Why ambidextrous companies should prioritize vision and purpose and not strategy
The word ambidexterity has fascinated me for years - from a phonetic and semantic point of view. In discussions with founders or corporate managers as well as from research I learned about some of the frustrations and threats which arise when companies don’t initiate necessary adjustments to accommodate for their ambidextrous dichotomy.
What does ambidexterity mean?
Ambidexterity describes the ability to use both the right and left hand equally well.
Organizational ambidexterity refers to an organisation's ability to be efficient in its management of today's business whilst at the same time remain adaptable for coping with tomorrow's changing demand and produce breakthrough innovation. Following the analogy of left and right handedness, organizational ambidexterity requires the organizations to use both exploration and exploitation techniques to be successful (source: wikipedia.com).
Ambidexterity as a pre-requisite for successful breakthrough innovation
Already years ago, studies showed (i.e. HBR 2004, O’Reilly III & Tushman) that ambidextrous organizations are significantly more successful in launching breakthrough products or services than other organizational structures (i.e. cross-functional teams, unsupported teams or project teams integrated in an existing structure).
The reasons for ambidextrous superiority (when managed well) are manifold: The structure of ambidextrous organizations allows cross-fertilization among units while preventing cross-contamination. Tight coordination at the managerial level enables the “undeveloped” units to leverage important resources from the traditional units (such as budget, talent, expertise, customers, etc.).
The organizational separation guarantees that the new units’ distinctive processes, structures, and cultures are not overwhelmed by the forces of “business as usual.” At the same time, the established units are shielded from the distractions of launching new businesses; they can invest attention and energy on refining operations, improving products, and serving customers (compare HBR 2004, The Ambidextrous Organization).
Ambidextrous organizations are hard to steer due to their contradictory nature
Ambidextrous organizations encompass two profoundly different types of businesses—those focused on exploiting existing capabilities for profit and those focused on exploring new opportunities for growth. The two demand distinct strategies, structures, processes, and cultures.
- Competence and mindset: While exploitative activities require rather operational competencies focusing on efficiency and incremental innovation, explorative undertakings require an entrepreneurial, highly adaptive mindset with an ambition to produce break-through innovation.
- Organizational structure: From a structural point of view, exploitative units are set up formally and mechanistically – mostly with hierarchical character. Explorative ventures are organized loosely, often in networks or fluid teams with flat hierarchies.
- Incentives and performance: In exploitative business high profit margins and productivity are rewarded, embedded in an efficiency- driven, risk-averse culture where quality and customers come first. Exploratory businesses embrace risk-taking, speed and experimentation. KPIs are rather growth-oriented and milestone-focused.
- Leadership style: Traditionally, the leadership style displayed in exploitative settings can be described as authoritative and top down whereas in exploratory environments it is visionary, often inclusive, humble and on eye-to-eye level.
As we saw, exploratory and exploitative businesses differ diametrically from various point of views. And that's why we sometimes see them clash in real life. To avoid managing by two different textbooks, some companies outsource or spin off explorative business – sometimes in form of i.e., subsidiaries, satellite approaches, formalized external cooperation and others. The intention is to let the explorative business grow without distraction whilst the core business can continue based on established principles and practices.
Ambidextrous role models establish a uniting culture and dichotomous management practices
Companies which launch exploratory businesses inhouse whilst maintaining their exploitative business succeed by:
1. Building a corporate culture which marries the diversity of the explorative, versatile subculture with the company’s traditions and values of the exploitative line organization. A culture which equally confronts and counteracts the envy of the conventional business towards the cultural and financial degrees of freedom of the explorative unit (often, the explorative unit applies new ways of working, has access to high performing teams as well as large budgets despite the lack of noticeable economic successes or tangible future potential).
2. Adjusting the rigid and calendar-based business steering so that it meets the needs of an agile world with sprints, feedback loops and experimentative mindset.
3. Compensating for the fact that long-term business strategy will lose impact and relevance – also due to increasing market dynamics. They define alternatives for strategic and short-term decision-making including budget distribution and prioritization which reflects the mindset and approach of an explorative unit.
4. Mitigating HR related challenges such as the downturn of traditional coaching on the job or annual feedback discussions as especially in explorative units the developmental needs are defined bottom up by employees and feedback is exchanged in high frequency. The unpredictable and volatile nature of explorative businesses contradict the cyclical rhythm of incentives. Successes and learnings of the innovation business may no longer be properly reflected nor rewarded in existing incentive schemes.
An external perspective can assist ambidextrous managers to strike a balance
The ones put in charge to manage, exploit and explore both worlds – the traditional business and innovation ventures – swing between efficiency and innovation-focused activities. They take the helicopter view whilst maintaining an eye for operational detail. In coaching, many of those leaders find sparring to identify and overcome challenges and develop individual success strategies. Sometimes also to manage fear of failure or to anticipate and reflect what’s next. In this context it can be useful to
- Become aware of the distinct tasks and responsibilities as an ambidextrous leader. It is not self-evident for all leaders how employees and teams in both organizational setups need and want to be led. Self-reflection of systematic and continuous application of situational leadership can be a first step. Reflections with a neutral sparring partner can shed light on: How do employee needs and expectations differ in my explorative vs. exploitative team? Which behavior and actions do I display in which? How do I maintain fairness and transparency with both units? How do I develop, retain and coach employees which operationally no longer work for me, but for the explorative project and still report to me? How do I secure quality and performance in my team after a top talent left to work for the explorative venture? How do I overcome the detachment from a content and interaction point of view?
- Develop a USP and reputation uniting the contradicting elements of the mandate. The USP ideally is of value in both “organizational worlds” to ensure long-term employability in any of the two. Jointly with a coach, scenarios can be outlined and assessed. Impulses for reflection could be: What is my professional next step once established structures and proven success strategies dissolve? To what extend do I still have a future in the “traditional part of the business” after having worked in the innovative arm? How do I maintain trust of and connectivity to my peers of the traditional unit while building an explorative one with different rules to the game? To what extend do relevant jobs continue to exist in the old structure if my company invests in new ventures? How do I need to expand my knowledge and skill portfolio to continue to steer projects in the future? Which skills will be required 10 years from now? How do I escape the dead-end street in case the explorative venture fails?
Coaching can be beneficial for ambidextrous top management
Top management oversees the aggregated challenges of its’ ambidextrous organization – thereby acting as ambidextrous managers.
Top management will find it ever more challenging to develop one robust, overarching strategic guidance for operational as well as pioneering activities due to the increasingly competitive and complex markets and differing business activities. Consulting can help to identify a compromising solution such as a compelling vision entailing the company’s ambition and purpose to provide direction, motivate and guide explorative and exploitative units equally. The vision can only unfold its motivational purpose if communicated relentlessly by the company’s senior team. The strategic frame becomes secondary and outlines the joint playing field including broader business priorities, principles of collaboration or degrees of freedom for decision making.
The conflict between focusing on innovation versus efficiency can be addressed by adopting a portfolio approach (HBR 2004, O’Reilly III & Tushman): On the one hand, a set of cash generating activities can be considered a source for survival. On the other hand, focus may lay on activities aimed at developing a new business model or a product. These sets of activities may also gradually move from innovation focus to efficiency focus (or vice versa). Through such a mechanism the organization’s portfolio as a whole remains balanced. A portfolio balance may also be achieved by acquisition of assets with complementary focus (i.e. acquisition targets may have innovation focus when the acquiring company’s focus on efficiency).
Ambidextrous circumstances require a mindset shift in workforce planning, too. Headcount but especially future-oriented skills and capabilities will need to be thoroughly anticipated and planned – and either sourced or developed inhouse.
It becomes evident that ambidextrous top management can no longer aim to dig deep into details of operational day-to-day, assimilate the bandwidth of topics and responsibilities in innovation networks or find solutions for explorative and exploitative challenges. First and foremost, it will need to provide visionary guidance and a fertile playing field for all areas of the organization.
- Harvard Business Review, 2004, O’Reilly III & Tushman
- Arthur D Little, Prism / 1 / 2018, Ambidextrous organizations
- Coaching Magazin, Ambidextrie, Ausgabe 4/ 2020