Ambidexterity in an organization is achieved by balancing exploration and exploitation , which allows the organization to be creative and adaptable , while also continuing to rely on more traditional, proven methods of business. On the other hand, companies that focus only on exploitation may accept status quo performance and products and fail to reach optimal levels of success. Organizational ambidexterity is defined broadly, and several other terms are also highly related or similar to the construct of ambidextrous organization, including organizational learning , technological innovation, organizational adaptation , strategic management , and organizational design. Things such as reconciling exploitation and exploration, the simultaneity of induced and autonomous strategy processes, synchronizing incremental and discontinuous innovation, and balancing search and stability also tend to refer to the same underlying construct as ambidextrous organization. Whereas earlier studies on structural and behavioral mechanisms regarded the trade-offs between exploration and exploitation to be insurmountable, more recent research has paid attention to a range of organizational solutions to engender the existence of ambidexterity.
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Create organizationally distinct units—but tightly integrate them at the senior executive level. Ambidextrous organizations segregate exploratory units from their traditional units, encouraging them to develop their own unique processes, structures, and cultures. But they also tightly coordinate these new units with existing organizations at the senior management level. Companies that use ambidextrous structures are nine times more likely to create breakthrough products and processes than those using other organizational structures—while sustaining or even improving their existing businesses.
The Idea in Practice Consider these examples of ambidextrous organizations that have successfully pioneered radical innovations while pursuing incremental gains to their established businesses. Initially it created a skunk works operation to launch online news service USAToday. But isolated from the print operation, USAToday.
Units were physically separate, and their staffing models, cultures, and processes were distinct. But Curley insisted that all three enterprises be integrated at the top.
The three business heads met daily to review stories and share ideas. They also trained print reporters in TV and Web broadcasting, outfitting them with cameras so they could file stories simultaneously in different media. Incentives tied to cross-unit growth targets and willingness to share news content replaced rewards tied to unit results.
President Glenn Bradley created autonomous units for six innovation projects. Innovation project leaders also attended executive-team meetings with established business heads. It successfully introduced several new contact lenses, a macular-degeneration treatment, and a low-cost manufacturing process, while maintaining a profitable business for its conventional lenses.
General managers and corporate executives should be able to relate. They, too, must constantly look backward, attending to the products and processes of the past, while also gazing forward, preparing for the innovations that will define the future.
Most successful enterprises are adept at refining their current offerings, but they falter when it comes to pioneering radically new products and services. Kodak and Boeing are just two of the more recent examples of once dominant companies that failed to adapt to market changes. Boeing, a longtime leader in commercial aircraft, has experienced difficulties in its defense-contracting businesses and has recently stumbled in the face of competition from Airbus. The failure to achieve breakthrough innovations while also making steady improvements to an existing business is so commonplace—and so fascinating—that it has become a battleground of management thought.
For decades, scholars have spun theories to explain the puzzle and offered advice on how to solve it. Some have suggested that big companies adopt a venture capital model, funding exploratory expeditions but otherwise staying out of their way. Others have pointed to cross-functional teams as the key to creating breakthrough innovations. Still others have claimed that a company may be able to shift back and forth between different organizational models, focusing on exploitation for a period and then moving into exploration mode.
We recently decided to test these and other theories by taking a close look at the real world, examining how actual, contemporary businesses fare when they attempt to pursue innovations that lie beyond their current products or markets. Do they succeed in achieving breakthroughs? Do their existing businesses suffer? What organizational and managerial structures do they use?
We discovered that some companies have actually been quite successful at both exploiting the present and exploring the future, and as we looked more deeply at them we found that they share important characteristics.
In particular, they separate their new, exploratory units from their traditional, exploitative ones, allowing for different processes, structures, and cultures; at the same time, they maintain tight links across units at the senior executive level. In other words, they manage organizational separation through a tightly integrated senior team.
A business does not have to escape its past, these cases show, to renew itself for the future. Exploiting and Exploring To flourish over the long run, most companies need to maintain a variety of innovation efforts.
They must constantly pursue incremental innovations, small improvements in their existing products and operations that let them operate more efficiently and deliver ever greater value to customers. An automaker, for example, may frequently tweak a basic engine design to increase horsepower, enhance fuel efficiency, or improve reliability.
Companies also have to make architectural innovations, applying technological or process advances to fundamentally change some component or element of their business. Capitalizing on the data communication capabilities of the Internet, for instance, a bank can perhaps shift its customer-service call center to a low-labor-cost country like India.
Finally, businesses need to come up with discontinuous innovations—radical advances like digital photography that profoundly alter the basis for competition in an industry, often rendering old products or ways of working obsolete. All these types of innovation can have different targets. Still others may be focused on serving an entirely new market that has yet to be clearly defined—people who download online music, for example.
A Map of Innovation To compete, companies must continually pursue many types of innovation—incremental, architectural, and discontinuous—aimed at existing and new customers. In our research with colleagues Wendy Smith, Robert Wood, and George Westerman, we studied how companies pursued innovations throughout this matrix. In particular, we looked for companies that attempted to simultaneously pursue modest, incremental innovations toward the lower-left area of the matrix and more dramatic, breakthrough innovations toward the upper-right area.
We ended up focusing on 35 attempts to launch breakthrough innovations undertaken by 15 business units in nine different industries. We studied the structure and results of the breakthrough projects as well as their impact on the operations and performance of the traditional businesses. Companies tended to structure their breakthrough projects in one of four basic ways.
Seven were carried out within existing functional designs, completely integrated into the regular organizational and management structure. Nine were set up as cross-functional teams, groups operating within the established organization but outside the existing management hierarchy. Four took the form of unsupported teams, independent units set up outside the established organization and management hierarchy. And 15 were pursued within ambidextrous organizations, where the breakthrough efforts were organized as structurally independent units, each having its own processes, structures, and cultures but integrated into the existing senior management hierarchy.
Organizing to Innovate In our examination of 35 different attempts at breakthrough innovation, we discovered that businesses tend to apply one of four organizational designs to develop and deliver their innovations. We tracked the results of the 35 initiatives along two dimensions.
First, we determined their success in creating the desired innovations, as measured by either the actual commercial results of a new product or the application of practical market or technical learning. Second, we looked at the performance of the existing business. Did results hold steady, improve, or decline as the firm worked on its breakthroughs? We found that the organizational design and management practices employed had a direct and significant impact on the performance of both the breakthrough initiative and the traditional business.
When it came to launching breakthrough products or services, ambidextrous organizations were significantly more successful than the other three structures. An exception was breakthrough innovations intended to directly substitute for existing products; in these instances, functional designs performed as well as ambidextrous designs.
The superiority of ambidextrous designs became even more apparent when we examined eight cases in which a company originally organized its breakthrough initiative around functional designs, cross-functional teams, or unsupported teams and then shifted to an ambidextrous design.
In contrast, three companies started from an ambidextrous design and then moved to one of the others; performance decreased substantially in two of these cases.
When we measured the effects of all 35 initiatives on their existing businesses, we found that ambidextrous organizations were again clearly superior. In almost every instance in which an ambidextrous structure was used, the competitive performance of the existing product either increased or held steady.
By contrast, the results of the traditional operations frequently declined where functional designs, cross-functional teams, or unsupported teams were employed.
The structure of ambidextrous organizations allows cross-fertilization among units while preventing cross-contamination. But how exactly do ambidextrous organizations work? By looking more deeply into the experiences of two such organizations—USA Today and Ciba Vision—we can begin to identify the key managerial and organizational characteristics that underpin their ability to both exploit and explore. The national newspaper, a division of the Gannett Corporation, had come a long way since its founding in , when its colorful brand of journalism was widely ridiculed by critics.
After losing more than half a billion dollars during its first decade, the paper turned its first profit in and continued to expand rapidly, becoming the most widely read daily newspaper in the United States. With well-heeled business travelers making up the bulk of its subscriber base, it also became an attractive platform for national advertisers, bringing in a steady flow of revenue.
But as the s progressed, storm clouds appeared on the horizon. Newspaper readership was falling steadily, particularly among young people.
Competition was heating up, as customers increasingly looked to television and Internet media outlets for news. And newsprint costs were rising rapidly. The company would need to find ways to apply its existing news-gathering and editing capabilities to entirely new media. He gave her free rein to operate independently from the print business, and she set up a kind of skunk-works operation, bringing in people from outside USA Today and housing them on a different floor from the newspaper.
She built a fundamentally different kind of organization, with roles and incentives suited to the instantaneous delivery of news and to an entrepreneurial, highly collaborative culture.
With Internet use exploding, the venture seemed primed for success. But results were disappointing. Although USAToday. Viewing her unit as a competitor with the print business, they had little incentive to help her succeed and made few efforts to share their considerable resources with her.
Soon, USAToday. Cichowski pushed to have her business spun out entirely from the newspaper, as other companies were doing with their Internet ventures, but Curley had a very different view.
He had come to believe that the new unit required not greater separation but greater integration. So in , he replaced the leader of USAToday. Both the online and television organizations remained separate from the newspaper, maintaining distinctive processes, structures, and cultures, but Curley demanded that the senior leadership of all three businesses be tightly integrated. Together with Karen Jurgenson, the editor of USA Today, the heads of the online and television units instituted daily editorial meetings to review stories and assignments, share ideas, and identify other potential synergies.
The moves quickly paid off, as the reporters realized that their stories would reach a much broader audience—and that they would have the opportunity to appear on TV.
At the same time, Curley made larger changes to the organization and its management. He let go of a number of senior executives who did not share his commitment to the network strategy, ensuring that his team would present a united front and deliver consistent messages to the staff. He also changed the incentive program for executives, replacing unit-specific goals with a common bonus program tied to growth targets across all three media.
Yet even as sharing and synergy were being promoted, the organizational integrity of the three units was carefully maintained. The units remained physically separate, and they each pursued very different staffing models. The staff members of USAToday. Reporters continued to be fiercely independent and to focus on more in-depth coverage of stories than the television staff.
Even as sharing and synergy were being promoted, the organizational integrity of the three units was carefully maintained. Because of its ambidextrous organization, USA Today has continued to compete aggressively in the mature business of daily print news while also developing a strong Internet franchise and providing Gannett television stations with coverage of breaking news. A New Lens on Growth Another company that has used an ambidextrous organization to spur growth through radical innovation is Ciba Vision.
Established in the early s as a unit of the Swiss pharmaceutical giant Ciba-Geigy now Novartis , the Atlanta-based Ciba Vision sells contact lenses and related eye-care products to optometrists and consumers.
Ambidextrous Organization: Managing Evolutionary and Revolutionary Change
Lakhani Purpose: This article offers insight on how to effectively help incumbent organizations prepare for global business shifts to open source and digital business models. Findings: Companies that let their old culture reject the new risk becoming obsolete if doing so inhibits their rethinking of their future using powerful tools like crowdsourcing, blockchain, customer experience-based connections, integrating workflows with artificial intelligence AI , automated technologies and digital business platforms. As important as technological proficiency is, managing the cultural shift required to embrace transformative industry architecture — the key to innovating new business models -- may be the bigger challenge. Insights are theoretically, based on additional study, interviews, and research, but need to be tested through additional case studies. Practical implications: The goal is to make the transition more productive and less traumatic for incumbent firms by providing a language and tested methods to help senior leaders use innovative technologies to build on their core even as they explore new business models. Social implications: This article provides insights that will lead to more effective ideas for helping organizations adapt. That research and experience has then been analyzed and viewed through the lens of models that have been known to work.
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Executive Summary Reprint: RD Although most managers publicly acknowledge the need to explore new businesses and markets, the claims of established businesses on company resources almost always come first, especially when times are hard. When top teams allow the tension between core and speculative units to play out at lower levels of management, innovation loses out. At best, leaders of core business units dismiss innovation initiatives as irrelevancies. Many CEOs take a backseat in debates over resources, ceding much of their power to middle managers, and the company ends up as a collection of feudal baronies. This is a recipe for long-term failure, say the authors. Their research of 12 top management teams at major companies suggests that firms thrive only when senior teams lead ambidextrously—when they foster a state of constant creative conflict between the old and the new. Successful CEOs first develop a broad, forward-looking strategic aspiration that sets ambitious targets both for innovation and core business growth.