By: Nima Heirati
Rapid development of technology, globalization, innovative initiatives and disruptive changes are pushing the organizations in the direction of increasingly flexible for changes. If they face major change, they might adjust the existing organization drastically. In this case, before managers rushing to breach, they must understand precisely what type of change the existing organization is capable and incapable of handling.
Varieties of factors are affecting an organization’s capabilities. At first resources such as tangible and intangible properties with high quality and appropriate amount, increase an organization chance of coping with changes. Second, processes as the patterns of interaction, coordination, communication and decision making employees use to transform resources into products and services have critical role in organization change. The visible processes, like manufacturing, and background processes, like how to plan the budget, are defined the main abilities and disabilities of an organization. However, these factors are the visible side of an iceberg, and to organizational change another critical factors must be considered.
An organization’s values as the standards by which employees set priorities that enable them to judge whether something is attractive or not. Employees at every level make prioritization decisions, so the consistent values among an organization are an ideal for every manager. A company’s values reflect its cost structure or its business model because those define the rules its employees must follow for the company to prosper.
In fact, over time the locus of the organization’s capabilities shifts toward its processes and values. In other words, each organization starts in resources, then moves to visible, articulated process and values; and migrates finally to culture. Also, these factors define what an organization can do; they constitute disabilities when the problems facing the company change fundamentally.
In brief, some companies are good at responding to evolutionary changes in their market which critics name it sustaining innovation. In this case, they make a product or service perform better in ways that customers in the mainstream market already value. However, some companies, run into trouble is in handling or initiating revolutionary changes in their market, are dealing with disruptive innovation. Disruptive innovations create an entirely new market through the introduction of a new kind of product or service, one that is actually worse, initially, as judged by the performance metrics that mainstream customers’ values.
Disruptive innovation generally occurs so intermittently that no company has a routine process for handling them. Furthermore, because disruptive products nearly always promise loser profit margins per unit sold and are not attractive to the company’s best customers, they are inconsistent with the established company’s values. Therefore, the large companies often surrender emerging growth markets is that smaller, than disruptive companies are actually more capable of pursuing them; because, their values can embrace small market, and their cost structures can accommodate low margin.
When an organization needs new process and values managers must create a new organizational space where those capabilities can be developed. At first, if a company’s capabilities reside in its process, and if new challenges require new processes, managers need to pull the relevant people out of the existing organization and draw a new boundary around new group, which somebody referred it to “heavyweight teams”. The teams are entirely dedicated to the new challenge, team members are physically located together, and each member is charged with assuming personal responsibility for the success of the entire project.
Moreover, if the mainstream organization’s values would render it incapable of allocating resources to an innovation project, the company should spin it out as a new venture. Large organizations cannot be expected to allocate the critical financial and human resource needed to build a strong position in small, emerging markets, and it is very difficult for a company whose cost structure is tailored to compete in high-end markets to be profitable in low-end markets as well. In addition, sometimes innovative managers need to make separate assessment of the capabilities and disabilities that reside in their company’s resources, process, and values, so must they do the same with acquisitions when seeking to buy capabilities. If the capabilities being purchased are embedded in an acquired company’s process and values, then the last thing the acquiring manager should do is integrate the acquisition into the parent organization.
To sum up, managers whose organizations are confronting change must first determine whether they have resources required to succeed. They then need to ask a separate question: Does the organization have the processes and values it needs to succeed in this new situation? Understanding a problem is the most crucial step in solving it. This is the reason that innovation often seems to be so difficult for established companies is that they employ highly capable people and then set them to work within organizational structure whose processes and values were not designed for the task.
