CH-6 Innovation and Change – Effective Management : Exam Guide

Chapter 6: Innovation and Change TRUE/FALSE 1. Organizational innovation is defined as doing things differently in an organization. Answer: False Organizational innovation is the successful implementation of creative ideas in an organization. 2. 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. Answer: True 3. Nearly all technology cycles follow a bell-shaped pattern of innovation. Answer: False Nearly all technology cycles follow a typical S-curve pattern of innovation. See Exhibit 6.1. 4. In 1977, at age 23, Jake Burton left a job at an investment firm to work in a wood shop where he developed the first marketable snowboard. Three decades later, he is the owner of Burton Snowboards, the leader in the $2.3 billion snow sports industry. Burton is responsible for the beginning of a technology cycle. Answer: True 5. Technology cycles for low-tech products follow the typical U-curve pattern of innovation. Answer: False All technology cycles typically follow an S-curve pattern of innovation. 6. The typical S-curve pattern of innovation indicates that both early and late in the technology cycle, increased effort (i.e., money, research and development) brings only small improvements in technological performance. Answer: True 7. Technological innovation makes it possible not only to duplicate the benefits obtained from a company’s distinctive advantage but also quickly creates an opportunity to turn a company’s competitive advantage into a competitive disadvantage. Answer: True 8. Companies that want to sustain a competitive advantage must understand and protect themselves from the strategic threats of innovation. Answer: True 9. In 2007, a startup company called Optovue introduced a new medical technology that uses an infrared beam to probe a patient’s eyes for ailments like glaucoma. Even though this new technology was a significant breakthrough in treatment, it is not a technological discontinuity, as it is not part of an innovation stream. Answer: False 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. 10. Batteries currently used in cell phones have an annoyingly short life. The development of a new power source for cell phones would act as a technological substitute. Answer: True 11. The research on technology cycles and technological innovation applies only to high-tech products developed in the bioengineering, robotics, and computer industries. Answer: False It’s important to note that technology cycles and technological innovation are not limited to “high technology.” 12. The term “innovation streams” refers to patterns of innovation over time that can create sustainable competitive advantage. Answer: True 13. 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. Answer: True 14. Technological discontinuities are followed by discontinuous change characterized by technological substitution and design competition. Answer: True 15. Dominant designs emerge because they solve a practical problem, are a result of the negotiations of independent standards bodies, or because of critical mass. Answer: True 16. The same techniques for managing innovation work equally well during discontinuous change as during periods of incremental change. Answer: False What works well when managing innovation after technological discontinuities doesn’t work well when managing innovation during periods of incremental change (and vice versa). 17. A creative work environment requires organizational encouragement and supervisory encouragement as well as work group encouragement. Answer: True 18. According to the Doing the Right Thing box, a manager should give credit to his or her subordinates when departments develop innovative ideas. Answer: True 19. The three parts of the experiential approach to innovation are design iterations, testing, and milestones. Answer: False There are five parts to the experiential approach to innovation: design iterations, testing, milestones, multifunctional teams, and powerful leaders. 20. When Finis, a manufacturer of swimming gear, developed SwiMP3, a waterproof music player, it probably created several product prototypes before settling on a design. Answer: True 21. Milestones are formal review points that tend to lengthen the innovation process. Answer: False Milestones are formal review points that shorten the innovation process. 22. When Finis, a manufacturer of swimming gear, developed SwiMP3, a waterproof music player, it probably used milestones to make sure the innovative product was brought to market in a timely fashion. Answer: True 23. Fully functional change occurs when incremental improvements are made to a dominant technological design so that the improved version of the technology is fully backward compatible with the older version. Answer: False 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. 24. In a properly managed organization, there will be no resistance to needed change. Answer: False Because resistance to change is inevitable, successful change efforts require careful management. 25. When Robert Haas became the CEO of Levi Strauss & Company, he wanted to change the company’s mission “from dressing the world in riveted denim to showing that a company driven by social values could outperform a company hostage to profits alone.” This mission statement change shows social responsibility and would not have met any resistance. Answer: False Resistance forces would have supported the status quo because all change is difficult. 26. According to Kurt Lewin, managing organizational change is a simple process that requires organizational dialogue, change intervention, and reformatting. Answer: False According to Kurt Lewin, managing organizational change is a basic process of unfreezing, change intervention, and refreezing. 27. Resistance to change results from organizational factors, such as the absence of promotion guidelines, bonuses, and praise. Answer: False Resistance to change results from personal factors, such as self-interest, misunderstanding and distrust, and a general intolerance for change. 28. Even though education and communication, participation, negotiation, top management support, and coercion can all be used to manage resistance to change, coercion should only be used in crisis situations or as a last resort. Answer: True 29. One of the most common errors managers make when leading change is to establish a sense of urgency for the change. Answer: False One of the most common errors managers make when leading change is failing to establish a great enough sense of urgency for change. 30. Declaring victory too soon is one of the mistakes managers often make in the refreezing stage of change. Answer: True See Exhibit 6.6. 31. According to John Kotter’s analysis of errors managers make when leading change, managers tend to make the largest number of errors during the unfreezing stage of organizational change. Answer: False Managers make the largest number (4) of errors during the change stage. See Exhibit 6.6. 32. Results-driven change focuses primarily on changing company procedures, management philosophy, or employee behavior. Answer: False This is the definition of activity-oriented change. By contrast, results-driven change supplants the sole emphasis on activity with a laserlike focus on quickly measuring and improving results. 33. The General Electric workout is a special kind of activity-oriented change. Answer: False The General Electric Workout is a special kind of results-driven change. 34. One of the primary responsibilities of a transition management team is to establish a context for change and to provide guidance. Answer: True See Exhibit 6.8. 35. According to the What Really Works, “Changing Individual Behavior and Organizational Performance,” the purpose of changing individual behavior is to improve organizational performance. Answer: True 36. The last step of organizational development intervention is separation, when the change agent leaves the organization after ensuring that the change intervention will continue to work. Answer: True See Exhibit 6.9. MULTIPLE CHOICE 1. Organizational _____________ is the successful implementation of creative ideas in organizations. A. change B. innovation C. creativity D. development E. deployment Answer: B Definition of organizational innovation. 2. _____________ refers to the production of novel and useful ideas. A. The synergistic use of resources B. Ideation C. Creativity D. Organizational adaptation E. Innovative style Answer: C Definition of creativity. 3. McDonald’s restaurants are involved in a long-term, worldwide movement to change consumers’ perceptions of its products by selling food that is healthier. McDonald’s is engaged in: A. organizational change B. reverse engineering C. demarketing D. market diversification E. product revitalization Answer: A A company has experienced organizational change when its form, quality, or condition changes over time. 4. A company has experienced organizational _____________ when its form, quality, or condition changes over time. A. innovation B. development C. change D. reengineering E. manipulation Answer: C Organizational change is a difference in the form, quality, or condition of an organization over time. 5. Gregg Steiner joined Cleveland-based Pinxav in 2003 knowing the diaper-rash product manufacturer’s sales were declining. At a trade show, Steiner was pitching the product to some new mothers who had never heard of it. The mothers weren’t convinced that they should part with their money for a new-to-them product. The inspired Steiner said, “If you’re not happy with the product, I will not only give you your money back––I’ll buy you our competitors’ product. I’ll buy you whatever other brand you want.” Suddenly, the women were interested, and they all plunked down their money. None of the women ever took Steiner up on his offer. So Steiner decided to make it part of his business practice. This new guarantee was an example of: A. corporate synergy B. organizational innovation C. assembly networking D. organizational networking E. reverse engineering Answer: B Organizational innovation is the successful implementation of creative ideas in organizations––in this case the “risk-free” trial offer. 6. Mike Domek is the owner of the Florida-based Tickets Now.com. Domek’s company tapped a market that Ticketmaster had neglected: He specialized in locating and securing premium seating and tickets to sold-out events. Domek used _____________ to locate and serve a profitable market. A. synergy B. ideation C. creativity D. organizational adaptation E. innovative style Answer: C Creativity refers to the production of novel and useful ideas. 7. In the successful implementation of creative ideas in organizations, _____________ must necessarily come before _____________. A. synergy; resource deployment B. organizational innovation; creativity C. resource development; creativity D. organizational development; organizational innovation E. creativity; organizational innovation Answer: E Organizational innovation is the successful implementation of creative ideas. 8. A technology _____________ 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. A. process B. pattern C. cycle D. hierarchy E. continuum Answer: C Definition of technology cycle. 9. Nearly all technology cycles follow the typical _____________ pattern of innovation. A. W-curve B. U-curve C. bell-shaped D. S-curve E. V-shaped Answer: D See Exhibit 6.1. 10. A technology cycle occurs whenever there are major advances or changes in the _____________ in a field or discipline. A. human, technical, and conceptual skills needed B. structure or personnel requirements C. internal resource environment D. knowledge, tools, and techniques E. way information is integrated Answer: D Technology is simply the knowledge, tools, and techniques used to transform inputs into outputs. So a technology cycle occurs whenever there are major advances or changes in these elements. 11. In the typical S-curve pattern of innovation, increased effort (i.e., money, research and development) brings only small improvements in technological performance: A. early in the cycle B. throughout the cycle C. at the end of the cycle D. at both the beginning and end of the cycle E. in the maturity stage of the cycle Answer: D Increased effort brings small improvements in performance at the beginning and end of the technology cycle. See points A and C in Exhibit 6.1. 12. In the typical S-curve pattern of innovation, small amounts of effort will result in significant increases in performance: A. during the growth stage of the cycle B. at the midpoint of the cycle C. only at the end of the cycle D. throughout the cycle E. only at the beginning of the cycle Answer: B The steeper slope of point A in Exhibit 6.1, at the midpoint of the technology cycle, indicates that small amounts of effort result in significantly increased performance. 13. In the typical S-curve pattern of innovation, increased effort (i.e., money, research and development) brings only small improvements in technological performance when performance limits of the technology are reached: A. during the introductory stage of the cycle B. at the breakeven point of the cycle C. during the maturity stage of the innovation cycle D. throughout the cycle E. at the end of the cycle Answer: E Performance limits are reached at the end of the technology cycle, as shown by point C of the S-curve. 14. In the typical S-curve pattern of innovation, when significant improvements in performance can ONLY be gained through radical new designs or new performance-enhancing materials, it is likely that a company is: A. at its breakeven point B. at the problem identification stage of the innovation cycle C. at the end of the innovation cycle D. at either the beginning or end of the innovation cycle E. at the end of its maturity stage Answer: C After a technology has reached its limits at the top of the S-curve, significant improvements in performance usually come from radical new designs or new performance-enhancing materials. This occurs at the end of the innovation cycle. 15. Patterns of innovation over time that can create sustainable competitive advantage are called: A. innovation maps B. organization development C. results-driven change D. innovation streams E. cyclical inventions Answer: D Definition of innovation streams. 16. The development of CDs was a source of _____________ to companies in the recording industry just as audiotapes and 8-track tapes had once been. A. a sustainable competitive advantage B. creativity reengineering C. technological discontinuity D. planned shrinkage E. technological replacement Answer: C A technological discontinuity creates a significant breakthrough in performance or function. 17. _____________ is the knowledge, tools, and techniques used to transform inputs into outputs. A. Resource manipulation B. Procedural innovation C. A transformation system D. Technology E. Creativity Answer: D Definition of technology. 18. An ongoing series of technology cycles will allow an organization to: A. satisfy more customers with fewer resources B. create a competitive advantage C. control variable costs D. eliminate the product-innovation process E. eliminate problems associated with economies of scale Answer: B 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. Consequently, we define innovation streams as patterns of innovation over time that can create sustainable competitive advantage. 19. An innovation stream moves from one technology cycle to another through the process of: A. technological substitution B. dominant design C. incremental environmental change D. organizational synergy E. transition management Answer: A Technological substitution occurs when customers purchase new technologies to replace older technologies. 20. In terms of innovation streams, _____________ occurred when customers purchased flat-screen computer monitors to replace the older, bulkier monitors. A. technological substitution B. technological expansion C. reengineering D. demarketing E. the pioneering era Answer: A Technological substitution is the purchase of new technologies to replace old ones. 21. When DaimlerChrysler learned that it took longer than any other U.S. car manufacturer to assemble a vehicle, it entered which period of the innovation stream when it purchased newer, more flexible manufacturing systems to replace its older ones? A. Technological adaptation B. The era of dominant design C. The technological growth stage D. Change substitution E. Discontinuous change Answer: E Discontinuous change is the phase of the technology cycle characterized by technological substitution and design competition. 22. Kodak is a company name that is associated with photography. The company has recognized that digital photography is a threat to the future growth of the company. Therefore, the company has decided to become a market leader in digital imaging. The development of the digital camera forced Kodak into the innovation stream because the new imaging process was a(n): A. technological subtraction B. technological discontinuity C. process obsolescence D. process addition E. example of design advantage Answer: B Technological discontinuity is the phase of an innovation stream in which a scientific advance or unique combination of existing technologies creates a significant breakthrough in performance or function. 23. Kodak is a company name that is associated with photography. The company has recognized that digital photography is a threat to the future growth of the company. Therefore, the company has decided to become a market leader in digital imaging. As Kodak tried to compete in this new innovation stream, it entered: A. technological adaptation B. the era of dominant design C. the technological growth stage D. change substitution E. discontinuous change Answer: E Discontinuous change is the phase of a technology cycle characterized by technological substitution and design competition. 24. _____________ is the phase of a technology cycle that is characterized by technological substitution and design competition. A. Technological adaptation B. The era of dominant design C. The technological growth stage D. Change substitution E. Discontinuous change Answer: E Definition of discontinuous change. 25. The term _____________ refers to the purchase of new technologies to replace older ones. A. adaptive change B. design replacement C. technological substitution D. dominant design E. innovative exchange Answer: C Definition of technological substitution. 26. Discontinuous change in an innovation stream is characterized by: A. synergy B. technological substitution C. incremental change D. empathetic design E. innovative reciprocity Answer: B Discontinuous change is characterized by technological substitution and design competition. 27. Kodak is a company name that is associated with photography. The company has recognized that digital photography is a threat to the future growth of the company. Therefore, the company has decided to become a market leader in digital imaging while still providing customer support for those still using film cameras. The existence of both technologies is an example of: A. design substitution B. modular management C. design competition D. hierarchical management E. a creative flow Answer: C Design competition is competition between old and new technologies to establish a new technological standard or dominant design. 28. During the _____________ phase of a technology cycle, companies innovate by lowering the cost and improving the functioning and performance of the dominant technological design. A. technological discontinuity B. discontinuous change C. dominant design D. incremental change E. technological continuity Answer: D Definition of incremental change. 29. In order, from beginning to end, the phases of a technology cycle within an innovation stream consist of: A. incremental change, discontinuous change, dominant design, and technological discontinuity B. discontinuous change, incremental change, technological discontinuity, and dominant design C. dominant design, discontinuous change, era of incremental change, and technological discontinuity D. technological discontinuity, discontinuous change, dominant design, and incremental change E. technological discontinuity, incremental change, discontinuous change, and technological continuity Answer: D See also Exhibit 6.3. 30. The auto industry has been perfecting the internal combustion engine (ICE) for some 120 years. There is plenty of work ongoing at all of the auto companies to find alternatives to ICEs. The money invested by them is measured in the billions of dollars. The Partnership for a New Generation of Vehicles, the cooperative program between the Big Three and the U.S. government to replace ICEs with electric engines, has been operating since 1993. The ICE is an example of: A. a dominant design B. design dichotomy C. a synergistic design D. a differential design E. a dichotomous product Answer: A A dominant design refers to the technology that is the accepted market standard. 31. Which of the following statements about managing innovation is true? A. Companies that manage innovation by allowing technological discontinuities risk quick organizational decline and dissolution. B. Companies that can’t manage incremental innovation slowly deteriorate as they fall farther behind industry leaders. C. The techniques that are effective in managing innovation after technological discontinuities are equally effective in managing innovation during periods of incremental change. D. The management of innovation begins with dominant design. E. All of these statements about managing innovation are true. Answer: B The management of innovation is the key to organizational survival. The process begins with technological discontinuities. Managing incremental changes requires a shift from design experimentation. 32. Titleist has been manufacturing golf balls for several years, but each year it comes out with new golf ball designs. Titleist’s development of the new Pro VI golf ball with a solid core that is designed to benefit players with high swing speeds is one example of how the manufacturer survives through: A. technological discontinuity B. discontinuous change C. dominant design D. incremental change E. technological continuity Answer: D During the incremental change phase of a technology cycle, companies innovate by improving the functioning and performance of the dominant design. 33. Companies need to excel at managing _____________ in order to successfully manage innovation streams. A. sources of innovation B. managing innovation during synergistic change C. reciprocity D. environmental design issues E. behavioral formality Answer: A 34. _____________ are workplace cultures in which workers perceive that new ideas are welcomed, valued, and encouraged. A. Creative work environments B. Innovative societies C. Homogeneous work environments D. Participative work teams E. Empathetic work stations Answer: A Definition of creative work environments. 35. Which of the following is NOT one of the components of creative work environments? A. Challenging work B. Group compensation C. Freedom D. Supervisory encouragement E. Organizational encouragement Answer: B Group compensation is not a component of creative work environments. 36. Which of the following is a component of a creative work environment that encourages creativity? A. The development of challenging work B. Organizational encouragement C. The granting of autonomy D. The removal of organizational impediments E. All of these Answer: E 37. Kodak is a company name that is associated with photography. The company has recognized that digital photography is a threat to the future growth of the company. Therefore, the company has decided to become a market leader in digital imaging. The company can encourage the development of a culture where workers perceive new ideas are welcomed by offering challenging work and supervisory encouragement. In other words, the company can create a(n): A. creative work environment B. open system C. adaptive culture D. culture of change E. tall structure to encourage horizontal communications Answer: A 38. Hewlett-Packard is exploring new products and markets through the development of digital imaging products in its plants in India, South Africa, and the United States. To jump-start this innovative process, Hewlett-Packard can: A. manage flow through the use of Gantt charts B. cncentrate on dominant design and ignore incremental design C. engage in creative reciprocity D. establish creative work environments E. do none of these Answer: D A creative work environment is a workplace culture in which workers perceive that new ideas are welcomed, valued, and encouraged. 39. Years ago, Jason Goldberg, T-Mobile USA’s strategic planning director, grew frustrated with the flood of unqualified applicants found on job boards and knew things had to change. So, in 2004, he developed a plan to reinvent online recruiting by combining the referring power of a social network with a recruiter’s perspective. He called his creation Jobster. This description of Goldberg’s action indicates that: A. he has a sense of autonomy and control over his ideas B. Jobster operates outside the innovation stream C. he has learned to control the uncertainty of an organizational environment D. the culture at Jobster does not support innovation E. Jobster is probably in the faulty action stage of its organizational development Answer: A Goldberg has the freedom to operate as he wants to––he has autonomy and a sense of control over his ideas. 40. Which of the following is an organizational impediment to creativity in a work environment? A. Internal conflict B. Rigid management structures C. Conservative bias toward the status quo D. Power struggles E. All of these Answer: E 41. Unverferth Manufacturing has been a manufacturer and supplier of innovative agricultural equipment since 1948. In 2003, it began developing a new 12-row strip-till subsoiler, which prepares 10-inch-wide seed beds spaced 40 inches apart, a width that is commonly used in cotton production. Before introducing the new tiller to the market, Unverferth developed and tested nearly three dozen product prototypes. Unverferth used the _____________ approach to innovation. A. compression B. experiential C. technological substitution D. generational change E. technological disruption Answer: B 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. 42. Unverferth Manufacturing has been a manufacturer and supplier of innovative agricultural equipment since 1948. In 2003, it began developing a new 12-row subsoiler, which prepares 10-inch-wide seed beds spaced 40 inches apart, a width that is commonly used in cotton production. Before introducing the new tiller to the market, Unverferth developed and tested nearly three dozen product prototypes. Unverferth used _____________ to produce the best possible tiller before introducing it to the market. A. service development B. process duplication C. design iteration D. design compliance E. process reengineering Answer: C Design iteration is a cycle of repetition in which a company tests a prototype of a new product, improves on that design, and then builds and tests a new prototype. 43. The _____________ 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. A. compression B. experiential C. technological substitution D. generational change E. technological disruption Answer: B Definition of the experiential approach to innovation. 44. Which of the following is NOT a part of the experiential approach to innovation? A. Hands-on experience to reduce uncertainty B. Testing C. Multifunctional teams D. Design iterations E. Initiative conversations Answer: E Initiative conversations are not part of the experiential approach to innovation. 45. Covisint is an e-commerce venture involving DaimlerChrysler, Ford, GM, Peugeot, and Renault/Nissan that allows carmakers access to online auctions for buying component parts and materials. Because the idea of such a website was a new concept, the prototype site was built and tested, then revised, and rebuilt for further testing before the website was ever offered to customers. _____________ was used to develop Covisint. A. Serve development B. Process duplication C. Design iteration D. Design compliance E. Process reengineering Answer: C Design iteration is a cycle of repetition in which a company tests a prototype of a new product, improves on that design, and then builds and tests a new prototype. 46. What is the first step for managing innovation during discontinuous change? A. Design iteration B. Budgeting C. The establishment of a dominant design D. Supplier involvement E. Process duplication Answer: A Design iteration is a cycle of repetition in which a company tests a prototype of new product or service, improves on that design, and then builds and tests the improved product or service prototype. This iterative process is basic to managing innovation. 47. Billionaire Richard Branson is committed to combating global warming. In 2007, he introduced Europe’s first scheduled passenger train fueled by vegetable oil. Branson’s Virgin Trains is running one of its trains on a 20 percent biodiesel blend for a six-month trial, and the British entrepreneur said his whole fleet might eventually be converted to run on biofuels. This single train running on a biodiesel blend is an example of a(n): A. innovative iteration B. product prototype C. product sample D. discontinuous design E. systematic design Answer: B A product prototype is a full-scale working model being tested for design, function, and reliability. 48. Billionaire Richard Branson is committed to combating global warming. In 2007, he introduced Europe’s first scheduled passenger train fueled by vegetable oil. Branson’s Virgin Trains is running one of its trains on a 20 percent biodiesel blend for a six-month trial, and the British entrepreneur said his whole fleet might eventually be converted to run on biofuels. From this information, you can surmise that Branson uses _____________ to manage innovation. A. service development B. process duplication C. design iteration D. design compliance E. process reengineering Answer: C Design iteration is a cycle of repetition in which a company tests a prototype of a new product or service, improves on that design, and then builds and tests the improved product or service prototype. 49. The use of milestones in the experiential approach to innovation: A. serves to eliminate manufacturing bottlenecks B. shortens the innovation process C. creates incrementally sustainable advantages D. virtually eliminates problems associated with the control function of management E. does all of these Answer: B Milestones shorten the innovation process by creating a sense of urgency that keeps everyone on task. 50. The use of milestones in the experiential approach to innovation: A. provides structure to the general chaos that follows technological discontinuities B. shortens the innovation process C. builds momentum by giving people a sense of accomplishment D. lets an organization know when to take corrective action E. does all of these Answer: E All of the responses are characteristic of milestones. 51. Multifunctional teams: A. allow organizations to concentrate on their internal environments and ignore the external environments until they have completed the brainstorming process B. integrate technical, marketing, and manufacturing activities C. speed innovation through early identification of new ideas or problems that would typically not have been generated until much later D. do not typically use milestones because of group cohesiveness E. replace organizational structures on a typical organizational chart Answer: C Multifunctional teams are work teams composed of people from different departments. 52. The _____________ approach to innovation assumes that incremental innovation can be planned using a series of steps and that compressing those steps can speed innovation. A. compression B. milestones C. dialectical D. generational E. prototypical Answer: A Definition of the compression approach to innovation. 53. ARI is a leading provider of sales and profit-building technology services for equipment dealers. When Unverferth Manufacturing, a supplier of agricultural equipment, wanted to change the way it supplied information to its dealers by implementing a website, it contacted ARI. ARI presented the manufacturer with a solution that allowed it to replace its paper catalogs with catalogs on CDs as well as to create a website. Unverferth was able to eliminate costly paper catalogs and gain the ability to provide up-to-the-minute information to its dealers. This incremental change that was aided by supplier involvement was an example of the _____________ approach to innovation. A. generational B. experiential C. milestones D. compression E. supply-side Answer: D It is appropriate to use a compression approach to manage innovation in more certain environments during periods of incremental change, in which the goals are lower costs and incremental improvements in the performance and function of the existing technological design. 54. It is appropriate to use a(n) _____________ approach to manage innovation in more certain environments during periods of incremental change, in which the goals are lower costs and incremental improvements in the performance and function of the existing technological design. A. experiential B. compression C. prototypical D. milestones E. reinforcement Answer: B 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. 55. The goals of the compression approach to innovation are: A. speed, lower costs, and incremental change of dominant design B. the development of milestones and the comparison of actual milestones with forecasts C. the establishment of a dominant design and speed D. absolute-time management and the creation of a dominant design E. a matrix innovation process and a sustainable competitive advantage Answer: A Whereas the experiential approach is used to manage innovation toward new designs, the compression approach is aimed at lower costs and incremental improvement of the dominant design. 56. The first step in the compression approach to innovation is: A. overlapping of the individual steps B. planning C. supplier involvement D. granting autonomy E. creating multifunctional teams Answer: B 57. _____________ are an important part of both the compression approach and the experiential approach to innovation. A. Multifunctional teams B. Design iterations C. Milestones D. Synergistic processes E. Overlapping steps Answer: A 58. 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, _____________ is said to have occurred. A. a milestone B. intuitive change C. generational change D. coercive change E. discontinuous innovation Answer: C Definition of generational change. 59. Backward compatibility is an important consideration for software users who are using an accounting program to facilitate their tax preparation and who want to use a newer version that has greater capacity. Therefore, many software manufacturers engage in: A. coercive change B. dominant design manipulation C. generational change D. intuitive change E. incremental modification Answer: C 60. Unverferth Manufacturing makes agricultural equipment. It used finite element analysis software to speed up the design cycle for its 12-row subsoiler. Which aspect of the compression approach to innovation would the use of this software assist? A. Planning B. Supplier involvement C. Shortening the time of individual steps D. Multifunctional teams E. Functional isolation Answer: C Software is often used to shorten the time of individual steps. 61. Which of the following is one of the sources of resistance to change? A. Self-interest B. Multifunctional teams C. A dynamic organizational culture D. Discontinuous innovation E. Sustainable status quo Answer: A 62. _____________ forces support the status quo. A. Dialectical B. Generational C. Resistance D. Experiential E. Autonomous Answer: C Resistance forces support the existing conditions in an organization, or the status quo. 63. According to social psychologist Kurt Lewin, _____________ lead to differences in the form, quality, or condition of an organization over time, while _____________ support the status quo, that is, the existing state of conditions in organizations. A. compressed changes; generational changes B. generational forces; resistance forces C. generational changes; inertial changes D. change forces; inertial forces E. change forces; resistance forces Answer: E 64. Which of the following approaches will speed up change but in the process may also fragment it? A. General Electric workout B. Transition management team C. Organizational development D. Activity-oriented change E. Lewin’s change synthesis Answer: A Because different managers may approve conflicting suggestions, the GE workout may result in fragmentation. 65. Which of the following statements about resistance to change is true? A. Resistance to change will not occur when those affected by the change participate in its planning and implementation. B. Resistance to change will not occur when employees are educated about the need for change. C. Resistance to change will not occur when change efforts receive significant managerial support. D. Resistance to change disappears when the organization operates in conditions of certainty. E. Resistance to change will always occur; it is inevitable. Answer: E 66. Which of the following is one of the three steps in the basic process of managing organizational change outlined by Kurt Lewin? A. Unfreezing B. Organizational dialogue C. Change definition D. Incremental change E. Change mentoring Answer: A According to Lewin, managing organizing change is a basic process of unfreezing, change intervention, and refreezing. 67. The three steps in the basic process of managing organizational change outlined by Kurt Lewin are: A. unfreezing, change intervention, and refreezing B. organizational change, departmental change, and individual change C. change definition, change motivation, and change D. synthesizing, motivating, and rewarding E. change definition, change mobilization, and change acceptance Answer: A These are Lewin’s three basic steps in the basic process of managing organizational change. 68. Which of the following is NOT one of the basic methods for managing resistance to change? A. Education and communication B. Participation C. Change simulation D. Negotiation E. Coercion Answer: C The following methods can be used to manage resistance to change: education and communication, participation, negotiation, top-management support, and coercion. 69. When resistance to change is based on insufficient, incorrect, or misleading information, managers should use _____________ as an approach to manage the resistance. A. education and communication B. participation C. negotiation D. coercion E. change manipulation Answer: A Education and communication are the best approach when resistance to change is based on these factors. 70. In a speech to members of the American Dental Association, William Bridges, an internationally recognized authority on managing change in the workplace, said, “The first stage in the change process is Endings. It is the letting go of the past and realizing that you must create endings in order to move to new beginnings. The second stage is called the Neutral Zone. This is the place or experience you enter when you are unsure of the future and of letting go of the past. It is an experience of limbo and uncertainty, but with new excitement about what lies ahead. The third stage is New Beginnings. Here you begin embracing the differences and positive aspects of change. You begin anew.” According to Kurt Lewin, when Bridges talks about Endings, he is referring to _____________, and when he talks about New Beginnings, he is referring to _____________. A. individual change; organizational change B. unfreezing; change intervention C. refreezing; unfreezing D. change definition; change mobilization E. unfreezing; refreezing Answer: E Unfreezing is getting the people affected by change to believe that change is needed. Refreezing is supporting and reinforcing the new changes so that they stick. 71. The management of a large urban-based hospital wanted to increase its profits. The consulting firm developed a plan to enhance the hospital’s profitability. In step one of this plan, clinical documentation specialists hired by the hospital and trained by the consultants reviewed patients’ charts and posted queries in the charts for the physicians to answer about treatment and tests conducted, but physicians refused to answer the questions because they didn’t want to lose their freedom to determine the best treatments for their patients. The source of this resistance to change is: A. self-interest B. multifunctional teams C. a dynamic organizational culture D. discontinuous innovation E. a nonsustainable status quo Answer: A Self-interest occurred because the physicians feared that change would deprive them of something of value. 72. The management of a large urban-based hospital wanted to increase its profits. The consulting firm developed a plan to enhance the hospital’s profitability. In step one of this plan, clinical documentation specialists hired by the hospital and trained by the consultants reviewed patients’ charts and posted queries in the charts for the physicians to answer about treatment and tests conducted, but physicians refused to answer the questions because they didn’t want to lose their freedom to determine the best treatments for their patients. _____________ is needed to get the physicians to believe that change is needed. A. Unfreezing B. An organizational dialogue C. A change definition D. Incremental change E. Change mentoring Answer: A Unfreezing is getting the people affected by change to believe that the change is necessary. 73. The management of a large urban-based hospital wanted to increase its profits. The consulting firm developed a plan to enhance the hospital’s profitability. In step one of this plan, clinical documentation specialists hired by the hospital and trained by the consultants reviewed patients’ charts and posted queries in the charts for the physicians to answer about treatment and tests conducted, but physicians refused to answer the questions because they didn’t want to lose their freedom to determine the best treatments for their patients. Which of the following actions should be taken to overcome this resistance to change? A. Include the physicians in the planning and implementing of decision making. B. Show the physicians how much the hospital administration supports these changes. C. Use formal power and authority to force the physicians to comply. D. Educate the physicians about why the change is needed, and communicate change-related information to them. E. Create self-mentoring units among teams of physicians. Answer: D Education and communication are the most likely tools for reducing or eliminating this resistance to change. 74. Downsizing has thinned the ranks of hospital personnel. In one hospital, management was bewildered by the high staff turnover rate, while in patient care areas each nurse had to do the work of two nurses. Hospital employees were adamantly resisting any more change. What method could hospital administrators use to manage this resistance? A. Educating employees about the need for change B. Letting the employees participate in implementing the change process C. Providing significant managerial support D. Letting employees discuss and agree on who will do what after change occurs E. Any or all of these Answer: E All of these methods could be used to manage such resistance. 75. In order to demonstrate top-management support in overcoming resistance to change, top managers must not only talk about the importance of change but also must: A. provide any necessary training B. provide resources as that are needed C. allow employees autonomy to make the change happen D. make necessary changes with the company’s suppliers E. do all of these except make necessary changes with the company’s suppliers (item d) Answer: E Managers must provide the training, resources, and autonomy needed to make change happen. 76. Which of the following methods for managing resistance to change should only be used as a last resort or under crisis conditions? A. Mentoring B. Arbitration C. Negotiation D. Coercion E. Reinforcement modification Answer: D Coercion is the use of formal power and authority to force others to change. 77. According to John Kotter’s analysis of the errors managers make when leading change, the first and potentially most serious of these errors is: A. not establishing a great enough sense of urgency B. declaring victory too soon C. not anchoring changes in the corporation’s culture D. not removing obstacles to the new vision E. a poorly designed organizational mission Answer: A This is the most serious error that managers make when leading change. See also Exhibit 6.6. 78. When a merger of South Carolina–based Springs Industries with the Brazilian textile producer Coteminas was announced, the CEO of Springs was quoted as saying, “It is unclear what effect this move will have on our employees though no immediate layoffs are planned. There may be some in the future.” To better manage the _____________ stage of organizational change, the CEO would need to use empathy and communicate specific details of the merger. A. change intervention B. the change prototype C. unfreezing D. refreezing E. change mobilization Answer: C See Exhibit 6.5. Employees are likely to resist the change because they do not feel that management cares about them and they do not know the specifics. 79. Tom Valerio was the point man on a major push to reinvent CIGNA Property & Casualty. When Valerio joined it, the company was in the basement due to poor underwriting decisions and multiple claims from natural disasters. His vision for CIGNA was to become a top-quartile, specialist property and casualty company. It was a radical proposition. During the organizational change, having this vision was especially important during the _____________ stage. A. change intervention B. the change prototype C. unfreezing D. refreezing E. change mobilization Answer: A The absence of a vision is one of the common mistakes made during the change stage. 80. Which of the following is one of the groups that John Kotter recommends be included in a core change coalition to guide and support organizational change? A. Board members B. Customers C. Union leaders D. Employees and managers E. All of these Answer: E Kotter recommends that all of these groups be members in a core change coalition. 81. According to John Kotter’s analysis of the errors managers make when leading change, managers tend to make the largest number of errors during the _____________ stage of organizational change. A. unfreezing B. change C. refreezing D. initiative E. dissolution Answer: B Those errors are listed in Exhibit 6.6. 82. According to John Kotter, which of the following actions will adversely influence refreezing efforts? A. The absence of a vision B. Not removing obstacles to the company’s new vision C. Not creating a powerful enough guiding coalition D. Declaring victory too soon E. All of these Answer: D See Exhibit 6.6. 83. Which of the following statements describes an advantage of the results-driven change approach? A. It supplants the sole emphasis on activity with a focus on quickly measuring and improving results. B. Managers actually test to see if changes make a difference. C. Quick, visible improvements motivate employees to continue to make additional changes. D. Managers introduce changes in policies, procedures, rules, and regulations only when they will improve measured performance. E. All of these were cited as advantages of the results-driven change approach. Answer: E 84. An Internet strategy enabled Nestlé USA to change its way of doing business and allowed the company to change its staid, risk-averse culture. Nestlé leaders relied on the Net to help them overhaul much of what the company does––from buying raw materials to processing purchase orders to marketing the roughly 2,000 products that make up its nearly 200 brands. Employees worked to “Make e-business the way we do business.” Nestlé USA used _____________ change to reinvent the company. A. activity-oriented B. results-driven C. generational D. vision-driven E. resources-driven Answer: B Results-driven change is change created quickly by focusing on the measurement and improvement of results.. 85. _____________ change focuses primarily on changing company procedures, management philosophy, or employee behavior. A. Resources-oriented B. Activity-oriented C. Vision-driven D. Discontinuous E. Results-driven Answer: B This is a description of activity-oriented change. 86. The General Electric workout is a special kind of: A. activity-oriented change B. results-driven change C. generational change D. vision-driven change E. resources-driven change Answer: B 87. A transition management team: A. contains 8 to 12 members B. provides ways to coordinate change throughout an organization C. is not an extra layer of management within the changing organization D. is not a steering committee E. is accurately described by all of these Answer: E 88. A(n) _____________ is the individual who is formally in charge of guiding a change effort. A. change ombudsman B. staff moderator C. change mentor D. change agent E. intrapreneur Answer: D Definition of a change agent. 89. Organizational development: A. takes a long-range approach to change B. creates change by educating workers and managers to change ideas, beliefs, and behaviors so that problems can be solved in new ways C. assumes that top-management support is necessary for change to succeed D. emphasizes employee participation in all stages of the change E. is accurately described by all of these Answer: E All of the choices describe organizational development. 90. Organizational development: A. requires a steering committee B. takes a short-term approach to change C. is a philosophy and collection of planned change interventions D. assumes that top management support is not necessary for change E. is accurately described by all of these Answer: C Definition of organizational development. 91. Tom Valerio was the point man on a major push to reinvent CIGNA Property & Casualty. When Valerio joined it, the company was in the basement due to poor underwriting decisions and multiple claims from natural disasters. His vision for CIGNA was to become a top-quartile, specialist property and casualty company. It was a radical proposition. Valerio was a(n): A. change ombudsman B. staff moderator C. change mentor D. change agent E. intrapreneur Answer: D A change agent is the individual who is formally in charge of guiding a change effort. 92. One of the primary responsibilities of transition management teams is to: A. create and monitor change budgets B. modify the organizational structure C. provide another level of managerial hierarchy D. create entrepreneurial synergy E. anticipate, identify, and address people problems Answer: E The primary responsibilities of transition management teams are listed in Exhibit 6.8. 93. There are eight general steps for organizational development intervention. The first step is: A. pioneering B. inception C. introduction D. entry E. startup Answer: D The steps are listed in Exhibit 6.9. During the entry step, the problem is discovered. 94. Refer to “What Would You Do?” CEO Daniel Vasella hired Mark Fishman, a Harvard cardiologist and industry outsider, to fundamentally change the way Novartis develops and researches new drugs. Fishman changed the company’s research focus to molecular pathways. This illustrates which component of the creative work environment? A. lack of organizational impediments B. freedom C. work group encouragement D. organizational encouragement E. empowerment Answer: D Organizational encouragement of creativity occurs when management encourages risk tasking and new ideas. 95. Refer to “What Would You Do?” Marketing managers at Novartis complained that it didn’t make sense to develop drugs that would work on only a small number of patients. They were exhibiting: A. coercion B. unfreezing C. change intervention D. resistance to change E. freezing Answer: D Resistance to change is opposition to change resulting from self-interest, misunderstanding and distrust, or a general intolerance for change. SHORT ANSWER 1. Define creativity. Explain its relationship to organizational innovation. Answer: Creativity is the production of novel and useful ideas. Organizational innovation is the successful implementation of creative ideas in an organization. Thus, creativity is a precursor to the process of organizational innovation, and organizational creativity could be considered a form of organizational innovation. 2. Briefly describe the typical pattern of technology cycles that occurs during technological innovation. Answer: 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. However, as a technology matures, performance improves quickly. Finally, small improvements occur as the limits of a technology are reached. At this point, significant improvements in performance must come from new technologies. 3. What are innovation streams? Describe a typical innovation stream. Answer: Innovation streams are patterns of innovation over time that can create sustainable competitive advantage. A typical innovation stream consists of a series of technology cycles, which begin with a new technology and end when that technology is replaced by a newer, substantially better technology. Innovation streams typically consist of (1) a technological discontinuity, (2) discontinuous change, characterized by technological substitution and design competition, (3) the emergence of a dominant design, followed by (4) a focus on incremental change until the next technological discontinuity occurs. 4. How are technology cycles and innovation streams related? Answer: 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. 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. However, as a technology matures, performance improves quickly. Finally, small improvements occur as the limits of a technology are reached. At this point, significant improvements in performance must come from new technologies. Innovation streams are defined as patterns of innovation over time that can create sustainable competitive advantage. As illustrated in Exhibit 6.3 on page 183 of the text, a typical innovation stream consists of a series of technology cycles over time. Each cycle involves variation selection based upon four stages of activity (technological discontinuity, discontinuous change, dominant design, and era of incremental change), followed by technological substitution involving the advanced technology, and then repeating this cyclical process until another technological advance occurs. 5. What are creative work environments? What does a manager need to do to develop and manage creative work environments? Answer: Creative work environments are workplace cultures in which workers perceive that new ideas are welcomed, valued, and encouraged. Creative work environments have five components that encourage creativity: challenging work, organizational encouragement, supervisory encouragement, work group encouragement, and freedom. A sixth component, organizational impediments, must be managed so as not to discourage creativity. Organizational impediments include such things as internal conflict and power struggles, rigid management structures, and a conservative bias toward the status quo. These can all discourage creativity, since they create the perception that others in the organization will decide which ideas are acceptable and deserve support. 6. Given the nature and demands of technology cycles and innovation streams, identify the two types of change that companies need to be able to manage. What are the approaches most appropriate for managing each type of change? Answer: Given the nature and demands of technology cycles and innovation streams, managers must be equally good at managing innovation in two very different circumstances. Unfortunately, what works well when managing innovation after technological discontinuities doesn’t work well when managing innovation during periods of incremental change (and vice versa). First, during discontinuous change, companies must find a way to anticipate and survive the technological discontinuities that can suddenly transform industry leaders into losers and industry unknowns into industry powerhouses. The most appropriate approach under these circumstances is the experiential approach to innovation. Second, after a new dominant design emerges following discontinuous change, companies must manage the very different process of incremental improvement and innovation in order to keep up with industry leaders. In this case, a compression approach to innovation is most appropriate. 7. Differentiate between the experiential and compression approaches to innovation. What is the single component that both approaches have in common? Answer: The experiential and compression approaches are complementary approaches to managing innovation, which are differentially appropriate to the phases of the technology cycle. The experiential approach is used to manage innovation in highly uncertain environments during periods of discontinuous change, while the compression approach is used to manage innovation in more certain environments during periods of incremental change. There are five parts to the experiential approach to innovation: design iterations, testing, milestones, multifunctional teams, and powerful leaders. There are also five parts to the compression approach to innovation: planning, supplier involvement, shortening the time of individual steps, overlapping steps, and multifunctional teams. The single component that both approaches have in common is multifunctional teams. 8. Identify and briefly describe the three steps involved in the process of managing organizational change as defined by Kurt Lewin. Answer: According to Kurt Lewin, managing organizational change is a basic process of unfreezing, change intervention, and refreezing. Unfreezing is getting the people affected by change to believe that change is needed. During the change intervention itself, workers and managers change their behavior and work practices. Refreezing is supporting and reinforcing the new changes so that they stick. 9. Identify the methods that can be used to manage resistance to change. Which one should be used only as a last resort? Answer: The following methods can be used to manage resistance to change: education and communication, participation, negotiation, top-management support, and coercion. Managers should educate employees about the need for change and communicate change-related information to them. Employees who participate in planning and implementing the change process have a better understanding of the need for change and are more likely to support it. Employees are less likely to resist change if they are allowed to negotiate (i.e., discuss and agree on) who will do what after change occurs. Resistance to change also decreases when change efforts receive significant managerial support, including providing the training, resources, and autonomy needed to make change happen. Finally, use of formal power and authority to force others to change is called coercion. Because of the intense negative reactions it can create (i.e., fear, stress, resentment, sabotage of company products), coercion should only be used when a crisis exists or when all other attempts to reduce resistance to change have failed. 10. Provide one example of a common error made by managers when they lead change at each of the three steps of the change process. Answer: See Exhibit 6.6. The basic change process occurs in three stages (unfreezing, change, refreezing). John Kotter has listed common errors of managers in leading the change process at each of these three stages. By stage, these errors are: Unfreezing––Not establishing a great enough sense of urgency; Not creating a powerful enough guiding coalition; Change––Lacking a vision; Under communicating the vision by a factor of 10; Not removing obstacles to the new vision; Not systematically planning for and creating short-term wins; Refreezing––Declaring victory too soon; Not anchoring changes in the corporation’s culture. ESSAY 1. Explain how the concept of innovation streams relates to the concept of sustainable competitive advantage. Give an example of how this occurs in the business world. Answer: 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. Furthermore, a competitive advantage becomes sustainable if other companies cannot duplicate the benefits obtained from that distinctive competence. Technological innovation, however, makes it possible not only to duplicate the benefits obtained from a company’s distinctive advantage but also to quickly turn a company’s competitive advantage into a competitive disadvantage. 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 (technological substitution) and companies compete to establish the new dominant design (design competition). 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 competence enhancing and competence destroying, companies that bet on the wrong design often struggle, while companies that bet on the eventual dominant design usually prosper. Emergence of a dominant design leads to a focus on incremental change, lowering costs, and small, but steady improvements in the dominant design. This focus continues until the next technological discontinuity occurs. Students may provide a variety of examples to illustrate the concepts of innovation streams resulting in sustainable competitive advantage. The text provides an example of Intel and the innovation stream associated with its microchips. Student examples should be evaluated with regard to the degree to which they are appropriate and clearly integrate the concepts and components of innovation streams into their explanations. In general, examples that come from outside the text demonstrate a higher level of learning than those simply repeating points made in the book. 2. In the mid-1990s, in hopes of replacing consumer videotape use in the viewing of prerecorded movies, two forms of digital videodisk were introduced––DVD and DIVX. While DVD technology was used by a variety of manufacturers (including Sony and RCA), DIVX was a proprietary format developed by Circuit City. Both formats could play DVD movies, which cost about $30 each. However, DIVX movies (which could only be played on a DIVX player and not on a DVD player) could be purchased for $5 and viewed for 24 hours, with the ability to view them renewable (including perpetual viewing) for a reasonable charge and a telephone call. Circuit City believed that consumers beginning to buy videodisk players and disks would prefer its format since the disks were less expensive and offered the convenience similar to a rental with the option of a purchase (conveniently, by telephone from home) at a later date. However, the DIVX format never took off, and in mid-1999, Circuit City announced that it was being discontinued. This left DVD as the dominant format for videodisks. Relate this example to the model of the innovation stream and corporate attempts to gain competitive advantage through technological innovation. Explain how this competition in formats between DVD and DIVX fits the model of the innovation stream. Answer: 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. Furthermore, a competitive advantage becomes sustainable if other companies cannot duplicate the benefits obtained from that distinctive competence. Technological innovation, however, makes it possible not only to duplicate the benefits obtained from a company’s distinctive advantage but also to quickly turn a company’s competitive advantage into a competitive disadvantage. This is exactly what Circuit City was trying to do. It hoped that its development of, and considerable investment in, the proprietary DIVX technology would enable it to become the dominant videodisk format. Such a development would have destroyed any competitive advantage that Sony, RCA, and other manufacturers of DVD players might have since they would have to either license the DIVX format from Circuit City or settle for a lesser market share. This situation can be analyzed in more detail using the model of innovation streams. In general, the best way to protect a competitive advantage is to create a stream of innovative ideas and products. Innovation streams (patterns of innovation over time that can create sustainable competitive advantage) begin with technological discontinuities that create significant breakthroughs in performance or function. This was occurring as digital videodisk technology was being introduced as a potential replacement for videotape. Technological discontinuities are followed by discontinuous change, in which customers purchase new technologies (technological substitution––or the replacement of VHS videotape recorders with videodisk players) and companies compete to establish the new dominant design (design competition––DVD or DIVX). Dominant designs emerge because of critical mass, because they solve a practical problem, or because of the negotiations of independent standards bodies. In this case, DVD was accepted by a variety of manufacturers and developed according to independent standards. Circuit City took a big risk in developing DIVX, which was a different incompatible and proprietary format that it hoped would prove more popular than DVD. In the end, it proved less popular. DVD began to develop a critical mass of players in the marketplace, and Circuit City decided to admit its mistake and cut its losses immediately. Because technological innovation is both competence enhancing and competence destroying, companies that bet on the wrong design often struggle, while companies that bet on the eventual dominant design usually prosper. In this case, Circuit City bet on the wrong design and lost, while Sony, RCA, and others bet on the winning design. The elimination of DIVX from the videodisk market heralds the emergence of a dominant design in the standard DVD format. This can be expected to lead to a focus on incremental change, lowering costs, and small, but steady improvements in that dominant design. This focus will continue until the next technological discontinuity occurs. 3. Identify and briefly describe the three things that companies need to be good at in order to successfully manage innovation streams. Explain why managing these factors is important. Specify which one of the three might tend to be more influenced by organizational culture and less influenced by the manager’s personal ability. Answer: Given the nature and demands of technology cycles and innovation streams, managers must be equally good at managing innovation in two very different circumstances. First, during discontinuous change, companies must find a way to anticipate and survive the technological discontinuities that can suddenly transform industry leaders into losers and industry unknowns into industry powerhouses. Companies that can’t manage innovation following technological discontinuities risk quick organizational decline and dissolution. Second, after a new dominant design emerges following discontinuous change, companies must manage the very different process of incremental improvement and innovation. Companies that can’t manage incremental innovation slowly deteriorate as they fall farther behind industry leaders. Finally, in order to have innovation streams to manage, companies must be able to promote the creative ideas that lead to organizational innovation in the first place. Unfortunately, what works well when managing innovation after technological discontinuities doesn’t work well when managing innovation during periods of incremental change (and vice versa). Consequently, to successfully manage innovation streams, companies need to be good at three things: (1) managing the sources of innovation, (2) managing innovation during discontinuous change, and (3) managing innovation during incremental change. In terms of managing the sources of innovation, companies can jump-start innovation by building creative work environments, in which workers perceive that creative thoughts and ideas are welcomed and valued. Creative work environments have five components that encourage creativity: challenging work, organizational encouragement, supervisory encouragement, work group encouragement, and freedom. A sixth component, organizational impediments, must be managed so as not to discourage creativity. The experiential approach to innovation is most appropriate when managing discontinuous change, in which a technological discontinuity created a significant breakthrough in performance or function. This approach 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. There are five parts to the experiential approach to innovation: design iterations, testing, milestones, multifunctional teams, and powerful leaders. The compression approach to innovation can be used during periods of incremental change, in which the focus is on systematically improving the performance and lowering the cost of the dominant technological design. The compression approach 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. There are five parts to the compression approach to innovation: planning, supplier involvement, shortening the time of individual steps, overlapping steps, and multifunctional teams. Of these three approaches, one might argue that building creative work environments would be the one more affected by organizational culture than the individual manager’s own ability. The emphasis on attitudes, perception, and interpersonal behavior in this approach would be more susceptible to overriding influences from organizational culture than the more procedural emphases of the other two approaches, which would be more easily influenced by managerial skill. However, an argument could be made for the experiential learning approach as being more affected by organizational culture, based upon the role of intuition, flexibility, multifunctional teams, and powerful leaders. Similarly, but perhaps to a lesser extent, an argument could be made for the compression approach as being more affected by organizational culture, based upon the use of multifunctional teams. However, this argument seems least appropriate in the context of all three approaches, given the more obvious behavioral components of the other two. The key to quality in answers is the extent to which the behavioral dimensions of values, beliefs, and attitudes are tied in to the argument in favor of majority influence for the given approach. 4. Shortly after taking office in January 1993, President Bill Clinton decided to take steps to eliminate discrimination, which he believed was occurring against gay men and women in the military. Without consulting with members of the military, he announced that he would be issuing an Executive Order banning all forms of discrimination against homosexuals in the military. There followed a tremendous controversy, played out in the public press and media, including threats of resignation by members of the Joint Chiefs of Staff. Ultimately, the new President backed down and agreed not to issue any Executive Order until a special commission (including members of the public and the military) had been formed and given the opportunity to study the problem and agree upon specific recommendations for change. This procedure was followed, and what resulted was the “Don’t Ask, Don’t Tell,” approach to dealing with homosexuality in the military that is in force to this day. Identify and briefly describe the three steps involved in the process of managing organizational change, according to Kurt Lewin, and specify which of these three steps President Clinton initially handled very poorly in the above scenario. Then, identify the approaches that can be used to manage resistance to change, and specify which of them the President was using when he made his initial announcement regarding the planned Executive Order and which were probably used in reaching the final resolution to this issue. Answer: According to Kurt Lewin, managing organizational change is a basic process of unfreezing, change intervention, and refreezing. Unfreezing is getting the people affected by change to believe that change is needed. During the change intervention itself, workers and managers change their behavior and work practices. Refreezing is supporting and reinforcing the new changes so that they stick. Initially, President Clinton handled the unfreezing stage very poorly. While he was personally convinced that the existing procedures for dealing with homosexual men and women in the military were wrong and inappropriate, he did not involve any of the people who would be affected by the change in evaluating or verifying this opinion before announcing the change that he planned to make. Thus, he encountered a very high level of resistance to change, both within and outside of the military. Because resistance to change is natural and inevitable, managers need to unfreeze resistance to change to create successful change programs. The following methods can be used to manage resistance to change: education and communication, participation, negotiation, top-management support, and coercion. When resistance to change is based on insufficient, incorrect, or misleading information, managers should educate employees about the need for change and communicate change-related information to them. Managers must also supply the information and funding or other support employees need to make changes. Another way to reduce resistance to change is to have those affected by the change participate in planning and implementing the change process. Employees who participate have a better understanding of change and the need for it. Furthermore, employee concerns about change can be addressed as they occur if employees participate in the planning and implementation process. Employees are less likely to resist change if they are allowed to discuss and agree on who will do what after change occurs. Resistance to change also decreases when change efforts receive significant managerial support. Top managers must do more than talk about the importance of change. They must provide the training, resources, and autonomy needed to make change happen. Finally, use of formal power and authority to force others to change is called coercion. Because of the intense negative reactions it can create (i.e., fear, stress, resentment, sabotage of company products), coercion should only be used when a crisis exists or when all other attempts to reduce resistance to change have failed. President Clinton was attempting to use coercion when he made his initial announcement about the impending Executive Order. However, this reliance only on his formal power and authority was insufficient (and inappropriate, as his first step and only step in managing resistance) to rally the military and the public to his side. Thus, he had to start over by forming an independent commission to study the problem and make recommendations. Since this commission was made up of members of the public as well as the military, and there was considerable collection and evaluation of data before possible solutions were identified and ultimately agreed upon by all parties, the final solution clearly entailed the use of all five methods for managing resistance (i.e., education and communication, participation, negotiation, top-management support, and coercion––since the President would not let the issue be dropped). 5. Explain the difference between activity-oriented and results-driven change, and list the advantages of the results-driven approach to change. Characterize each of the approaches to organizational change presented in the text in terms of their apparent degree of emphasis on activities or results. Answer: One of the reasons that organizational change efforts fail is that they are activity-oriented, meaning that they primarily focus on changing company procedures, management philosophy, or employee behavior. Typically, there is much buildup and preparation as consultants are brought in, presentations are made, books are read, and employees and managers are trained. There’s a tremendous emphasis on doing things the new way. But, with all the focus on “doing,” there’s almost no focus on results, to seeing if all this activity has actually made a difference. By contrast, results-driven change supplants the sole emphasis on activity with a laserlike focus on quickly measuring and improving results. Rather than emphasizing changes in philosophy, procedures, and employee behavior, this approach emphasizes identifying and working with easily measurable dimensions associated with demonstrably successful change. This direct emphasis on measuring and improving results is the first advantage of the results-driven change approach. The second advantage is that managers introduce changes in procedures, philosophy, or behavior only if they are likely to improve measured performance. In other words, managers actually test to see if changes make a difference. A third advantage of results-driven change is that quick, visible improvements motivate employees to continue to make additional changes to improve measured performance. Consequently, unlike most change efforts, the quick successes associated with results-driven change are particularly effective at reducing resistance to change. The text identifies results-driven change, the General Electric workout, transition management teams, and organizational development as different change tools and techniques that can be used to create and manage organizational change. Among these approaches, the General Electric workout is a special kind of results-driven change. It is a three-day meeting that brings together managers and employees from different levels and parts of an organization to quickly generate and act on solutions to specific business problems. At the other end of the spectrum, as an activity-oriented approach, would be organization development. Organizational development is a philosophy and collection of planned change interventions designed to improve an organization’s long-term health and performance, which clearly places greatest emphasis upon process, philosophy, procedure, and behavior. The remaining approach, the transition management team (a team of 8 to 12 people whose full-time job is to completely manage and coordinate a company’s change process), seems to lie in between the results and activity orientations. It includes more emphasis on activities, or things to be done, than on the specific measurement of demonstrated results. On the other hand, its greater emphasis on specificity is closer to the results orientation than that of organization development. Test Bank for Effective Management Chuck Williams 9781285866246