Organizational Theory, Design, and Change

Sixth Edition Gareth R. Jones

Chapter 13 Innovation, Intrapreneurship, and Creativity

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Learning Objectives
1. Describe how innovation and technological change affect each other 2. Discuss the relationship among innovation, intrapreneurship, and creativity 3. Understand the many steps involved in creating an organizational setting that fosters innovation and creativity
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Learning Objectives (cont.)

4. Identify the ways in which information technology can be used to foster creativity and speed innovation and new product development

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Innovation and Technological Change

Innovation: process by which new goods and services or new production and operating systems are developed

Enables better response to customer needs

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Types of Innovation
Quantum technological change: a rare, fundamental shift in technology that revolutionizes products or the way they are produced

Quantum innovation: new products or operating systems that incorporate quantum technological improvement These can cause major changes in the environment
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Types of Innovation (cont.)

Incremental technological change: technological change that represents a continual refinement of some base technology

Incremental innovations: products or operating systems that incorporate refinements of some base technology

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Types of Innovation (cont.)

Technology cycle

Quantum innovations occur rarely

Technological discontinuity

Dominant design emerges Era of incremental change and innovation during which competition is based on technology Technological discontinuity may occur again and the process starts all over
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Figure 13.1: The Technology Cycle

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Property Rights
Innovation is expensive and needs to be protected

Patents Copyrights Trademarks

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Innovation, Entrepreneurship, and Creativity

Intrapreneurs: leaders of innovation and new product development in established organizations

Notice opportunities Manage product development May leave organization if their ideas are not supported

Become entrepreneurs

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Innovation, Entrepreneurship, and Creativity (cont.)

Creativity: ideas going beyond the current boundaries, whether those boundaries are based on technology, knowledge, social norms, or beliefs

Most people are creative at some time May involve combining and synthesizing new things

Knowledge-creating organization: an organization where innovation is going on at all levels and in all areas
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Entrepreneurship as Creative Destruction

Creative destruction: new companies use new global and technological opportunities to make better products that drive old, inefficient companies out of business Old inefficient companies are driven out of business Emergence of new industries

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Innovation and the Product Life Cycle

Product life cycle: the changes in demand for a product that occur over time

Demand for most successful products passes through four stages:

The The The The

embryonic stage growth stage maturity stage decline stage

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Innovation and the Product Life Cycle (cont.)

Product life cycle (cont.)

Embryonic stage: a product has yet to gain widespread acceptance

Growth stage: a product has been accepted by customers
Minimal demand

Mature stage: market demand peaks because most customers have already bought the product Decline stage: occurs if and when demand for a product falls
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Demand increases

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Innovation and the Product Life Cycle (cont.)

Determinants of the length of the product life cycle

Rate of technological change

Faster the rate of change, the shorter the product life cycle Determine the attractiveness of products to customers

Role of fads and fashion

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Figure 13.2: Technological Change and Length of the Product Life Cycle

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Managing the Innovation Process

Project management: the process of leading and controlling a project so that it results in the effective creation of new or improved products

Project: a subunit whose goal centers on developing the products or service on time, within budget, and in conformance with predetermined performance specifications

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Managing the Innovation Process (cont.)

Project management (cont.)

Effective product management often begins with a clearly articulated plan

Takes a product through the concept, initial test, modification, and manufacturing phases

Project managers tasks are different from regular managers

Manage high proportion of highly skilled and educated professionals Plan to deal with top corporate executives Often quantitative modeling is used
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Must keep project on track

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Managing the Innovation Process (cont.)

Project management (cont.) Quantitative modeling

Examples include PERT/CAM network of Gantt Chart Flowcharts of a project that can be built with many proprietary software packages

These software packages focus on:

Modeling the sequence of actions necessary to reach a projects goal Relating these actions to cost and time criteria Sorting out and defining the optimal path for reaching the goal
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Managing the Innovation Process (cont.)

Quantitative modeling (cont.)

Critical path method

Goal is to determine:

Which particular tasks or activities of the many that have to be performed are critical in their effect on project time and cost How to sequence or schedule critical tasks so that a project can meet a target date at minimum cost

Optimal sequencing of tasks is often worked out by a team

Analysis is an important learning tool

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Figure 13.3: CPM Project Design

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Managing the Innovation Process (cont.)

Stage-gate development funnel

A structured and coherent innovation process that improves control over the product development effort Forces managers to make choices among competing new product development projects so that resources are not spread thinly over too many projects

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Managing the Innovation Process (cont.)

Stage-gate development funnel (cont.)

Stage 1: Funnel has a wide mouth to encourage as many new product ideas as possible from both new and established project managers Stage 2: Specify all of the information required to make a decision about whether to go ahead with a full-blown product development effort

Plans are either accepted, revised, or rejected

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Stage 3: Proceed to development phase

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Figure 13.4: A Stage-Gate Development Funnel

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Managing the Innovation Process (cont.)

Cross-functional teams

Coordinating R&D function with other functions is critical but often difficult

New product development teams

Marketing, engineering, and manufacturing need to be core members of product teams Core members: refers to a nucleus of three to six people who bear primary responsibility for the product development effort
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Figure 13.5: Innovation as a Cross-Functional Activity

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Managing the Innovation Process (cont.)

Team leadership

Having cross-functional teams is not sufficient for innovation they have to be managed properly Lightweight team leader: a mid-level functional manager who has lower status than the head of a functional department Heavyweight team leader: a true project manager who has higher status within the organization
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Managing the Innovation Process (cont.)

Skunk works: a temporary task force that is created to expedite new product design and to promote innovation by coordinating the activities of functional groups

An island of innovation located away from the organization Dissolved when the product is brought to market
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Managing the Innovation Process (cont.)

New venture divisions: a new division that is allocated a complete set of value-creating functions to manage a project from beginning to end

Assumes full responsibility for the commercialization of the product Normally an independent division Balance of control between the division and the corporate center is problematic
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Managing the Innovation Process (cont.)

Joint venture: a strategic alliance among two or more organizations that agree to jointly establish and share the ownership of a new business

Allows organizations to combine their skills and technologies and pool their resources to embark on risky projects Partners may disagree over future development plans
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Managing the Innovation Process (cont.)

Creating a culture for innovation

Organizational structure
Creating the right setting is important to fostering innovation Increasing organization size, age, and complexity may slow innovation Organic structures tend to promote innovation

People organizations need to guard against too much similarity Property rights create career paths to show that success is closely linked with future promotion and rewards
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Innovation and Information Technology

Information efficiencies: the cost and time savings that occur when IT allows employees to perform current tasks at a higher level

Enables employees to assume additional tasks Enables employees to expand their roles in the organization due to advances in the ability to gather and analyze data also allows information efficiencies
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Innovation and Information Synergies

Information synergies: the knowledge building created when individuals or subunits pool their resources and collaborate across boundaries Boundary-spanning activity: the interactions of people/groups across the organizational boundary to obtain valuable information and knowledge from the environment
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IT and Organizational Structure and Culture

IT affects the innovation process through its many effects on organizational structure IT gives lower-level employees more detailed and current knowledge of consumer and market trends and opportunities IT can produce information synergies

Facilitates increased communication and coordination between decentralized decision makers and top managers
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IT and Organizational Structure and Culture (cont.)

IT means that fewer levels of managers are needed to handle problem solving and decision making IT provides lower-level employees with more freedom to coordinate their actions

Information synergies may emerge as employees experiment and find better ways of performing their tasks
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IT and Organizational Structure and Culture (cont.)

IT facilitates the sharing of beliefs, values, and norms

Allows for the quick transmission of rich and detailed information between people and subunits

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