The Ambidextrous Organization: Exploring the New While Exploiting the Now

By Jens Maier

How can businesses balance the demands of both exploiting and exploring? Companies and their leaders have to use both hands: on the one hand making next quarter's targets through existing business, whilst simultaneously exploring new opportunities. This is the first book to explain how to use this approach to encourage innovation.

• Language: English
• Publisher: Palgrave Macmillan
• Release date: Jul 8, 2015
• ISBN: 9781137488145

Book preview

Introduction – The Case for Ambidextrous Organizations and Ambidextrous Leaders

Ambidexterity – Why is this Important for You and for Your Organization?

Ambidexterity – the use of both hands is not a new concept. The word ambidextrous is derived from the Latin roots ambi-, meaning both, and dexter, meaning right or favorable. Thus, ambidextrous is literally both right or both favorable. Human beings are usually born with two hands. As they progress through life, it quite naturally develops that one hand becomes more dominant. This is recognizable immediately, as when writing or eating, your dominant hand will prevail without you even thinking about it. This type of preferred behavior develops quite early in life. Usually, by the time you reach the end of your teenage years it will be quite fixed. In normal circumstances your preference for behavior kicks in: You put the pen in the dominant hand and you start to write. In the absence of any significant reason for change – for instance, while skiing you break your dominant hand – there is no need to alter that habit. I have yet to meet a person who decides: Today is the day. From now on I will start to sign my name with the other hand.

The CEO Test

Recently, I was asked by the CEO and the HR Director of a global IT firm, Leadership? What has this got to do with ‘personality?’ In response I gave them a test I learned from my colleague Brent Smith:

Test step 1: Take a pen and a clean sheet of paper, then sign your name. They looked at me in bewilderment, but still did what I asked them to do. This took seconds; so what?

Now, I explained step 2: Put the pen in your other hand, and sign your name again… Their reaction was a mixture of laughter and embarrassment. I asked: "Are you proud of the result? No? Describe the process: Was it challenging, uncomfortable? This is what ambidexterity feels like – literally, as a first-hand experience.

As the CEO test demonstrated, to use the other hand is usually awkward, uncomfortable, and unfamiliar. However, with a bit of practice it is doable. Imagine the situation of the person who has broken her/his dominant hand in a skiing accident. For the following few weeks that person will have to function using the other hand. Whilst it will be very hard at the beginning, by the time the dominant hand has recovered, I am sure that individual will be quite comfortable using both hands.

What has this got to do with business? And what has this to do with innovation?

Organizations, as well as individuals, have over time developed their dominant hand. Success at using the dominant hand mainly reinforces the successful behavior. This works really well as long as the environment around both the individual and the organization stays stable. However, changes in the environment may force both individuals and organizations to adapt and to, literally, put the pen in the other hand.

In this change, both individuals and organizations can find themselves in the role of the victim (skiing accident) or in the role of the pro-active change agent who purposefully addresses an opportunity overlooked by competitors. Individuals and organizations can therefore look at this issue from both a defensive and a pro-active, attacking stance.

Before we look at the implications at the organizational level, let us first focus on the individual leader and the role of ambidexterity.

The Individual

Having worked with individual leaders for more than 30 years I have observed time and again how these leaders first identify and then use their dominant hand, their own leadership style. This dominant hand will produce results and will lead to advances in their leadership career.

Take, for instance, an example of a young sales person, extraverted and with a high level of conscientiousness. Among the peer group, this person, through visibility and good achievements, may be identified for its first leadership role. Now, with clear goal setting, tight deadlines, and good follow-through, she/he can achieve impressive results. The individual leadership style of telling is emerging and the leader can subsequently hone that style. Based on the good performance, it is not a surprise that this person then gets promoted.

At the forefront of the recently promoted individual’s mind is the question: Why did I get promoted? The answer is clear: Because my leadership style worked. What will this person do in her/his new role? More of the same – it has worked! It is very clear after a few years of leadership experience that the dominant hand is well practiced: Manifested in a style of telling, clear goal setting, and close follow-through.

The big challenge arises when this person gets exposed to a new leadership context, outside the functional area of expertise. Take for instance the project of collaboration between two organizations or the internal challenge of moving into a general management role, overseeing a number of functional areas. Here the dominant hand of telling will clearly not work. In order to succeed here a style of influencing may be the recipe for success. The big challenge for the individual leader is: Can she/he use the other hand, influencing? Is the leader able to use both hands?

We have known since Darwin that adaptability matters for the survival of a species. The same is also true for leaders and organizations. Leaders succeed for many different reasons and the leadership literature has tested many hypotheses, only to conclude that it depends. Now, if you ask the question differently – Why do leaders fail? – then the answer is much clearer: Lack of adaptability. Exactly, the Darwin conclusion!

Adaptability means to understand when and how to use the other hand

So, what does adaptability mean for an individual leader? Adaptability means to understand when and how to use the other hand. So your preference for behavior as an extraverted, highly conscientious individual is to tell your subordinates exactly what to do and hold them accountable to clear goals and tight deadlines. However, exactly this preference for behavior may turn out to be completely counter-productive when you find yourself managing a very delicate alliance of business partners whom you need to influence to achieve a common goal in an exploration project.

Adaptability here means to understand that your dominant hand to tell will not work and that you have to deliberately put the pen in the other hand to influence.

In your leadership role you also have to remain predictable. That means that the people around you expect authenticity, they want to see the real person. In Chapter 2 we will discuss the T-Model as a framework for the individual challenge of being both adaptable and authentic in more detail.

The Organization

Let us now turn the focus towards ambidexterity in the organizational context. Organizations have to deliver products and services today, to meet the expectations of all stakeholders on a short-term basis. Therefore, a strong operational focus is required to deliver quarter after quarter in a predictable manner. Now, even with such a clear focus on the here and now, organizations also need to prepare for the future, they must innovate.

Innovation matters because it pro-actively offers the opportunity to differentiate and to create new offerings that are unique and wanted by customers. Defensively, innovation is required to respond to changes in the environment, new technologies, and new competitors.

Organizations, like people, have their own history, their own DNA code. Organizations also develop their dominant hand. In the organizational context it is called core competences, following the groundbreaking work of C.K. Prahalad and Gary Hamel (1990).

Innovation

Organizations behave similarly to individuals. They stick to their core competence, their dominant logic, and their dominant hand. Organizations also want to be authentic; hence so much weight is put on values in organizations, emphasizing their corporate DNA code. However, organizations also have to be adaptable to changes in their environment.

In the business literature, ambidexterity is defined as an organization’s ability to be:

aligned and efficient in the management of today’s business demands, whilst simultaneously being adaptive to changes in the environment.

(Duncan, 1976; Tushman & O’Reilly, 1996; Gibson & Birkinshaw, 2004)

This entails using the dominant hand to make incremental changes and using the other hand to address major shifts in the environment. This is then the equivalent to using both hands for the individual, on the one hand to do exploitation and simultaneously with the other hand to do exploration.

Exploitation

This is the word used to describe the ability of an organization to keep the company aligned and efficient in the management of today’s business demands. Exploitation refers to the past, the previous investments, the track record of an organization, and the existing customer relationships. The organization is exploiting and building on these achievements. Activities usually include continuous improvement, benchmarking, and business process re-engineering.

The outcome of exploitation is maximization of the utility from previous investments, in fact, harvesting. It means that the short-term performance is guaranteed, market share is won or at least maintained, and revenue and profit targets are being met.

The focus on exploitation can secure the short-term survival of an organization, but it does not guarantee its success in the future. In recent years we have seen great companies such as Nokia and Blackberry struggling mightily as they focused on exploitation and continuous improvements at a time when a whole new market with new players was emerging – the smartphone market.

Therefore the biggest challenge for organizations only focusing on exploitation is the capability trap, not being able to respond to environmental changes.

Exploration

This term is used to describe innovation activities beyond the core competencies of the organization: Where new markets and/or new technologies are being explored. Moving beyond the core competencies has the effect of renewing the knowledge base and preparing the organization to discover and shape new markets.

Exploration sounds very exciting and lucrative at first sight. However, examples of companies such as Eastman Kodak or Xerox, or even Motorola, demonstrate the dangers of exploration. It is very easy to fall into the trap of a potentially endless cycle of search and unrewarding change, without maximizing the potential of all the exploration efforts translated into groundbreaking products or services.

As early as 1993 a simple rule was determined for organizations: Engage in enough exploitation to ensure the organization’s current viability and enough exploration to ensure future viability (Levinthal & March, 1993).

To provide an example of organizational ambidexterity and to illustrate the difference between exploitation and exploration, let us use the example of one of the most admired organizations of our times, Apple.

In the Apple product line in 2014 you would have found, for instance, the MacBook Air. Somehow you can trace the roots of today’s MacBook Air to the Apple Lisa way back in 1983. Of course the functionalities have changed; the size and power as well. However, as an individual user you could have moved with the Apple generations to support you in your individual work in both private and professional applications. This is a good example of how Apple was able to use exploitation as a powerful innovation tool to stay aligned with the changing times and their competitors.

Now, with the advent of new products and services around the iPod, iPhone and iPad exploitation alone cannot be the explanation. These new products and services are the results of exploration activities. Each of these three much admired products and the associated services created a new competitive space.

The iPod, for instance, in conjunction with iTunes became a groundbreaking new device for music lovers who wanted individual song titles – legally. The iPhone became the epitome of a new category, the smartphone, and the iPad created the category today known as tablets. Whilst with the launch of each of these products and associated services new categories and new competitive spaces were established, the journey did not stop there. Regularly each of these products was updated and fine-tuned. So when, in the summer of 2014, the Apple user eagerly awaited the launch of the iPhone 6, the implication was that this model represented the sixth generation of the iPhone. Now, how were these new generations created: Yes, through exploitation, not exploration!

With its track record over the years Apple has demonstrated good performance in ambidexterity, of purposefully linking and aligning both exploration and exploitation processes. Exploration gives you the opportunity to create a new competitive space. However, this is not enough. Within that new competitive space exploitation activities have to follow in order to protect the position in this newly attractive space.

Implications for this Book

This book works at two levels:

1) At the level of the individual leader. How can you excel at the ambidexterity challenge and make a significant contribution to the organization and your own career – in possible roles as architect, project leader, or implementer?

2) At the organizational level. How can a company create the appropriate levels of capabilities to take advantage of the huge opportunities presented by being an ambidextrous organization? How can the right organizational architecture be created?

Both individual leaders and organizations need to be authentic and adaptable. This means they have to embrace the notion of innovation. Innovation comes on scales ranging from continuous improvement based on benchmarking, to fundamentally rethinking the business. We all remember the famous story of how Nokia turned itself from a manufacturer of rubber boots into the world’s top mobile phone manufacturer. You do not achieve that through continuous improvement or benchmarking!

From Ambidexterity to Dealing with Convergence – The Drivers

In a 2013 survey of the most innovative organizations, Boston Consulting Group (BCG) identified some eight car companies among the top 20 most admired organizations. The headline was: The car as mobile data center. Now, most of us admire car companies for being so innovative around the ever-expanding product range. For example BMW, in the past known for their 3-Series, 5-Series, and 7-Series, now produce the full range – 1-Series to 8-Series. Not just the normal four door versions either, but also the coupé, SUV, and open-top versions within each series. One can imagine how busy the research & development (R&D) departments must have been and will have to continue to be in order to maintain the freshness of all the models introduced.

Looking at the performance in terms of model range, BMW and most of its competitors have achieved a lot to merit being included in the list of most admired companies for innovation. However, model range innovation was not cited by BCG as the key reason for being most innovative, but the car as a mobile data center.

The concept of convergence must be understood in order to unravel the link between cars and data centers. Data centers are associated with server farms, IT organizations, maybe telecommunications companies, perhaps Google or Amazon. As much as individuals and organizations like to feel comfortable in their normal habitat, there are outside forces that disturb that comfort. These are changes taking place beyond the control of any individual or any organization.

One of the key outcomes has been the convergence of industries, which had previously been quite separate: For instance, the car industry and IT organizations. In 2014 Google showcased their driverless car concept. As an organization Google has been greatly associated with the IT industry. What is Google doing in the car industry? This is an example of convergence. However, convergence is not only taking place in the car industry, it is in fact prevalent across many industries.

It is best to explain with a personal story. In the Autumn of 2012 I was working with the top management teams of companies from the following very diverse industries:

   Telecommunication.

   Pharmaceuticals.

   Washing powder.

   Postal services.

   Biotechnology.

   Financial services.

When discussing opportunities for 2017/18, what struck me was that the executives of these companies talked about the same thing: Access to the individual household – and what extra products or services they could offer.

However, what all these discussions had in common was that the opportunities were all outside of each company’s own individual core competencies. Each of these organizations had to think beyond their own industry boundaries to assemble the necessary capabilities for the opportunities so quickly identified.

The oil company BP made a virtue of addressing these opportunities a few years back when they introduced the tag-line BP-Beyond Petroleum as a main part of their global advertising campaigns.

In recent years, in many organizations, units have been formed to innovate beyond. In pharmaceuticals it is called beyond the pill. These are examples of how organizations respond to convergence and try to be ambidextrous: In pharmaceuticals, for instance, exploitation is being taken care of in the normal R&D departments and through the well-established R&D processes. Then, parallel units address the exploration opportunities around innovating beyond the pill.

As Individuals and Companies Address the Issue of Ambidexterity

Mega trends, such as aging population, drive convergence between industries. Older people not only need more and more medicine, they also have to take it. In order to be effective, it is important to understand compliance: Has the patient actually taken the medicine? Here it is innovation beyond the pill – the information on whether the pill has been taken is important. Who has the capabilities? It is a combination of capabilities traditionally associated with pharmaceuticals, diagnostics (has the person taken the pill?), and telecoms (information flow). The implications for all three industries are as follows: How do companies polish the existing business (exploitation – develop better pills) and at the same time take advantage of shaping game opportunities (exploration – innovation beyond the pill)?

Linking Leadership Development to Corporate Development

This book aims at building the bridge between the need to be successful at ambidexterity at both the individual and the organizational level. The two organizational processes that therefore need to be connected are:

   Corporate development; and

   Individual development (leadership development).

Many organizations have ambidexterity already on the strategic agenda. For those organizations it is then the challenge of how they can move from diagnosis into action.

It requires development at two levels:

1) Individual – can we build the individual’s competencies?

2) Organizational – can we build the right capabilities (e.g. robust processes) to handle ambidexterity?

Key Message of this Book

Both leaders and their organizations have to be geared towards ambidexterity

Convergence between markets and technologies happens around us. Leaders have to steer their organizations through this unchartered territory. Traditional management approaches will not work. Both leaders and their organizations have to be geared towards ambidexterity: With one hand exploiting the current business and the other simultaneously exploring new opportunities that arise through converging technologies and markets. This has implications at two levels:

1) The organization – how can the whole organization embrace the simultaneous processes of exploitation and exploration?

2) The individual leader – how can you personally balance the different demands of both exploiting and exploring?

Structure of this Book

This book is divided into two parts. Part I identifies the challenges around building successful ambidextrous organizations and Part II identifies solutions to building ambidextrous organizations.

In Part I the key challenges will be identified from a number of different angles:

Chapter 1 looks from the organizational perspective at strategic challenges and the need for being ambidextrous.

Chapter 2 looks at the challenges through the eyes of individual leaders inside the organization.

Chapter 3 lays out the challenges around internal processes for exploitation projects and exploration projects.

Chapter 4 discusses the mindset challenges both at the organizational level and at the individual level.

In Part II possible solutions will be discussed from a number of different angles:

Chapter 5 looks at linking two aspects of development: Corporate and individual development.

Chapter 6 looks at the solutions provided by external scouting activities.

Chapter 7 lays out the role of purposeful engineering in creating appropriate partnerships.

Chapter 8 discusses approaches to managing risk. How to de-risk the exposure inherent in convergence for both the organization and the individuals?

Part  I

Challenges

Introduction to Part I

Why is this Important for You and Your Organization?

In Part I we will investigate the challenges around ambidexterity at both the individual and the organizational level. Therefore, in four separate chapters we will discuss:

1) The strategic challenges; challenges at the organizational level.

2) The leadership challenges; the focus being on the individual leader.

3) The process challenges; these are challenges at the organizational level.

4) The mindset challenges; the influence of the dominant logic on both the organization and the individual.

At the end of Part I we will have built the foundation upon which we can then discuss possible solutions in Part II.

In this introduction, we will first highlight the generic challenges for individuals in organizations by discussing the concept of the roles of managers and leaders.

Then we will focus on the challenges for organizations based on discussions with global learning and development (L&D) experts from large organizations and leading business schools.

The Individual Perspective: The Roles of Manager and Leader

Organizations have their strategic plans, their processes for innovation. These have to be implemented by individuals, real people. Implementation of a plan cannot be achieved with a spreadsheet, it requires real people who drive the plans and the ideas forward.

These real people will have their own personal agendas and goals. The intersection between these two perspectives is clear. Organizations can provide certain formal roles, like Head of Corporate Development, Head of Research, and so on. These formal roles go along with formal descriptions of the role, including the responsibilities entailed. Individuals have the option to apply for these formal roles.

Now, having a formal role provides clarity for both the organization and the individual. However, just having a formal role and an individual in that role will not lead to any action by itself. It is the actual interpretation of that role that leads to action.

In this section two concepts around roles of individuals are being presented, the formal role as well as the project/change