Building an ambidextrous organization is by no means easy, but the structure itself, combining organizational separation with senior team integration, is not difficult to understand. Given the executive will to make it happen, any company can become ambidextrous. 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.
Innovation from Information Systems: An Ambidexterity Approach | SpringerLink
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. 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.
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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.
The Roman god Janus had two sets of eyes—one pair focusing on what lay behind, the other on what lay ahead. 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.
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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. 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. 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. 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.
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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. In the late s, USA Today was a thriving business, but it faced an uncertain future. 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. When developing operational strategies, companies can examine and implement effective and efficient systems for using resources, personnel, and the work process. Companies in the service sector can also use these strategies to link long- and short-term corporate decisions in order to create an effective management team .
According to Richard-Gustafson there are five core operational strategies;. These five core operational strategies leads us to three vital terms within the area of organizational ambidexterity; exploration, exploitation, and ambidextrous organizations.
Since then, it has entered various streams of research, such as in strategic management, operations management, and innovation management . To better understand the meaning of exploration, exploitation, and ambidextrous organisations, these three terms have been explained in the sections below. Within operational ambidexterity, exploration and exploitation are two typical tools that can be used within and across organizations for knowledge creation .
The difference between the two is that exploration contains thing captured by terms such as search, variation, risk taking, experimentation, play, flexibility, discovery, and innovation. Exploitation on the other hand includes things as refinement, choice, production, efficiency, selection, implementation, and execution . Basically, exploration engages individuals and organizations in search, experimentation, and variation whereas exploitation enhances productivity and efficiency .
Several authors argues that in order for an organization to be successful there is a need of combining exploration and exploitation .