A new way of thinking about organizational ambidexterity
Organizational ambidexterity is a topic that not all decision makers are aware of. Being an ambidextrous organization means having the ability to innovate while operating efficiently — or simply economically — to the point of achieving financial and operational goals in the short term while maximizing value in the long term.
Designing such kind of business involves, first, the definition of an ambidextrous strategy, that is, the premise that innovative processes must be part of the company’s DNA, even while actual products, services and markets continue to be successful in the short term. If you think about the resource flows inherent on the previous sentence, you might have understand how hard it is.
One of the reasons for this difficulty is the imperfection and uncertainty of innovation versus the certainty and mastery of repeated processes that guarantee efficiency. The organizational elements related to these two types of objectives — innovation and efficiency — are quite distinct and this has an impact even on people’s mental model.
Clayton Christensen translated this difficulty even in the 1990s, in his book ‘The innovator’s dilemma ’. After all, why to devote resources (always scarce) to uncertain innovations, if the company has already found its formula for success?
The increasingly dynamic VUCA* world — which is, thinking sistemically, cause and consequence of the innovation dynamics — offers us a simple and hard answer to this question: for the simple fact that such a formula can lose its relevance in the market very quickly or even abruptly. Therefore, the dynamics of social, environmental and technological changes require continuous innovation to seek new sources of wealth generation: this is the mechanism of value maximization in the long term.
The description above is the most traditional vision of ambidexterity, but it lacks of reconciling innovative and efficiency efforts. On this way, I add here two other main elements: agility and resilience. Joining innovation and efficiency requires companies to be agile in deciding, delivering and adjusting their strategies and process. Two main reasons are related to this need: first, several opportunities and concomitant threats may require timely responses against (sure) losses. Second, the high uncertainty of the potential of each opportunity can make traditional refined long term planning practices totally irrelevant.
Under agility, decisions are ongoing process that are tested in a less calculated way (risk management required here!) and recognizing their imprecision is part of the process. The faster the error, the cheaper it will be and the faster it will generate learning to be used in future rounds. The faster small trial projects demonstrate their success, the greater the chances of gaining synergy with current businesses and learning that allows managers to regulate the level of investment each project will deserve.
But a company does not live by agility alone. It requires levels of operation with deliverables that guarantee its sustainability and, also, its innovative potential. That is why innovation, efficiency and agility must be built in order to guarantee resilience of the organizational system, that is, being capable to suport losses even not knowing when or where they are going to happen — some sort of ‘organizational affordance’ and readyness that derivates from system design and risk management.
I consider 2 types of resilience: the first, financial, should allow variations and responses to external dynamics and the second, strategic, to support strategic failures, unexpected turns, black swans and high-impact events that place businesses and entire sectors at high risk (as we learned from COVID-19).
At this point, it migh be clear that we are in the field of complexity. And we are discussing the highest level of strategic thinking. Changing the traditional logic of strategic planning to address these 4 elements at the same time will not be a simple task. However, this new mindset seems to be a safer way in the long run and already finds examples of practices in global companies. To facilitate the reconciliation of the ideas discussed here, I present this new reflective model of strategic ambidexterity in the scheme below.
In the proposed model, the consolidation of the approaches mentioned above occurs in 4 quadrants, which have their own elements to allow the organizational assessment and the search for issues in which companies need to invest with greater care.
In the first quadrant, innovation is understood as a continuous source of resilience that requires systemic thinking (internal and external to the organization) in order to be able to perceive the sectorial and extra-sectorial innovative dynamics and to predict mechanisms of influence of the main elements in the system. In addition, systemic thinking allows for a broad and complementary view of the opportunities to be prioritized. For example, instead of thinking about product innovation, it is possible to think about product platforms that can undergo minor and continuous innovations.
In the second quadrant, we highlight the role of an organizational culture that accepts innovation and the logic of agility that competes with the traditional models of command and control so ingrained in the mental models of managers. The rupture of formal hierarchies and centralized power logics are some of the points to be worked on.
The third quadrant highlights the need for a robust management system that guarantees the efficiency of the processes already learned, with strong kpis, routines and leadership to offer agile feedbacks both to avoid unnecessary errors and to seek corrections of routes in existing models in a timely manner. The basis of this agile efficiency is the concept of lean organization (yes, the good old lean!), which must rely on digitization and machine control to avoid unnecessary errors.
The last quadrant is, maybe, the most advanced vector of reconciliation. After all, how to be efficient (and, therefore, have reliable and repeatable process) while looking for resilience to dynamic environments? The way to seek this answer lies in the broad and fluid organizational structures, such as the ecosystems already adopted by large corporations (such as Haier and large consulting firms). The construction of platforms of common solutions from which shared structures are stabilized is also a way of guaranteeing stability and security in what is known and allows new complementary business fronts to be opened in economically viable ways.
Finally, in view of the complexity of the subject, further deepening is naturally necessary for a deep understanding of the model. My goal with this article is just to propose the model I adopt in consultancies and clarify the main points on a topic still unknown to most companies. I hope that readers can use it to reflect on their investments and divestments decisions.
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* VUCA acronym for volatile, uncertain, complex and ambiguous.
