deny. The experience of the “Seoul
Electric Railway,” and of other similar enterprises, favors this
judgment. Not to speak of the financial methods of this company,
and after admitting that the physical condition of its property and the
character of its service leave much to be desired, it has been, on the
whole, successful in demonstrating the possibility of conducting such
business enterprises by means of Korean labor. Mr. Morris, its
manager, who came to Seoul in July, 1899, told me the interesting
story of his earlier experiences. The working of the road during the
first years of its running was accompanied by enormous difficulties.
Neither the passengers, nor the motormen and the conductors had
any respect for the value of time; most of the employees had even to
learn how to tell time by their watches. The populace thought it
proper for the cars to stop anywhere, and for any length of period
which seemed convenient to them. If the car did not stop, the
passengers made a mad rush for it and attempted to jump on; they
also jumped off wherever they wished, whether the car stopped or
not. This practice resulted in serious bruises and fractured skulls as
an almost daily occurrence. Native pedestrians in the streets of
Seoul were not content to walk stolidly and with a dignified strut
(which is still the habit of the Korean before an approaching
Japanese jinrikisha) along the track in the daylight, with the
expectation that the car would go around them; but at evening they
utilized the road-bed by lying down to sleep on the track with their
heads on boards placed across its rails. One dark night in the first
summer three men were killed by the last trip between the river and
the city. In those days the broad thoroughfare, which is now kept
open for its entire length, was greatly narrowed by rows of booths
and “chow” shops on either side. Here the men from the country
would tie their ponies (the Korean pony is notable for his vicious
temper when excited) to the tables, and, reclining upon the same
tables, would proceed to enjoy their portion of food. When the
electric car came through the centre of the street, the beasts went
wild with fright; sometimes they dashed into the shops; sometimes
they fled down the street dragging the tables and scattering “chow”
and men in every direction. At one place the line to the river runs
over a low hill which is, in the popular superstition, a part of the body
of the rain-bringing Dragon. In a dry season the people became
greatly excited and threatened violence to those who had brought
upon them the calamity of drought by such sacrilege done to the
body of this deity. Mr. Morris had himself fled for his life before a
Korean mob who were ready to tear him in pieces to avenge the
killing of a child by the car. At the present time, however, there were
fewer accidents in Seoul than on the electric car-lines of Japan; and
many fewer than those from the same cause in the larger cities of
the United States. In one of the more recent years they had carried
6,000,000 passengers and had only killed one. This is certainly not a
bad record; for while, on the one hand, the service of the road is
relatively slow and infrequent, on the other hand, in Seoul there are
no sidewalks and the streets are thronged with foot-passengers and
with children at play.
One other excursion from Seoul is, perhaps, worthy of record as
throwing some sidelights upon Korea—this time, however, chiefly an
affair of recreation. This was the ascent of Puk Han, the ancient
place of royal refuge in cases of revolt or foreign invasion. The party
consisted of Mr. Cockburn, the British Consul-General; Mr. Davidson,
the successor of J. McLeavy Brown in the Department of Customs;
Dr. and Mrs. Wm. B. Scranton, and Madam Scranton, the mother of
the Doctor. Mr. Cockburn and Mr. Davidson made the ascent as far
as was possible in jinrikishas, and the rest of the party in chairs
carried by four or six coolies each. By the longer way out which the
party took, there was, however, much walking (but no hard climbing)
to do; and by the shorter way home, with its much steeper descent,
there was little besides walking which could safely be done by any
one.
The actual start was preceded by the customary bargaining with
the coolies. This resulted in reducing by one-half the original charge
—only to find the head man applying late in the evening after our
return for an additional “present” direct from me, in reliance on my
ignorance of the fact that a handsome present had already been
given through the friend who made the arrangement. But, then, such
squeezes are not confined to Korea in the Far East, nor are they
peculiar to the Far East and infrequent in London, Paris, and New
York.
Under “Independence Arch,” where, as we have already seen, the
promise of a new and really independent Korea is built into the form
of a monument of stone, the whole party were photographed. At a
small village some three miles from Seoul, the coolies made another
stop; here they received their first advance of money for “chow.” In
the street of the village was standing one of those gorgeous
palanquins which serve as biers, and which give the lifeless body of
the poorest Korean his one ride in state to the hillsides where the
tombs of the dead hold the ground against the fields needed for
cultivation by the living. But these hillsides at least serve the living to
some good purpose as preferred places for recreation and for
intercourse with nature, as well as, in some sort, with their deceased
ancestors. In Korea, as in India, birth, marriage, and death are
expensive luxuries for the poor; to get into the world, to beget an
heir, and to get out of the world again, absorb all the accumulated
resources of a lifetime of toil for the average Korean. Surely, under
such circumstances, “the will to live” lays itself open to the charge of
Schopenhauer—that it is blind and working ever to the production of
increased misery. Industrial development, firmly coupled with
improved morality, and with the cheer and hopes of an elevating
religion, as a true “psychical uplift,” are the only sufficient cure for
such pessimistic tendencies.
West Gate or “Gate of Generous Righteousness.”
Among the several attempts at photographing made on the way to

Puk Han, were some intended to catch one of the numerous Korean
children who appeared puris in naturalibus. These were uniformly
unsuccessful. Pictures of this characteristic sort were not to be had
by us foreigners, although the attempts were supported by the offer
of sizable coins. At the first motion to point the camera toward these
features of the landscape, they took to their heels and fled afar with
urgent precipitancy.
Within perhaps two miles of the Outer Gate of the mountain
Fortress we were obliged to dismount, the way having become too
rough and difficult even for chairs with four coolies each. Puk Han’s
wall was built in 1711; although there is a not altogether improbable
tradition that the mountain, which is somewhat more than 2,000 feet
high, was fortified long before, under the Pakje kingdom. The gate
through which one enters the walled enclosure is picturesque and
interesting. Not far inside the wall, across a little valley, are to be
seen the solid stone foundations of the new Buddhist temple which is
to take the place of one that was destroyed by fire. This is one of
several indications that the introduction of modern civilization and of
Christian missions is to be followed in Korea, as it certainly has been
followed in Japan and elsewhere, by a revival of the spirit, and an
improvement in the form and efficacy, of the older religion of the
country. Buddhism has, indeed, been for centuries largely lacking in
all moral force and spiritual satisfactions in Korea. But I cannot agree
with those who are so sure that it is not capable of revival there, of
improvement, and even of offering a vigorous competition to
Christian evangelizing.
As we climbed up toward the pavilion in which we were to take our
luncheon, we saw few ruins of the structures which were once
scattered over the area within the mountain’s wall; but everywhere
was an abundance of beautiful wild flowers and flowering shrubs.
Among the many varieties were wigelia, cypripedium, several kinds
of iris, Solomon’s-seal, syringa, hydrangea, giant saxifrage, large
white clematis, hawthorne, jassamine, lilies of the valley, many kinds
of violets and azaleas, wild white roses, viburnum, Allegheny vine,
and wild cherry.
About twenty minutes before we reached the pavilion where it was
proposed to spread out our luncheon, great drops of rain caused us
to quicken our pace; and the following smart shower which crept by
the brow of the overhanging mountain, in spite of the protection of
our umbrellas, gave the party somewhat of a wetting before shelter
was reached. But soon the rain was over; the sun came gloriously
out; the mountain stream which was just below the outer wall of the
pavilion ran fuller and more merrily; and the food was more
comforting in contrast with the slight preceding discomfort.
Lying in the sun on a shelving rock, I had an interesting
conversation with the English Consul-General. In the course of this
Mr. Cockburn expressed the amazement of his country at what he
graciously called the “patience” of Americans in putting up so quietly
with political and social wrongs which the English had refused any
longer to suffer, now nearly a century ago. He seemed sincerely
gratified at my assurance that the feeling of the United States toward
England is more cordial and appreciative of our common good and
common mission in the world than was the case twenty-five and
thirty years ago. I found myself also in hearty agreement with his
view that the treaty between Great Britain and Japan, whether it
should prove of commercial advantage to the former, or not, was
fruitful of good to the latter nation, to the Far East, and to mankind as
interested in the world’s peace.
At about four o’clock the party started on its return to Seoul. The
distance was some ten miles, most of which must be walked, by a
rather steep descent in places over barren surfaces of granite rock.
But the path at first led us still higher up the mountain until, having
passed through an inner gate, we reached the outer wall upon the
other side of the whole enclosure. For as much of the slope of Puk
Han, as somewhat more than two miles of rambling wall can
embrace, constitutes this fortified retreat of the Korean monarchy.
Thus, with its stores of provisions and implements of war, the
cultivated fields, palaces, and other official and unofficial residences
inside, it was intended that Puk Han, like its somewhat earlier
colleague, the fortresses of Kang Wha, should resist siege by any
numbers and for any length of time. But from prehistoric times to
Port Arthur, and all over the earth from Sevastopol to Daulatabad,
the experiences of history have shown how vain is the hope of the
rulers of men to ward off the results of moral and political
degeneracy by walls of stone and implements of iron.
Far away on the very top of the mountain, to the left of our path,
stood a watch-tower which commanded a view of all this part of
Korea. From both of the gates in this portion of the wall, which,
although they are only a short distance apart, look toward different
points of the compass, the views are extensive and charming. To the
southward one could look down the steep mountain side, over a
valley from which rose rocky but brilliantly colored hills, bare for the
most part of foliage, and through which the silvery thread of the River
Han wound its way, upon a series of mountain ranges bounded only
by the horizon. From the Western gate were to be seen Chemulpo
and its island-dotted harbor, and beyond the open sea.
The downward path of Puk Han winds around the mountain, from
the Southern gate in the wall toward the northwest; and although it is
quite too steep and rough for safe descent in chairs, it is not
particularly difficult for those who walk it with sound knee-joints and
ordinarily careful and judicious feet. For the first five or six miles it
affords an uninterrupted series of interesting and beautiful views.
Here the colors of the rock, when seen in full sunlight, were trying for
all but the most insensitive eyes. But as the light was modified by the
occasional passing of clouds, or by the changes in the relation of the
path to the points of the compass, the effect was kaleidoscopic in
character on a magnificent scale. On this side of the mountain the
shapes of the rocks are peculiar. In general, each mountain-ridge—
supreme, subordinate, or still inferior—is composed of a series of
pyramidally-shaped granite structures, rising higher and higher as to
their visible summits; but with their sides welded, as it were,
together, and their surfaces of disintegrated yellowish or reddish
rock. Between the sides of the pyramids in each series, and between
the different series, and between the higher ranges composed of the
series, are dry ravines, down which the summer rains descend in
torrents, keeping the slopes of all these rocky elevations almost bare
of verdure. Thus there is produced an aspect of severe grandeur
quite out of proportion to the real height of the mountains. But this
aspect is relieved by an abundant growth of wild flowers and
flowering shrubs—such as have been already named and still others
—with more gorgeous blossoms than I have anywhere else seen
produced by the same species. With these the ladies filled all hands,
and all the luncheon baskets—and then even the chairs, which,
however, we took again as soon as it became practicable, to the
relief of feet and knees; and thus we entered the city by the North-
West Gate, where we stopped awhile to rest the men and to enjoy
the magnificent view of Seoul from the inside of the gate.
The excursion up Puk Han will certainly be remembered by some
of the party as one of the most enjoyable to be obtained anywhere. It
far surpasses most of those much-lauded by the guide-books in
other more frequented but really less rewarding portions of the world.
If time had permitted, by turning aside an hour or two, the ascent
of Puk Han might have been varied by a visit to the “Great White
Buddha.” This rather interesting relic of a long-time decaying, but
possibly now to be revived, Buddhism, I visited one morning in
company with Mr. Gillett. The path to it leaves the main road some
miles out of the city; where it begins to wind through the paddy fields
it becomes somewhat difficult for jinrikishas. On the way one passes
shrines such as are used not infrequently for the now forbidden
exorcising ceremonies of the sorceresses, and heaps of stones that
are continually being piled upon by the passers along the way, who
wish thus to propitiate the spirits and to obtain good luck. The
Buddha itself is a large and rudely-shaped figure, whitewashed on to
the face of a rock, which has been escarped and covered with a
pavilion, having a highly decorative frieze and a roof set on granite
pillars. A few women were there worshipping in the manner common
to the ignorant populace in Korea and Japan—i. e., clapping the
hands, offering a small coin or two, and mumbling a prayer. A dirty,
disreputable-looking priest was assiduously gathering up the coins,
for they had merely been placed upon a table before the Buddha,
instead of being thrown into an enclosed box. He volunteered the
explanation that this was the most celebrated place in all Korea at
which to offer effective prayer for a son; childless women, and also
men, came from all over the land to worship at this shrine. In Korea,
as well as in India and China, this vulgar and degrading superstition
is connected with ancestor worship—namely, that the welfare of the
living and the dead, in this world and in the next, is somehow
inseparably bound up with begetting and bearing, or somehow
possessing, a male descendant. No heavier curse is put on woman;
no subtler form of temptation to lust for man; no more burdensome
restriction on society; and no more efficient check to a spiritual faith
and a spiritual development exists among the civilized peoples of the
world than this ancient but unworthy superstition. Even devil-worship
is scarcely less cruel and socially degrading.
It was with sincere regret that I left Korea without the opportunity
to see the country even more widely, to feel more profoundly the
spirit of its national life, and to become more acquainted in a
relatively “first-hand” way with its history and its antiquities. I was
confident that I had gained sufficient trustworthy information to judge
fairly of the character of the native government—Emperor and Court
and Yang-bans—to estimate in a measure the difficulties which
encompassed the position of the Resident-General, and to
appreciate the sincerity and self-sacrificing nature of his plans and
the value of his achievements. But there are few countries in the
world to-day where richer rewards await the expert and patient
investigator of history and of antiquities. The history of Korea
remains to be written; its antiquities are there to be explored.
CHAPTER VII
THE DEPARTURE
Soon after breakfast on the morning of the day before our stay in
Seoul came to an end (Monday, May 27th), a telephone message
was reported with the inquiry whether we expected to be at home at
ten o’clock. Contrary to the understanding of the servant who
brought the report, it proved to be Marquis Ito himself who,
accompanied by General Murata, had kindly taken the time from his
always busy morning hours to call in person and bid his guests
good-by. Speaking with his customary quiet deliberation, brevity, and
sincerity, His Excellency thanked me for the services rendered to him
and to his nation, both directly and indirectly, by the visit to Korea;
and the words which added a promise of continued friendship will
always remain among the choicest of memories. In reply—with more
adequate reason but with no less sincerity and earnestness—I
thanked the Marquis for the confidence he had reposed in me, and
as well for the experience which his invitation had furnished. If I had
been of some small service, I had received a much more than
adequate reward in the opportunity of seeing an interesting side of
human life which had hitherto been, for the most part, unfamiliar to
me. I also expressed my belief in a universal and omnipotent Spirit of
Righteousness, who shapes the destinies of men and of nations, and
who uses us all in His service—if we so will—to our own real well-
being and to the good of humanity. God has so bound together
Japan and Korea, both physically and politically, that their interests
cannot be separated, whether for weal or for woe.
In the afternoon of the same day, at the house of Mr. D. W.
Stevens, whose hospitality we had before enjoyed and whose
friendship we had learned highly to prize, we met at tea some
twenty-five of the most intimate of the acquaintances made during
the previous two months. This was not, however, our final leave-
taking of these friends. For the next morning at 8.50, at the South-
Gate Station, most of the same persons gathered to give us one of
those partings which one would not gladly miss, but which are
always a mixture of sad pleasure and sweet pain. The insight of the
Japanese language into such human experiences is shown by the
fact that it has a single word which combines all these complex
elements, and expresses them in itself. Nor do I find that the
repetition of many such experiences in different far-away lands at all
changes the intrinsic character of the feelings they excite. To make
friends away from home is the traveller’s choicest pleasure; to part
soon from these friends is the traveller’s keenest pain.
The journey from Seoul to Fusan was without incident and
accomplished on time. As furnishing a change in the character of the
surroundings, it is almost equivalent to going from Korea to Japan.
For Fusan is essentially a Japanese city, and has been such for
many years. The greeting given us on arrival was also
characteristically Japanese. There, on the platform, were thirty or
more of both sexes, including the Resident and other officials, whose
cards were handed to us with such speed and profusion that to
recognize names was impossible, and even to avoid dropping some
of the pieces was difficult. The harbor launch again served us, as it
had done before, for transportation between railroad station and
Japanese settlement. Only twenty minutes were allowed for effecting
a presentable appearance after the day’s travel; and then we were
ushered to the dining-room, where about fifty persons had gathered
for a complimentary banquet. After this, the Resident introduced,
welcomed, and proposed a toast for the guests, and Mr. Zumoto
interpreted the response. The banquet finished, there followed, in
another part of the hotel, an entertainment of juggling, a farce, and
dancing to samisen and koto—all by amateur performers. The day
had certainly, when it ended, been sufficiently full of incident. But a
real old-fashioned Japanese bath, in a deliciously soft wooden tub,
with water at 108° Fahrenheit—the first I had been able to obtain
during this visit to Japan—took away all soreness of flesh and
weariness of spirit, and secured a good night’s rest.
The following morning in Fusan was dull and unpromising—there
was drizzle, cloud, and fog over land and sea, and a fresh breeze. In
spite of the weather, however, we were taken in jinrikishas to the villa
of Mr. Kuruda, one of the oldest of the Japanese settlers, a
prosperous commission merchant and manufacturer of saké. This
villa is seated on the mountain’s side and is surrounded by as fine an
example of a certain style of Japanese gardening as I have ever
seen. Here is a profusion of artistic rock arrangement, decorated
with shrubs and flowers, for the most part brought from Japan, and
marking out ponds, paths, and favored points of view from which can
be had glimpses of the charming harbor and surrounding hills. The
owner was proud to have us know that Marquis Ito makes the villa
his home when journeying between Korea and Japan. Among other
objects of interest in the garden is a huge boulder which fell from the
mountain’s side some twenty years ago; near this the owner of the
garden has chosen his last resting-place, and upon it the proper
inscription has already been prepared.
After leaving the villa we were shown over one of the public
schools which has been founded for the children of Japanese
residents, and were bidden to notice how its reports showed the high
average attendance of from 93 per cent. to 98 per cent., and even
above, in the different grades, for the entire year. Next came a visit
to a private school for girls, which is under the patronage of
Japanese ladies, and which gives an education of a more distinctly
domestic type. Here we were served with an excellent luncheon in
foreign style, cooked by the pupils of the school; during and after
which there was an entertainment consisting of tableaux vivants and
a musical performance that might best be described as a trio of
kotos with a violin obligato. One of these tableaux represented three
young girls defending a castle wall with bow and arrow—a scene
corresponding to actual events of history; for, in fact, the loyalty of
certain clans in the north of Japan carried them to such extremes in
support of the Tokugawa dynasty. Indeed, through many centuries,
Japanese women and girls have been far braver and more loyal in
defence of their liege lord than Korean men have been.
From this school we were taken to the park on the mountain, with
its trees brought from Tsushima some two hundred years ago, to
which reference has already been made (p. 15) as the only one in all
Korea. The Shinto temple upon the hill-top is equally old, and was
originally dedicated to no fewer than nine different divinities—the
goddess, Amaterasu (the “Heaven-Shiner,” or Sun-goddess), born
from the left eye of the Creator Izanagi, whose principal shrine is
now at Ise, being the chief.
The lecture of the afternoon was given to an audience of about six
hundred, upon a topic selected by those who had extended the
invitation. This topic was “The Necessity of an Improved Commercial
Morality”; it was expected that the speaker would enforce and
illustrate the thought by the situation at the present time in Korea,
and by an appeal to Japanese patriotism to show their nation worthy
of setting a good example, and capable of accomplishing the task of
industrial development and political redemption in the land which
was now so dependent upon Japan for its future. Mrs. Ladd also said
a few words expressing her interest in what we had seen in the
morning illustrating the education given to Japanese girls in Fusan,
and also the hope that something similar might soon be possible for
their Korean sisters. The heartiness with which these suggestions
were received in this, the principal Japanese settlement of the
Peninsula, shows that the better classes of settlers are honorably
sensitive to the obligation to redeem the fair fame of their nation from
the injury which it has received in the past at the hands of the inferior
and baser elements of their own countrymen.
That this determination was not beyond reasonable hope of
speedy realization was made more evident to me by conversation
with the agent of the Transportation Company operating between
Shimonoseki and Fusan. A careful investigation of its records had
revealed the fact that for some months past about 200 Japanese
passengers were, on the average, daily coming into Korea, and only
about 150 returning from Korea to Japan. Of the fifty who,
presumably, remained as settlers, about one-half chose for their
home either the city of Fusan or the surrounding country; the other
half went by rail inland, chiefly to Seoul and Chemulpo. There had
also been of late an obvious change in the character and intention of
these immigrants. Formerly, they were largely young fellows of the
type of adventurers; but now the old people, and the women and
children, were coming with the men—an indication that their
business was no temporary venture, but a purpose to remain and
make homes for themselves. When it is understood that these
figures are exclusive of the Japanese military and civil officials, they
compare very closely with the results of the census taken just before
our departure. On taking passage from Shimonoseki to Fusan we
had noticed that the passengers which crowded and overflowed the
second- and third-class cabin accommodations of the steamer
appeared to be very decent folk. Many of them had brought along,
not only their luggage, but also their agricultural implements and
mechanic’s tools. But the subject of Japanese settlement in Korea,
and its effect upon both countries concerned, is so important as to
deserve further discussion of such statistics as are now available.
We went on board the Iki Maru early enough to avoid the crowd
that would come by the afternoon train from Seoul. After bidding
good-by to the score of ladies and gentlemen who had come down
to the wharf to see us off, there was time for dinner before the
steamer sailed. As we watched the retreating shores of Korea, we
remembered the morning of two months before when these shores
had first come into view. It was Japanese friends who had then
welcomed us—the same friends who had just bidden us farewell. But
between the two experiences lay a busy period of work and of
observation which had resulted in making more friends, Japanese
and foreign, in Korea itself. But how about the Koreans themselves;
had we won, even to the beginnings of real and constant friendly
feeling, any among their number? I was unable confidently to say.
The Koreans are spoken of, by the missionaries especially, as
notably kind and affectionate in disposition and easily attached to the
foreigner by friendly ties. By the diplomats and business men they
are, for the most part, distrusted and despised. As the guests of
Marquis Ito, it was not strange that we did not quickly gain any
assurance of genuine and trustworthy friendliness on their part. But
this, too, is a subject which requires consideration from a more
impersonal point of view. For there is something startling in the wide
divergencies, and even sharp antagonisms, of the estimates of
Korean character which any serious and disinterested inquiry
evokes.

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• Lesson Plan for Lecture (for large sections)

 What Would You Do? Case Assignment––3M

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Chapter 7: Innovation and Change 154

7.1 Explain why innovation matters to companies.

7.3 Discuss why not changing can lead to organizational decline.

Chapter 7: Innovation and Change 155

Lesson Plan for Lecture (for large sections)

Pre-Class Prep for You: Pre-Class Prep for Your Students:

Chapter 7: Innovation and Change 156

7.2 Managing 7: Managing Innovation

7.3 Managing Change 12: Forces

Chapter 7: Innovation and Change 157

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Conversely, break for this group activity:

Chapter 7: Innovation and Change 158

Lecture on Organizational Decline: The Risk of Not Changing (Section 7.3).

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“GE Workout for Campus President”

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What Would You Do? Case Assignment

Chapter 7: Innovation and Change 160

If you were in charge at 3M, what would you do?

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Chapter 7: Innovation and Change 161

Chapter 7: Innovation and Change 162

Chapter 7: Innovation and Change 163

Chapter 7: Innovation and Change 164

Chapter 7: Innovation and Change 165

Chapter 7: Innovation and Change 166

FACE THE FUTURE

Chapter 7: Innovation and Change 167

Students’ responses will vary.

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Develop Your Career Potential

SPARK YOUR OWN CREATIVITY

Sources: Julie Schlosser, “Inside-the-BoxThinking,” Fortune, 1 November 2004, 54; http://www.mindwareonline.com;

Chapter 7: Innovation and Change 170

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