Leading Innovation And Change- Literature Review 313t5v

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eading

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Creating sustainable growth thought innovation and change

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“I Lundoji Pinto Da Silva declare that I am the sole author of this assignment and the work is are result of my own investigations, except where otherwise stated. All references have been duly cited”

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Index:

About the assignment…………………………….………………………….......4 Critical review of theories of innovation and change, including the leadership of innovation and change……………...…………………………5 Innovation………………………………........................................................5, 6 Change……………………………………………………………………….......6, 7 Fig 1: Change process……………………………………………………………7 Leadership of innovation and change……………………………….……..8,9 Successful and less successful innovation and change…….……………10 Innovation success: Toyota Prius – Hybrid Synergy Drive car…….…10, 11 Fig 2: 3rd Generation Toyota Prius……………………………………………..11 Innovation/change failure Bankers catastrophic idea: “subprime mortgage”……………………12, 13 Lessons to learn………………………………………………………………13, 14 Leader of innovation and change, personal action plan...........…...15, 16 Table 1: performance plan……………………………………….…………….16 Quick thought to conclude……………………………………….……… 17, 18 Bibliography………………………………………………………….19, 20, 21, 22

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About the assignment: With all plausible sources of scientific and individual research collected, we intend to bring about the important theories of innovation and change. We analyse the need of having change agents, not just as rule players to influence followers, but also as leaders to share their vision and bring about change within the organization. Change will take place either in: process, products/services, markets, strategies and people. We evaluate practical examples of successful change that took place at Toyota with its Toyota Prius model. We look at less successful change, implemented by American and European Banks. What for some Subprime mortgage lending was a bright idea, we find later that it gave birth to the orchestrated financial and economic melt-down first of the United States of America economy then Europe. We point out the reasons, behind the positive and negative outcome of innovation and change. To conclude we analyze our performance as innovation and change leaders. We take a look at skills, traits and characteristics that we need to have in order to become change agents in the best possible way.

Note: We understand that some of the facts involve sensitive political, economical and social factors. All information and facts were collected with sole purpose of concluding this research project, and not in anyway to bring about any political, economical or social disruptive criticism.

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1. A critical review of theories of innovation and change, including the leadership of innovation and change?

Innovation Since the 19th century industrial revolution, innovations become the most important element of economies of mass production. From land line phones to mobile phones, from mail to email and internet, from slow trains into high speed trains, from dirt roads to high speed roads, from double engine airplanes into jet airplanes, from ferry boats to mega ferry cruisers etc, all this thanks to innovation. The word derives from the Latin word innovati or innovatus. It means to renew or to change. It also refers to an idea, method or object that was created and then altered to an improved version. West et al (2003) considers innovation as ‘…the introduction of new and improved ways of doing things at work.’Porter and Ketels, (2003) on the other hand sees as ‘the successful exploitation of new ideas’ It’s doing more, with less resources, since it enables to increase overall istrative and financial efficiency in the process. When substantial improvements (innovations) are done to the process the work becomes easier, less time is wasted resulting in better service and high quality products offered to the end-consumer. Freeman, believes that “it’s the process that includes the technical activities, concept, development and management and ultimate results in the commercialization of improved products or utilization of improved processes” “The human body is in constant change; millions of cells multiply single second to replace old cells. Our bone structure changes every single month” innovation and change is everywhere and nature proves that. As strange it might sound but there are various types of innovation, and these are: 

Product innovation (technological) : introduction of improved products and services

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Process innovation: includes the improvement of new production process and logistics. Alteration of the techniques, software or equipment.

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Organizational Innovation: includes the new organizational practices or improved ones. New business practices, work practice and improved stakeholders relationships.

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Market innovation: implementation of new marketing methodologies, which might include improved product design, packaging, pricing and promotion. In other words it’s the substantial improvement of the 4 P’s.

Innovation can be considered closed or open, depending of the source of information. Normally innovation becomes open when both external and internal information/sources are used to improve knowledge management. Innovation is closed when only internal information/ sources are used to improve management.

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hange

‘It’s an alteration, a different state of affairs” Innovation and change are interconnected. It’s impossible to have innovation without change, but not every change is an innovation. For instance: recently Portuguese government announced that more than 30,000 teachers lost their jobs, the most profound change was that statistics would immediately show unemployment both in Portugal and Europe. Organizational change might mean many things such as: change in market positioning, change in social status, change in strategy, change in mission and vision, revaluation of work practices etc. It’s a natural process that co-existed with organizations, its part of the business life of any organization be it governmental or private. Changes will always an integrant part of the organization, unless decision makers, succumb the organization into a stagnant state of affairs. Change requires time, patience, leadership, responsibility and determination. For a number of organizations, change might be quite 6

simple, quick and not expensive to implement. In other organizations change is an expensive exercise and requires extensive research before implementation. For instance: Mercedes Benz spends almost 1 million dollars in research before launching a new Mercedes model. On the other hand: Kellogg’s does not spend not even a third of that budget daily to implement major changes. Balogun and Hope Hailey (2004) underlined that change can Incremental (Change who does not create major impact in the organization) or revolutionary (Complex and unplanned change. Organization trays to respond to challenges as it progresses) Nadler and Tushman (1990) see change as either Anticipatory (planned change, can be controlled) or Reactive (normally present after certain outcome or stimulus) Paton and McAlman (2000), Senior and Fleming (2006) on the other hand see change as Hard (technical issues, possible to analyse, produce ‘right’ answer) or Soft (more complex, different viewpoints) Studies from Beer and Nohria (2000) bring about two important theories concerning change. Theory E: Says that change needs to be top-down strategic change. It maximizes shareholders value, structure and systems). Theory O: Focus more into, developing the organization’s , culture and learning. It’s more participative change. How to implement triumphant change? Perhaps the best work comes from Kotter (1995/1996) where he identifies 8 fundamental steps. In order for the organization to achieve successful change, there must be a sense of urgency (team must want to change), there must be team work (Strong team work focus to change), there must be a clear vision (the future must be clear and how to get there must clarified), communication (create channels of communication, that facilitate understanding the vision), Empowering those who participate (removing all barriers of those who are willing to contribute), create short term wins (produce some degree of success even if its in small scale), consolidate and build ( don’t give up, create a step by step consolidation of the change until it becomes a reality) and finally institutionalize the new approaches( create a new culture of values and beliefs that go in line with change)

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Leadership of innovation and change What is leadership? Leadership is “the process of influencing others to understand and agree what needs to be done and how it can be done effectively, and the process of facilitating individual and collective efforts to accomplish the shared objectives” (Yukl 2007) How is leadership related to innovation and change? “leadership that drives a particular innovation, seeking to make progress with it through the various stages of its life cycle, enlisting the of others, gathering resources, planning and monitoring progress” Boat (2011) The innovation leader can have different leadership rules such as: “Entrepreneur, Sponsor, Mentor, Critic and Institutional leader” (Van de Ven et al 1999) Its unquestionable the fact that, no matter how good is the theoretical explanation of innovation/change, there must be a change agent/leader to materialize the vision. In other words organizations need to appoint and trust the leader to bring about innovation/change. The leader must work together with the group/team to gain and implement change. According to Buchanan (2003) “The notion of the single change agent…as a lone vehicle for organizational creativity, innovation, and change, appears to be problematic…. It would appear … to be the case that the competent change agent, acting alone, is likely to have limited success” Very important studies from West (1997) found that organisations that are orientated towards flexibility encourage flexibility. Normally these organizations would have: flatter structures, decentralised decisionmaking, low specialisation of jobs, encouraging interaction between different functions, professions and specialisation are likely to stimulate innovation. Traditional management embraces goal achievers and punishes non performers; innovation/change agents/leaders on the other hand reward achievers and non-achievers and punish inactive workers (Sutton 2001)

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Do employees embrace change always? Average employees like their status quo, dislike change, dislike new rules and responsibilities. Innovation and change becomes therefore a process of change to peoples who do the work. Without their cooperation and the process will certainly fail. For instance: let’s look at Toyota Prius, Toyota’s hybrid car that it’s capable of an amazing economy of 72, 4 miles per gallon. With its amazing 132 horse power this car is capable of reaching 175 -190 km per hour. However without the commitment of the CEO, chief project managers, project managers, electrical engineers, mechanical engineers, operations managers, workshop staff etc, this great innovation would become a prototype only and never materialize. Today anyone can enjoy this great piece of auto mobile innovation! How important is the process of change for leaders? Leading change it’s about leading peoples towards a specific alteration in the state of affairs of the organization. Change can be very simple and quick or very complex and time consuming. Reason why, Hayes (2010) study points to managers/leaders “that change is process that goes trough series of stages ” Fig 1: Process of change P e o p l e m a n a g e m e n t

Recognise the need and start the change process

R e v i e w

Diagnosis: review present state and identify future state Plan and prepare to change Implement the change

Sustain the change

i s s u e s

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2. Successful and less successful innovation and change?

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nnovation success:

Toyota Prius – Hybrid Synergy Drive car “To evaluate practical examples of successful change that took place we look at Toyota with its Toyota Prius model with Hybrid Synergy Drive technology. It is said that when you are at the top, the only way you can go is down. Not so for the remarkable Toyota Prius, which this summer takes its advanced hybrid power technology and environmental leadership on to a higher level. Toyota prius is a remarkable car, with its hybrid power technology, which means a combination of both fossil fuel (gas or diesel) and electricity. It’s the most advanced technology hybrid car of its range. Toyota with its long tradition of keeping innovation and quality certainly together proved once again that Toyota is one the best brands out there. According with Toyota “Prius delivers emphatic improvements in fuel efficiency, environmental responsibility and driving performance” Build with the highest standard of quality in motor industry, the Prius has been in the top since 2004 as the best engine of the year and the best green engine of the year for the last five years in a row. The new Prius has been comprehensively revised and improved, with more than 90 per cent of its components redesigned to create a lighter, more compact system, with a focus on increased power, further reductions in real-world fuel consumption and improved cold weather operation. Its power and efficiency can really prove that this is an excellent motor vehicle. The new 2.0 litre petrol with 134 horse power it’s a great improvement, if compared to the previous 109 horse power of the 1.8 litter petrol engine.

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As for performance, the Prius is surely not a sports car, but also not the slowest in the market. The Prius driver can accelerate from 0 to 100 km just in 10, 4 seconds, with an average consumption of 72.4 gallons per litter. In EV (Electric) mode at speeds up to 55 km per hour, it uses no fuel and produces zero exhaust emissions. The Prius is one the best Hybrid cars available not just because of fuel economy but also because it accessed Euro 5 emissions standards with 89 grams per kilometre of carbon dioxide (CO2). With its innovative Hybrid Synergy Drive System Components, “the new prius it’s a full hybrid capable of running in petrol and electric modes alone, as well as a combination of both” In figure 2 we can see how Toyota engineers, were able to revolutionize the auto-motor industry. By creating an electronic system that controls the exchange between different drive modes, without much effort and without having to learn the auto motor encyclopaedia. We can only it this is a great car, prove of sustainable innovation.

Figure 2: The new 3rd generation Toyota Prius

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nnovation/change failure

Bankers catastrophic idea: “subprime mortgage” “You can get into way more trouble with a good idea than a bad one” Warren Buffett “The potential danger of a good idea (innovation/change) is more dangerous than a bad idea, since people normally embrace good ideas (innovation/change) rather than bad one. Managers normally act on good ideas and if the idea (innovation/change) is successful it becomes an institution” Benjamin Graham. Subprime mortgages were initially a great idea because peoples with poor credit portfolio could easily have access to credit over and above their credit rate. Clients were initially very happy, leaving Banks with a beautiful smile because now they could buy the million dollar house in Beverly Hills. The word spread all over, and now every one wants credit to buy expensive cars, houses, finance projects etc. It seemed as if the 40-50’s “live the American dreams” propaganda was still alive. Financial institutions were doubling their profits, brokers were becoming millionaires over night, and CEO’s salaries and bonus almost tripled. While in Africa poverty, unemployment and corruption was the front page of the paper, some even thought that immigrating to States to live “The American dream” was the best. As any dream, it only lasts for a while, reality is often different when we weak up. One day America’s financial institutions weak up to find out, that there was inflation and recession. Peoples with poor credit history were not paying their debt. Private institutions were not making enough money to recover investments. Millions of jobs were lost in process and trillions of dollars were lost. Adding to that government’s budget was reaching numbers that illiterates could no longer read or write just to deal with the crisis. The treasure was printing more money out of “thin air” with no collateral and reserves making things even worse. Government and FED (Federal Reserve) had to step down, with a rescue plan of 700 billion. The aim was to buy default mortgage and

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help major American companies. This money would allow companies, to carry on business at minimum level. While in America “The American dream” was now a nightmare, things in Europe started to deteriorate as A.I.G the worlds biggest insurance company was now in great danger to close down due to its great idea of “writing insurance on subprime mortgages was profitable” Warren buffet . Contrary to what happen in America, in Europe the banking system was one the best and lending was not really a major cause of the crisis, since most of the European banks rely in the basics of banking to borrow money. While in America banks could borrow more than 10 times its capital reserves, European banks rely in more safe approach of 4-6 times lending against its capital reserves.

Lesson to learn: Close analysis of this case of success innovation/change from Toyota and the Financial sector in America and Europe, we can only conclude that innovation/change needs to be very well accessed before decision of final implementation is done. Very often companies act on good ideas that produce change, not in bad ones. Regardless if it’s a bad idea or a not so good one all changes need to be accompanied with strong analysis of applicable/not applicable. Burnes (2004) proposed a four step before any major change is implemented such as: “a) Clarify the problem or opportunity, b) Investigate alternative course of action, c) and d) Give clear recommendations to decision-makers.” (Hayes 2002; Holbeche 2006) recommend that organizations to first “Recognise a problem or opportunity and them Do analysis – or diagnosis” on the problem before change takes place. Financial statements, proven records of past failure/success of other companies, market analysis and trial tests in a specific group of individuals are also some of the solutions that perhaps could work. It’s not by coincidence that companies such Microsoft do extensive research before launching a new product or some major change. “This is reason why we make available, a trail of the software/program. Our clients can then test the trail version before we release the final software/program” Bill gates

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Any successful and unsuccessful change leaves a foot print. Normally success changes: Benefit the organization, or the group or team; where it was introduced It is popular with customers (product or service innovation); It improves on what was there before (E.g. a change to a process); It meets its original objectives and It is sustainable (over a period of time)

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3. Assessment of performance as a leader of innovation and change, to include a personal action plan to your further development? As a leader of innovation of change, the writer puts some theories and experiences in paper. Based in his personal experience and independent studies he concluded the following: Leading innovation and change it’s not a one step process where by the leader simple encourages the team to become creative and come up with some ideas. It’s not just about launching new product and then dump it into the market in attempt to make more money. Leading innovation and change it’s a continuous process, which requires skills and abilities. The writer names few of the most important skills based on his personal experience: 

The self image (Innovation and change require, that we become flexible and can easily adapt to circumstances as they change)

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To be a visionary (As innovation leaders we need to become visionaries and think ahead. Be able to grasp a piece of the future to better shape the present)

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To become self organized, self determined and risk taker (Perhaps the most important characteristic of innovation and change leaders it’s to lead the way towards change. Yes peoples will be reluctant to change in first place, but over time change will be part of the culture)

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Become a team builder (encourage more than punish, reward more than demand, encourage team work in stead of individual accomplishments of innovation)

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Be solution seller ( traditional leadership tells what needs to be done, innovation leaders needs to sell ideas and expect some creative outcome)

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Works from Balogun and Hope Hailey (2004) pin point other skills and traits that change agents need such as: analytical skills, judgement skills, implementation skills and self-awareness. ability to deal with complexity, and to be good at influencing those around them to sell change, political judgement, common touch, visibility, persuasiveness, networking, team building, communication awareness. As way to improve and measure performance perhaps would do the Following: 1st Careful analyze of leading innovation and change personal skills 2nd Measuring performance evaluation in of leading innovation and change 1st Careful analyze leading innovation and change personal skills: . Draw a list of all skills needed to become a better leader of innovation and change. Tick or select those skills that we already pursue, and leave in blank those that need improvement. As an example:  Analytical skills,  Judgement skills,  Implementation skills  Ability to deal with complexity  Influencing those around them to sell change  Political judgement  Common touch  Visibility,  Persuasiveness,  Networking  Team building,  Communication  Awareness nd 2 Measuring performance evaluation in of leading innovation and change: Table 1- Leading innovation and change: performance evaluation Evaluation of performance Team player

Strengths/weakness

Comments

Strength

Meets dead lines Organizational skills

Strength weakness

Leadership ability

Strength

Room for improvement Continues to improve Needs urgent improvement Needs urgent improvement 16

Quick thought to conclude: 2008 financial crisis makes us rethink that perhaps innovation and change it’s much more than to release a new Coke can, new Ford car a new green building or cars that can fly. Present economical and financial conditions in major countries such as: United States of America, , Greece, , Italy and UK do make us believe that perhaps “business should not be done the old fashion”, at least for now. Governments and private organizations need to tackle some paradigms about innovation and change in order to solve crucial problems that can endanger our own existence. But why is that? “Some individuals/institutions accumulate extraordinary wealth that can not be spent in a thousand years, even though wrong business practices. The impact of wrong practices is irreversible and last for ever in mother nature” Silva, L. (2011) Yes contrary to socialism, capitalism encourages privatization, competition, profit, growth, and development, but at same time it also encourages the individual or companies to apply all necessary means to achieve its end. In summary capitalism is about making profit, with some degree of responsibility, not the other way around. Are we over exaggerating? The main problem starts with the very systems we created, be it financial, economical and technological. If 100 years ago capitalism was the main reason to accumulate wealth, today we might recognize that perhaps the very core of capitalism needs to change otherwise it will become a “Global nightmare.” The combined fortune of Forbes billionaires is thousands of times bigger than Africa’s GDP (Gross Domestic Product). Was this a financial crisis or signal that we need urgent change? If we look at current financial crisis we can easily see that this could be avoided, only if leadership and decision makers were more responsible in of identifying urgent financial problems, choose solutions and implement sustainable change things could be far better.

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Question is where do we draw the line between profit seeking and sustainable global economic growth? Leading innovation and change with sustainable growth is the answer, if we don’t eliminate the word “sustainable” since it’s more than urgent to implement innovation/change that lasts, but also keep the natural balance between human beings and natural environment. In other words if your business is timber, you need to change strategy to plant more trees. If your business is industrial fishing, your company needs to develop programs to contribute for the repopulation of the sea. If your business is energy, oil, gas etc, there must be some serious process and technology change in order to protect the environment. After the Kyoto agreement, major countries started making considerable changes in order to protect the environment and decrease CO2 emissions. China is third economy of the world, but the first to implement radical changes as far the environment is concerned. Are there any solutions available to deal with the problem? Yes there are many solutions available, and we still have time to correct modern economics. We say modern economics because; old economics speaks of using limited resources to satisfy our needs. Modern economics speaks of growth, increase without ever thinking that natural resources are limited. What is the Importance of this theory? This theory gave us the opportunity to rethink of ways to successfully implement innovation and change to achieve sustainable economic growth either in small or big scale.

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