Why do companies need to change?
Constant change is one of the key aspects of economic development. A company’s position in the market can be influenced by various factors. For example, a decrease in demand for a particular product or service, monopolization of production, price increases, currency fluctuations, and natural disasters can all drive the need to implement changes in business processes.
The activity of a company in testing and using new business technologies in modern management is known as innovation management. It’s important to understand that any innovation is the result of aligning opinions and ideas, which then leads to a series of decisions.
Joseph Schumpeter classified possible changes into five categories:
- The emergence and active use of new technology and the implementation of new technological processes.
- The introduction of a new feature in a product (adding this new feature).
- The use of new types of raw materials in technological processes.
- The renewal of material and technical equipment for the production of goods and services.
- The discovery of new markets.
Innovations can be implemented at one of the following levels: individual, organizational, or sectoral—or across all levels simultaneously. The innovation process is a multi-dimensional concept. It can be viewed as a production, marketing, or research activity. A common understanding of the innovation process is that it is a sequence of stages in the life cycle of an innovation—from the formulation of an idea to its final implementation. From the perspective of resource allocation, this process may involve financing and investing in the development and distribution of a new product or service.
What hinders change?
Before starting to implement innovations, it is necessary to analyze the forces at play within existing business processes. This will help determine the feasibility of changes and how to neutralize the actions of opponents. There are two types of forces—driving forces (those that are willing to support innovations through their actions) and restraining forces (those that actively resist change).
The key task for a manager at this stage is to identify the potential for change, meaning identifying the forces that can become driving forces.
The next responsibility of a leader is to minimize resistance, which is based on four main reasons:
- Narrow self-interest (the desire to overcome the threat of losing values—status, salary, company resources, etc.).
- Misunderstanding of the situation (misinterpretation of management’s position, low level of trust, or lack of trust in management).
- Different interpretations of the consequences (incorrect assessment of the company’s activities).
- Low tolerance for change in general (excessive conservatism, inability to accept new things).
How to make employees work for the benefit of the business?
The main methods of overcoming resistance include:
- Providing information (the more objective and complete it is, the fewer suspicions of deception and profit-seeking will arise among employees).
- Involving employees in the design and implementation of innovation (a sense of involvement in changes and pride in the company’s achievements in the future).
- Support from the manager (this will allow each employee to feel their own importance in the process of change).
- Negotiations with individual employees and signing written agreements (the more agreements and approvals the document goes through, the fewer complaints will arise about its implementation).
- Manipulating people (focusing on the positive aspects, skillful handling of the available information).
- Explicit or implicit coercion (creating special job instructions, direct pressure on employees).
When developing an innovation plan, it is important to include a number of activities that will allow for quick responses to any manifestations of resistance:
- Clarification talks
- Meetings at all levels
- Meetings and discussions with company co-founders
- Encouraging the development of innovative ideas
- Implementing a motivation system in the company
In addition, at every stage of the innovation process, it is necessary to constantly carry out control and persuasion functions.
Changing quickly and effectively
The conditions that should be present in a company ready for change are as follows:
- The leader must be prepared to provide all types of resources available to them (and the company).
- The staff must be ready to accept the need for the introduction of innovations.
To create the most effective combination of these “readiness” factors, the leader must correctly set the boundaries for the dissemination of information and the format of discussions regarding proposed changes. It is necessary to allow employees to draw conclusions independently, while the innovation manager should influence the motivation of the staff. Coercion (through the establishment of job instructions) is an extreme and not the most effective tool in terms of long-term impact. In other words, it is necessary to set constraints that will contribute to the “right” conclusions from employees, which will significantly ease the perception of alternatives.
Once managers have decided what to implement, they face the challenge of how to introduce innovations into the company’s operations.
In the practice of innovation management, there are four key technologies:
- Project technology
- This technology involves selecting employees from the company’s own staff to carry out a project, with their duties and powers limited to the scope of that project. Afterward, members of the project team reform a part of the company, and upon completion of the project, depending on its goal, either reorganize into a separate subsidiary or the selected employees return to their previous duties.
- Reforming a specific area
- This technology involves transforming an already functioning area of business. The key aspect is that there is no need to create an autonomous structure to handle the reorganization. The advantage of this technology is that a minimal number of people are involved in approving the change project. However, the disadvantage is that if the head of the department being reformed does not agree with the change program, they may need to be removed from their role during the innovation process; otherwise, resistance will not be overcome, and the implementation of changes will not achieve the desired economic effect.
- Introducing a parallel structure
- Within the company, a new structure is created (with the involvement of external specialists), whose main goal is to compensate for and correct the shortcomings of the existing one while retaining its core essence. This approach is used in two cases:
- When a division needs to be reformed, but its head strongly opposes it and cannot be immediately replaced;
- When the company’s co-owners cannot agree on the near-term development prospects.
- Within the company, a new structure is created (with the involvement of external specialists), whose main goal is to compensate for and correct the shortcomings of the existing one while retaining its core essence. This approach is used in two cases:
- Training and consulting
- This technology involves intensive professional assistance on a temporary basis. The advantage is that it’s the only way to invite an external expert who understands a specific sector of business processes, gain an independent perspective, and receive advice on the types of innovation development that the company needs. The downside is the high cost of services from qualified consultants.
In literature and practical examples, there are other specific technologies for the innovation process. Detailed algorithms for action within these concepts can also be found in open sources.