The Ambidextrous Organisation
©2014
Seminar Paper
24 Pages
Summary
Firms struggle with innovating while at the same time exploiting their previous innovations. This paper elaborates on the most important scientific findings regarding this organisational challenge and discusses the concept of the ambidextrous organisation. With the use of both current literature and older state-of-the-art knowledge, a comprehensive summary of the topic is provided. The literature mentioned in this paper is integrated into a framework, providing an overview over the three forms of ambidexterity, their antecedents, moderators and environmental factors as well as the main outcomes of ambidexterity. After the conceptual chapters, the knowledge is applied to SME´s.
Excerpt
Table Of Contents
performance management is implemented to enhance the conflicting goal. Two conditions
to achieve leadership ambidexterity in SME's are risk-taking and adaptation.
Finally chapter 7 covers the discussion and the conclusion part. The discussion focuses on
the literature used in this paper and its limitations. Some suggestions for further research
are given. In the conclusion, all the concepts described in the paper are briefly summarized
and the main conclusion is provided. A presentation of the integrated framework that
includes all discussed antecedents, moderators and environmental factors, concludes this
paper.
2. The ambidextrous organisation combines exploring and exploiting activities to
conquer uncertainty and achieve better performance
Firms, which successfully balance between exploiting markets with their current products
while simultaneously exploring new markets with innovations are known as ambidextrous
organisations.
1
This, however, is not easily achieved, as described by Levinthal and
March
2
:
"An organisation that engages exclusively in exploration will ordinarily suffer
from the fact that it never gains the returns of its knowledge. An organisation that engages
exclusively in exploitation will ordinarily suffer from obsolescence. The basic problem
confronting an organisation is to engage in sufficient exploitation to ensure its current
viability and, at the same time, to devote enough energy to exploration to ensure its future
viability. Survival requires a balance, and the precise mix of exploitation and exploration
that is optimal is hard to specify."
Exploitation activities can be seen as refinement, efficiency and production of products.
3
Exploiting current products and previous innovations are what give corporations the ability
to operate on a daily basis, by providing revenues and cash. Therefore, efficient production
is important for a firm to be profitable. Furthermore, being able to exploit gained efficiency
allows enterprises to extract greater benefits from current markets and customers.
4
An
industry known for its efficient production is the automotive industry, with for example the
Japanese production system.
5
This system focuses on making incremental changes to a
1
See O'Reilly and Tushman (2004), p.76.
2
See Levinthal and March (1993), p. 105.
3
See March (1991), p.71.
4
See Kyriakopoulos and Moorman (2004), p. 232.
5
See Rehder (1994), p.3.
4
process, with the intention to become more and more efficient. However, these mass
production firms are known for their hierarchical and bureaucratic structures.
6
Bureaucratic
firms struggle more with innovation of new products and services, which are also called
the exploration activities.
7
Exploration is the process of search, risk taking, experimentation and innovation for new
products or services.
3
Innovation is possible on multiple levels, i.e. continuous,
architectural discontinuous innovation. Continuous innovation is the process making
incremental improvements to a known product or service, e.g. a new motor for a car with
better gas mileage. Architectural innovation, in contrast, reconfigures an established
system to link the existing components in a new way.
8
An example is a bank that moves its
customer service call-centre to a lower labour cost country. Discontinuous innovation is
the creation of a new product, service or process that can set other products out of business.
Examples of this kind of innovation are digital photography or the personal computer.
Innovation is an important activity for a company, as it can be very profitable.
Discontinuous and architectural innovations can either make products cheaper (e.g. car
with better gas mileage) or help the firm doing its core business cheaper (e.g. increased
efficiency in assembly lines). Discontinuous innovation, however, can change markets or
create new ones and therefore helps to gain a competitive advantage and contributes to a
firm´s overall profitability.
8, 9
Therefore a firm should strive to innovate in all three
possible ways.
It can be argued that organisational goals are largely affected by the external environment.
Therefore, the need for ambidexterity is also influenced by the environment of a firm.
Duncan (1972) describes two dimensions to assess environmental uncertainty.
10
The first
dimension is the stable-unstable environment, which means is the degree of change of the
environment itself. A rapid changing environment can be seen in the aerospace industry,
while the water supply industry has a mostly stable environment. The second dimension
Duncan describes is the environmental complexity, the simple-complex dimension. This is
the degree to which firms interact with and are influenced by external elements.
6
See Daft et al (2010), p. 280.
7
See Dearden et al (1990), p. 1120.
8
See Henderson and Clark (1990), p. 12.
9
See Veryzer (1998), p. 305.
10
See Duncan (1972), p. 314-317.
5
Universities are an example of organisations with complex environments, while food
manufacturers have a simpler environment.
It can be concluded that ambidexterity is more needed in unstable environments, as the call
for change in such environment is higher. To conquer this change, innovation of products
and services is needed. To match this, an ambidextrous organisation structure can be used
to explore innovations while exploiting previous innovations. On the other hand, it looks
like firms with complex environments are more innovative than firms with simple
environments. For example, computer and telecommunication firms are known for their
complex environments.
1
These industries are known for their innovative character.
However, no research is currently provided about the exact relation between environmental
complexity and the need for ambidexterity.
3. Ambidexterity can be achieved by spatial differentiation of the exploratory and
exploitative business units
Combining efficient production with innovativeness is rather difficult, because the two
require different processes, structures and cultures.
1
As companies struggle with the
balance between both innovations (i.e. exploitation and exploration), the proposed
antecedents of organisational ambidexterity are organisational structures, behavioural
contexts and leadership processes.
11
Until 2004, organisational ambidexterity theory was
limited to the structural antecedent.
12
Production firms are generally more structured and more centralized. They use more
vertical control mechanism and have a stricter hierarchy. This approach fits the
mechanistic management structure as described by Burns and Stalker.
13
Innovation, on the
other hand, requires a more organic structure, with decentralized decision making, lower
formalization, less hierarchy and more horizontal communication.
14
The question remains
whether or not both of those requirements can fit in one and the same enterprise.
The structural antecedents represent an assumption at the origin of ambidexterity theory,
i.e. the explorative and exploitative activities are absolutely incompatible.
3
Gibson and
11
See Raisch and Birkinshaw (2008), p. 381.
12
See Gibson and Birkinshaw (2004), p. 209-226.
13
See Daft et al (2010), p. 155-156.
14
See Pierce and Delbecq (1977), p. 31-32.
6
Birkinshaw point out the current research focus up until 2004 on "developing structural
mechanisms to cope with the competing demands faced by the organisation for alignment
and adaptability", i.e. structural promoters of ambidexterity.
15
Different ways to design an
ambidextrous structure are being proposed. Brown and Eisenhardt suggest a structural
mechanism in the form of a semi structure, which can secure the balance between "order"
and "disorder" and thus satisfy the competing demands of exploiting and exploring
activities.
16
According to Adler and Borys, an ambidextrous structure has to allow
employees to switch between routine and non-routine tasks and thus enable changing of
focus from exploiting to exploring and the other way round. Their proposed recipe includes
a complex structure consisting of organic, i.e. non bureaucratic and mechanistic, i.e.
enabling bureaucratic elements.
17
The structural antecedents advocate a spatial separation of exploitation and exploration
into separate business units, which are coordinated by integration mechanisms.
1,18
Duncan
introduces spatial separation as division at the level of the business units or at corporate
level. The different units can then focus on either exploitation or exploration.
19
This
separation and the resulting dual structure allows setting up the organisational units
according to the required task specifics, i.e. small and decentralized exploration units with
loose processes and larger and more centralized exploitation units with tighter processes.
20
However such ambidexterity through spatial separation cannot be successful without
integration mechanisms, which combine and coordinate the independent organisational
units. Therefore a combination of the two structural forms, i.e. loose coupling and tight
structure is considered by O´Reilly and Tushman. The corresponding organisational
architecture promotes a physical and cultural separation of the exploring and exploiting
units with a loose coupling between one another and a strategic integration at the top
management level, promoting a strong corporate culture.
1
Spatial separation, as a way of
achieving ambidexterity using structural promoters, dominates the current research.
21
The result is a production focused unit and an innovation focused unit, with the senior
management governing them both. The production unit has a more mechanistic structure
15
See Gibson and Birkinshaw (2004), p. 211.
16
See Brown and Eisenhardt (1997), p. 3.
17
See Adler and Borys (1996), p. 79.
18
See Jansen et al. (2006), p. 1661 1674.
19
See Duncan (1976), p. 172.
20
See Benner and Tushman (2003), p. 247.
21
See Raisch and Birkinshaw (2008), p. 391.
7
while the innovation unit has a more organic structure. Figure 1 shows the structure of an
ambidextrous organisation. However, both businesses can occur within a single firm as
long as there is a proper specification of the organisational context, as recent studies have
proposed.
22
Figure 1. Organisation structure of an ambidextrous organisation
Source: O'Reilly and Tushman (2004), p. 79.
4. New insight in the literature reviles new ways to achieve ambidexterity, i.e.
contextual and leadership ambidexterity
By identifying and implementing conditions complementary to both types of innovation,
contextual ambidexterity can be created. This reduces the risk that one innovation type will
self-replicate systems and processes that are destructive to the other.
12
Proponents of the
structural solution have accepted that spatial separation of both innovations is not resolute
in achieving ambidexterity. Over-arching visions and values, culture and flexibility are
highlighted as supportive conditions of ambidexterity.
12,23
Thus in creating contextual
ambidexterity, internal firm conditions such as autonomy, cooperation and rewards are
validated.
24
Contextual ambidexterity is only an object of recent research and defined as "the
behavioural capacity to simultaneously demonstrate alignment and adaptability across an
entire business unit".
12
Here the focus lies not on an organisation's architecture but more
on the behavioural component, i.e. the creation of a supportive business-unit context,
consisting of processes and beliefs, which enables and encourages the individuals to decide
on their own how to divide their time between exploiting and exploring tasks. There is a
variety of ways of designing such an organisational unit. The proposed solution paths are
22
See Chang & Hughes (2012), p. 1-17.
23
See O'Reilly and Tushman (2007), p. 1-60.
24
See Lubatkin et al (2006), p. 646-672.
General manager
Existing business
Emerging business
Finance
Finance
Sales
R&D
Sales
R&D
8
inter alia meta-routines, job enrichments
25
, creation of a shared vision
26
and the four
elements, as introduced by Gibson and Birkinshaw stretch and discipline, also referred
to as hard elements and support and trust, also called soft elements.
12
Several implications for leadership as an antecedent of ambidexterity have also been
proposed. When taking leadership based antecedents into account, two alternative views
are considered, i.e. the top management as a supporting role in developing structural or
contextual ambidexterity
12
and top management as an independent antecedent of
organisational ambidexterity.
24
Most recent studies agree on the top management role of
shifting resources between the existing products and innovations, insuring support to both
exploitation and exploration.
27
. The leadership antecedent can be subdivided into three
components, i.e. founding team composition, team design and behavioural integration.
Founding team composition is a leadership-based antecedent implying the team member´s
previous company affiliations. Beckman provides empirical evidence that teams consisting
of members with both diverse and common prior company affiliations are able to achieve a
higher degree of ambidexterity than those having only common or diverse affiliations.
28
Teams with common company affiliations would be expected to have a strong focus on
exploitation due to their common understanding of processes and routines, whereas
diversified company affiliations would be likely to result in focusing on exploring
activities, stimulated by the member's different background and thus different ideas. An
organisation provided with access to both, however, would be able to achieve exploitation
of its existing portfolio and simultaneously work on innovation, which would lead to
ambidexterity.
Besides team composition in terms of previous company affiliations, the team design
regarding new vs. more experienced team members is suggested to be an important
antecedent to ambidexterity. Again, a mixture of "newcomers" and "old-timers" is
suggested to be more likely leading towards ambidexterity.
29
Teams consisting of both new
members that bring new ideas and different points of view and older members, having
25
See Adler et al. (1999), p. 46-47.
26
See Bartlett and Ghoshal (1989), p. 66.
27
See Smith (2006), p. 2.
28
See Beckman (2006), p. 741.
29
See Peretti and Negro (2006), p. 760.
9
knowledge of previous lesson learned and successful practices on their disposal, are able to
achieve ambidexterity more likely than teams having either or.
Finally, besides the team composition, the top management plays an important role in
enabling and stimulating ambidexterity. The senior management is expected to contribute
to a team's wholeness and unity of effort by providing clear messages and inspiring goal
setting. Empirical evidence is provided that a team's collaboration, high quantity and
quality of information exchanged and joint decision making have positive influence on
developing an ambidextrous organisation.
24
5. Social and organisational integration mechanisms to connect and coordinate the
separated business units
As stated in chapter two, an important aspect of achieving ambidexterity is structurally
differentiating the exploratory and exploiting activities of an organisation.
1, 30, 31
However,
this consequent separation necessitates explicit management attention to coordinate the
divergent activities, mobilize employees from different departments and finally integrate
these diverse activities to achieve the organisation´s ultimate business goals .
32
To realize this integration and build the bridge from mere structural differentiation to
successful ambidexterity, integration mechanisms have been identified that build on factors
mediating the relationship between structural differentiation and ambidexterity. As the
differentiated activities take place across separate, differentiated organisational units and
play on multiple organisational levels, the most prominent integration mechanisms focus
on senior team- and organisational integration mechanisms.
Informal senior team social integration mechanisms are necessary as, due to the
interdepartmental nature of senior teams, participants from both the exploratory and the
exploiting units are brought together. In this context, role conflicts are likely to arise and
endanger the acceptance of decisions which, in turn, can compromise overall
organisational performance.
33, 34
In order to counter this threat, a high emphasis has to be
30
See March (1991), p. 71-87.
31
See Levinthal and March (1993), p. 105.
32
See Jansen et al (2009), p. 797.
33
See Jansen et. al (2008), p. 800.
34
See O´Reilly & Tushman (1997), p. 23.
10
Details
- Pages
- Type of Edition
- Originalausgabe
- Publication Year
- 2014
- ISBN (PDF)
- 9783954894031
- File size
- 1 MB
- Language
- English
- Institution / College
- University of Twente
- Publication date
- 2015 (November)
- Grade
- 1,3
- Keywords
- innovation organisation management explore and exploit Contextual ambidexterity Leadership ambidexterity Small and medium-sized enterprises
