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Chapter 7
Managing Change and Disruptive
Innovation
Change is a constant for organizations and thus for managers. Because change can’t be
eliminated, managers must learn how to manage it successfully. Because innovation is
often closely tied to an organization’s change efforts, managers must know how to
manage it as well. Focus on the following learning objectives as you read and study this
chapter.
LEARNING OBJECTIVES
1. Describe making the case for change.
3. Classify areas of organizational change.
5. Discuss contemporary issues in managing change.
6. Describe techniques for stimulating innovation.
7. Explain why managing disruptive innovation is important.
It’s Your Career
Be Change Ready: Be a Change Agent
1. Maintain a clear vision. Having a clear vision and the ability to effectively
3. Ask tough questions. Seek to inspire others to feel an emotional connection
to the plan for change.
4. Be knowledgeable and lead by example. Putting a plan forward for others
to consider is not enough to be an effective change agent.
5. Build strong relationships based on trust. Honesty goes a long way
toward building an effective team who is able and willing to travel the distance
with you.
CHAPTER OUTLINE
7.1 THE CASE FOR CHANGE
A. Organizational change is defined as any alteration of people, structure,
or technology in an organization. Instead of trying to eliminate change,
managers must realize that change is always present and that they
should seek ways to manage change successfully.
from various sources:
2. New government laws
4. Economic changes.
1. New organizational strategy
3. New equipment
7.2 THE CHANGE PROCESS
1. The calm waters metaphor characterizes the process of change
as being like a ship crossing a calm sea. The calm waters
1. Increasing driving forces, which are forces that direct
behavior away from the status quo.
3. Combining the two approaches.
2. The white-water rapids metaphor describes change that takes
place in uncertain and dynamic environments. To put the two
views into perspective, it is helpful to note that not every manager
7.3 AREAS OF CHANGE
A. Types of Change.
What can a manager change? A manager may make changes in four
1. Strategy
a. Companies that fail to change strategy when
2. Structure
a. Managers can alter one or more structural components of
3. Technology
a. Competitive factors or new innovations often require
4. People
a. Organizational development (OD) is techniques or
7.4 MANAGING CHANGE
Managers are motivated to initiate change when they are committed to improving
organizational performance.
A. Why do People Resist Change?
1. Education and communication
3. Facilitation and support
5. Manipulation and co-optation
7.5 CONTEMPORARY ISSUES IN MANAGING CHANGE
1. Managers at all levels of an organization should be involved in the
change process.
2. How can managers make change happen successfully? They
1. Culture is resistant to change because:
a. Culture consists of relatively stable and permanent
2. Understanding the Situational Factors
Some situations can facilitate culture change, including:
3. Making Changes in Culture
1. What is Stress? Stress is the adverse reaction people have to
2. What Causes Stress? Research shows that stress may be related
to the organization or to personal factors. Important variables that
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2. Role Overload: Having more work to accomplish than time
permits.
3. Role Ambiguity: When role expectations are not clearly
understood.
2. Type B personality: People who are relaxed and
easygoing and accept change easily.
3. What are the Symptoms of Stress? Stress may be exhibited in a
4. How Can Stress Be Reduced
Employee selection, RJP, MBO, and job redesign are methods of
1. Focusing on preparing the organization for change
3. Involving every organizational member in the change
7.6 STIMULATING INNOVATION
Innovation is essential to organizational success in a dynamic marketplace.
2. Innovation is taking creative ideas and turning them into useful
products or work methods.
B. Stimulating and Nurturing Innovation.
How can managers foster innovation? The systems model shows how to
1. Structural variables can be summarized as follows:
a. Organic structures positively influence innovation.
b. The easy availability of organizational resources provides a
critical building block for innovation.
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c. Frequent communication among work units helps to break
down barriers to innovation.
d. Minimize time pressures on creative activities.
e. Provide explicit support for creating work and nonwork
sources.
2. Cultural variables show that an innovative culture is likely to have
the following characteristics:
a. Acceptance of ambiguity
b. Tolerance of the impractical
c. Low external controls
d. Tolerance of risk
e. Tolerance of conflict
f. Focus on ends rather than means
g. An open systems focus
h. Positive feedback
i. Exhibit empowering leadership
FUTURE VISION: The Internet of Things
Imagine that your refrigerator could inventory its contents and restock itself through
online delivery of food. This is just one example of how technology has the potential
to change everyday lives. The “Internet of Things” (IoT) allows everyday “things” to
generate and store data about their own performance and share that information
across the Internet and this technology is expected to transform every industry.
While such innovations may seem far off, in reality they are already here. By 2020,
an estimated 21 billion IoT devices will be in our lives and companies need to be
ready for the challenges these devices will create.
The following discussion questions are posed:
Talk About It 1: Can you imagine some future innovations that the Internet of Things
could create?
Talk About It 2: How can organizations prepare for the changes in processes that the
Internet of Things will require?
Student answers to these questions will vary.
LEADER MAKING A DIFFERENCE
Satya Nadella was named CEO of Microsoft in February 2014. Nadella is a 22-year
veteran of Microsoft. His new “slogan” is innovation, innovation, innovation. When asked
what his plans are for the software giant, he answered with that one word, innovation.
How does he plan to make innovation part of the culture? By “ruthlessly removing any
obstacles that allow us to be innovative; every individual to innovate.”
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What can you learn from this leader making a difference?
3. Human resource variables indicate the important role that people
play in innovative organizations.
a. Innovative organizations actively promote the training and
development of their employees so that their knowledge
7.7 DISRUPTIVE INNOVATION
A. Definition.
1. Disruptive innovation describes innovations in products,
services or processes that radically change an industry’s rules of
2. Disruptive innovation has been around for centuries (see Exhibit
7-10)
B. Why Disruptive Innovation is Important.
1. Disruptive innovations are a threat to many established
2. However, new ideas for products or services that differ
significantly from the status quo are a threat to the established
power structure within large companies.
C. Who’s Vulnerable?
1. Large, established, and highly profitable companies are the most
vulnerable to disruptive innovations. These companies are
1. For Entrepreneurs. Disruptive innovations mean opportunity.
2. For Corporate Managers. The challenge for corporate managers
is to identify an appropriate response to disruptive change.
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a. Small groups within a large organization that are given a
high degree of autonomy and are unhampered by
corporate bureaucracy, whose mission is to develop a
project primarily for the sake of radical innovation are
called skunk works.
4. For Career Planning. How should you approach your career in a
ANSWERS TO REVIEW AND DISCUSSION QUESTIONS
Student answers to these questions will vary.
7-1. Why is a change agent needed for organizational change? Can a low-level
employee be a change agent? Explain your answer.
7-2. Contrast the calm waters and white-water rapids metaphors of change.
According to the calm waters scenario, an occasional disruption (a “storm”) means
7-3. What is organizational development? How do organizational development
techniques support organizational change?
7-4. Why do people in organizations resist change? Provide examples an organization
can take to reduce resistance to change.
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organization’s best interest. Companies can use the following techniques (Exhibit 7-5)
to reduce resistance to change: education and communication; participation; facilitation
and support; negotiation; manipulation and co-option. (LO: 4, Explain how to manage
change, AACSB: Analytical thinking)
7-5. Discuss the role of organizational culture in the change process. What are steps an
organization can take to create a culture that supports change?
7-6. Why should organizational managers be concerned about reducing employee stress
levels? 6.1 7.5
7-7. Innovation requires allowing people to make mistakes. However, being wrong too
many times can be disastrous to your career. Do you agree? Why or why not? What are
the implications for nurturing innovation?
7-8. Provide an example of a disruptive innovation. What impact did this innovation have
on the industry?
PERSONAL INVENTORY ASSESSMENTS
Student answers to these questions will vary.
This case also asks students to consider if organizations have an ethical responsibility to
help employees deal with stress? The simple answer to this question is yes. For many
employees it is the stressful nature of the job that causes employees’ poor behavior at
work, which can spill over into their home life. (LO: 4, Explain how to manage change,
AACSB: Ethical understanding and reasoning abilities)
SKILLS EXERCISE: DEVELOPING YOUR CHANGE MANAGEMENT SKILL
In this exercise, students are asked to work on personal skills that will help make them
better change agents. Change management is a necessary skill for two reasons, first
managers are always making changes and second employees almost always resist
change. (LO: 4, Explain how to manage change, AACSB: Reflective thinking)
WORKING TOGETHER: TEAM EXERCISE
MY TURN TO BE A MANAGER
• Choose two organizations you’re familiar with and assess whether these
organizations face a calm waters or whitewater rapids environment. Write a short
report describing these organizations and your assessment of the change
environment each faces. Be sure to explain your choice of change environment.
(LO: 2, Compare and contrast views on the change process, AACSB: Analytical
thinking)
• Reflect on a significant change you’ve experienced in your life (for example,
moving to a new school, going to college, or a family problem such as a divorce).
Did you resist the change? Why? Did you use any strategies to adjust to the
change? What could you have done differently? Write your reflection and make
note of how you could effectively manage future changes in your life. (LO: 2,
Compare and contrast views on the change process, AACSB: Analytical thinking)
• When you find yourself experiencing dysfunctional stress, write down what’s
causing the stress, what stress symptoms you’re exhibiting, and how you’re
dealing with the stress. Keep this information in a journal and evaluate how well
your stress reducers are working and how you could handle stress better. Your
goal is to get to a point where you recognize that you’re stressed and can take
positive actions to deal with the stress. (LO: 5, Discuss contemporary issues in
managing change, AACSB: Analytical thinking)
• Is innovation more about (1) stopping something old or (2) starting something
new? Prepare arguments supporting or challenging each view. (LO: 6 Describe
techniques for stimulating innovation, AACSB: Analytical thinking)
ANSWERS TO CASE APPLICATION 1
QUESTIONS
In Search of the Next Big Thing
7-13. What do you think of UA’s approach to innovation? Would you expect to see this
type of innovation in an athletic wear company? Explain.
7-14. What do you think UA’s culture might be like in regards to innovation? (Hint: refer
7-15. Could design thinking help UA improve its innovation efforts? Discuss.
7-16. What’s your interpretation of the company’s philosophy posted prominently over
the door of its design studio? What does it say about innovation?
7-17. What could other companies learn from the way UA innovates?
ANSWERS TO CASE APPLICATION 2
QUESTIONS
Student answers to these questions will vary.
The iPhone: A Technology Disruptor
7-18. Are you surprised about the impact that the iPhone has had on the technology
marketplace? Why or why not?
7-19. Why is the iPhone considered a disruptive innovation?
7-20. Apple is known as an innovative company. Why do you think Apple has been able
to stimulate innovation successfully?
