"The MGMT Solution," Vocabulary from Chapter 7

A technology cycle begins with the birth of a new technology and ends when that technology reaches its limits and dies as it is replaced by a newer, substantially better technology.

Technological innovation, however, can enable competitors to duplicate the benefits obtained from a company’s distinctive advantage.

Consequently, we define innovation streams as patterns of innovation over time that can create sustainable competitive advantage.

An innovation stream begins with a technological discontinuity, in which a scientific advance or a unique combination of existing technologies creates a significant breakthrough in performance or function.

Discontinuous change is followed by the emergence of a dominant design, which becomes the new accepted market standard for technology.

Second, 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 functioning and performance of the dominant design.

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.

Freedom means having autonomy over one’s day-to-day work and a sense of ownership and control over one’s ideas. Numerous studies have indicated that creative ideas thrive under conditions of freedom.

By celebrating failure, these companies encourage their employees to keep taking risks for the sake of creativity, thereby fueling innovation.

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 experiential approach to innovation has five aspects: design iterations, testing, milestones, multifunctional teams, and powerful leaders.

An iteration is a repetition. So a design iteration is a cycle of repetition in which a company tests a prototype of a new product or service, improves on the design, and then builds and tests the improved product or service prototype.

A product prototype is a full-scale working model that is being tested for design, function, and reliability.

Finally, testing accelerates learning and understanding by forcing engineers and product designers to examine hard data about product performance.

By making people regularly assess what they’re doing, how well they’re performing, and whether they need to take corrective action, milestones provide structure to the general chaos that follows technological discontinuities. Milestones also shorten the innovation process by creating a sense of urgency that keeps everyone on task. Finally, milestones are beneficial for innovation because meeting regular milestones builds momentum by giving people a sense of accomplishment.

Multifunctional teams are work teams composed of people from different departments. Multifunctional teams accelerate learning and understanding by mixing and integrating technical, marketing, and manufacturing activities.

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.

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.

Generational change occurs when incremental improvements are made to a dominant technological design such that the improved version of the technology is fully backward compatible with the older version.

Because the compression approach assumes that innovation can follow a series of preplanned steps, one of the ways to shorten development time is supplier involvement. Delegating some of the preplanned steps in the innovation process to outside suppliers reduces the amount of work that internal development teams must do.

Organizational decline occurs when companies don’t anticipate, recognize, neutralize, or adapt to the internal or external pressures that threaten their survival. In other words, decline occurs when organizations don’t recognize the need for change.

This blindness may be due to a simple lack of awareness about changes or an inability to understand their significance.

In the inaction stage, as organizational performance problems become more visible, management may recognize the need to change but still take no action.

In the faulty action stage, faced with rising costs and decreasing profits and market share, management will announce belt-tightening plans designed to cut costs, increase efficiency, and restore profits.

In the crisis stage, bankruptcy or dissolution (breaking up the company and selling its parts) is likely to occur unless the company completely reorganizes the way it does business.

In the dissolution stage, after failing to make the changes needed to sustain the organization, the company is dissolved through bankruptcy proceedings or by selling assets in order to pay suppliers, banks, and creditors.

It is important to note that decline is reversible at each of the first four stages, and that not all companies in decline reach final dissolution.

Resistance to change is caused by self-interest, misunderstanding and distrust, and a general intolerance for change. People resist change out of self-interest because they fear that change will cost or deprive them of something they value. Resistance might stem from a fear that the changes will result in a loss of pay, power, responsibility or even perhaps one’s job.

The following methods can be used to manage resistance to change: education and communication, participation, negotiation, top-management support, and coercion.

The first and potentially most serious error is not establishing a great enough sense of urgency. Indeed, Kotter estimates that more than half of all change efforts fail because the people affected are not convinced that change is necessary.

The second mistake that occurs in the unfreezing process is not creating a powerful enough coalition. Change often starts with one or two people. But change has to be supported by a critical and growing group of people to build enough momentum to change an entire department, division, or company.

Change is threatening and uncomfortable, so people need to see an immediate payoff if they are to continue to support it.

The last two errors that managers make occur during the refreezing phase, when attempts are made to support and reinforce changes so that they stick.

Rather than declaring victory, managers should use the momentum from short-term wins to push for even bigger or faster changes. This maintains urgency and prevents change supporters from slacking off before the changes are frozen into the company’s culture.

One of the reasons that organizational change efforts fail is that they are activity-oriented rather than results-oriented.

Test action steps to see if they actually yield improvements.

Another advantage of results-driven change is that managers introduce changes in procedures, philosophy, or behavior only if they are likely to improve measured performance.

Organizational development takes a long-range approach to change; assumes that top-management support is necessary for change to succeed; creates change by educating workers and managers to change ideas, beliefs, and behaviors so that problems can be solved in new ways; and emphasizes employee participation in diagnosing, solving, and evaluating problems.

Then, the company designates a change agent to be formally in charge of guiding the change effort. This person can be someone from within the company or a professional consultant.

More specifically, the purpose of large-system interventions is to change the character and performance of an organization, business unit, or department. Small-group intervention focuses on assessing how a group functions and helping it work more effectively to accomplish its goals. Person-focused intervention is intended to increase interpersonal effectiveness by helping people to become aware of their attitudes and behaviors and to acquire new skills and knowledge.