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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
Highlighted Assignments
Key Points
What Would You Do?
3M must return to its roots by sponsoring innovation
throughout its organization.
Self-Assessment
The self-assessment gives students insights into how
innovative their attitude is.
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
Supplemental Resources
Where to Find Them
Course Pre-Assessment
IRCD
Course Post-Assessment
IRCD
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Learning Objectives
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
2 Discuss the different methods that managers can use to effectively manage innovation in their
organizations.
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 creative work environment in
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
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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, which stems from
self-interest, misunderstanding and distrust, and a general intolerance for change, can be managed through
Terms
change agent
change forces
change intervention
coercion
compression approach to innovation
creative work environments
multifunctional teams
organizational change
organizational decline
organizational development
organizational innovation
product prototype
Lesson Plan for Lecture
Pre-Class Prep for You:
Pre-Class Prep for Your Students:
• Review chapter and determine what points to
cover.
• Bring PPT slides.
• Bring book.
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.
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Topics
PowerPoint Slides
Activities
Organizational
Innovation
1 Why Innovation
Matters
1: Innovation and Change
2: What Would You Do?
3: Organizational
Innovation
Launch your lecture with
your brainteaser and
prompt students to think of
what a brainteaser has to do
2 Managing Innovation
2.1 Managing Sources
of Innovation
2.2 Experiential
11: Managing Sources of
Innovation
12: Managing Sources of
Innovation
13: Components of
Organizational Change
3 Organizational
Decline: The Risk of
Not Changing
19: Organizational
Change
20: Five Stages of
Organizational Decline
Text uses General Motors
as an extended example of
organizational decline.
4 Managing Change
4.1 Managing
21: Managing Change
22: Managing Resistance
to Change
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Workout
28: Transition
Management Team
29: Transition
Management Team
Adjust lecture to include the activities in the right column. *Some activities should be
done before introducing the concept, some after.
Assignments:
1. Give students some experience in developing their own innovative thinking.
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.
Lesson Plan for Group Work
Pre-Class Prep for You:
Pre-Class Prep for Your Students:
• Review material to cover and modify the
4-5 students can sit together.
• Bring book.
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.
Lecture on Why Technology Matters and Managing Sources of Innovation (Sections 1 &
2).
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“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
making recommendations for improvement or refinement.
Come back together as a class to share results from the group activity.
Segue into next section by asking students “Does change matter?”
Break for the following activity:
“What’s Happening”
Divide the class into groups of 3-4 students to map what is happening to at least 2
companies facing significant change forces. For each company, students need to list
Segue into 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?”
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.
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Assignments:
1. As an assignment that follows up the Ideation exercise above, have students write
Remind students about any upcoming events.
Assignment with Teaching Tips and Solutions
Case Assignment – What Would You Do?
[insert WWYD text]
What Really Happened? Solution
3M
In the opening case, you learned that 3M, once the most innovative company in the world, was no longer considered
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
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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
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
Whereas the experiential approach is used to manage innovation in highly uncertain environments during
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—
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
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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
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
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,
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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.
Sources: “The 50 Most Innovative Companies 2010,” Bloomberg Businessweek,
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.
In-Class Use
Have students open their books to page 273 of the text and give them 5 to 7 minutes to complete the
inventory. Use the Self-Assessment PowerPoint slides and have students raise their hands as you read off
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
97
95
If you are unhappy with your score (meaning you would like to improve it), the Develop Your Career
Potential consists of an exercise to help you develop your creative side.
Management Decision
INNOVATION COPYCATS
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?
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
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?
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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,
Management Team Decision
FACE THE FUTURE
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.
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?
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
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
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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
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
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
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.