Artificial Intelligence and Business Strategy. Still, an individuals ability to exhibit ambidexterity is facilitated (or constrained) by the organizational context in which he or she operates, so contextual ambidexterity can also be diagnosed and understood as a higher-order organizational capability. A number of business writers have used the term ambidexterity over the years. The Roman god Janus had two sets of eyesone pair focusing on what lay behind, the other on what lay ahead. Third, they encourage action that involves adaptation to new opportunities but is clearly aligned with the overall strategy of the business. The moves quickly paid off, as the reporters realized that their stories would reach a much broader audienceand that they would have the opportunity to appear on TV. Bartlett, The Individualized Corporation: A Fundamentally New Approach to Management (New York: Harper Business, 1997). Companies tended to structure their breakthrough projects in one of four basic ways. And perhaps because of this, the concept of ambidexterity sits easily with its senior executives. The result was an organization that became proficient at continually making small adaptations to its strategy without losing alignment. Ciba Vision also revamped its incentive system, rewarding managers primarily for overall company performancenot individual units. Create organizationally distinct unitsbut tightly integrate them at the senior executive level. What is an Ambidextrous Organization? Definition and meaning - MBA Brief Companies in this position also have low ambidexterity and produce satisfactory but lackluster results. Ambidextrous Organizations The term ambidextrous organization, refers to the ability of a firm to utilizes tools and processes to be both exploitative and explorative. Organizational ambidexterity (OA) is an organization's dual capability to simultaneously engage in exploration and exploitation to sustain corporate success in today's highly dynamic business . Second, there is no single leadership model for an ambidextrous organization. Some pull individuals out of their current jobs to work in a dedicated cross-functional team for a limited period of time. The standard approach is to create structural ambidexterity, that is, to create separate structures for different types of activities.2 For example, the core business units are given responsibility for creating alignment with the existing products and markets; and the R&D department and business development group are given the job of prospecting for new markets, developing new technologies and keeping track of emerging industry trends. The more a company emphasizes performance management and social support, the more likely are its employees to behave ambidextrously aligned and adaptive and the more likely the organization is to achieve high performance. As one of them put it, We align around adaptability.. 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. Volume 1, eds. He had come to believe that the new unit required not greater separation but greater integration. 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. The country-club context in which there is a strong sense of support and trust, but no one works too hard and mediocre performance is tolerated can be as dysfunctional as the burnout context. USA Today, well aware of the natural skepticism of newspaper reporters, took a particularly aggressive approach to communicating its new vision, strategy, and organization. The national newspaper, a division of the Gannett Corporation, had come a long way since its founding in 1982, when its colorful brand of journalism was widely ridiculed by critics. At a theoretical level, its easy to explain why ambidextrous organizations would outperform other organizational types. An ambidextrous organization. One of the most important lessons is that ambidextrous organizations need ambidextrous senior teams and managersexecutives who have the ability to understand and be sensitive to the needs of very different kinds of businesses. The 'Ambidextrous Organization' is an organizational development concept coined by R. Duncan (Duncan, 1976). It is manifested in the behaviors of hundreds of individuals in the ways described above and in the unwritten routines that develop in organizations. The focus of the class was on Leading . In the more ambidextrous and higher-performing companies, the rating disparity was typically 0.5 points or less. What is an ambidextrous organization? To test this, we asked respondents questions about a range of contextual factors, out of which we created two indexes one for performance management, the other for social support. Cao, X., Zhang, X., & Xi, Y. A companys ability to execute todays strategy while developing tomorrows arises from the context within which its employees operate. The forces of inertia in companies are strong. He developed a dual role for himself, managing operations four days a week and on the fifth developing a promising electronic module that automatically reported impending problems inside a coffee vending machine. The exploration unit operates independently and is structured to encourage risk-taking and creativity. Given the executive will to make it happen, any company can become ambidextrous. Similarly, too much attention to the adaptability side of the equation means building tomorrows business at the expense of todays. Almost every company needs to renew itself through the creation of breakthrough products and processes, but it shouldnt do so at the expense of its traditional business. Kodak and Boeing are just two of the more recent examples of once dominant companies that failed to adapt to market changes. In an era when disruption is only increasing in many markets, it is time to . Tushman and C.A. The new ventures need to be separate, but not lose access to the assets and capabilities of the core business that can give them an edge over small startups in fast-moving markets. It can be supplemented with a more qualitative discussion of the context in the organization. Structural separation is necessary, the argument goes, because the two sets of activities are so dramatically different that they cannot effectively coexist. Others have pointed to cross-functional teams as the key to creating breakthrough innovations. At the same time, the company developed what one executive called a deep desire to adapt. The seven strategic goals were updated every two or three years, the organization had an informal style of management in which expressing alternative views was encouraged and managers developed a self-critical approach, always looking to improve. It underscored the connections between the breakthrough initiatives and the conventional operation, bringing together all employees in a common cause and preventing organizational separation from turning into organizational fragmentation. The memo explicitly stated that the stress of billable hours is dehumanizing and verging on an abdication of our professional responsibilities.. It indicates an organization's ability to be aligned and efficient in its management of today's business demands, as well as being adaptive to changes in the external environment. Create top-down and bottom-up . He inquired further into these plans, and on his return to Canada, he called a regional manager in Manitoba, who he knew was looking for ways of building his business. The legions of once successful firms that have fallen on hard times or gone out of business underscore how hard it is to break out of a rut, especially a comfortable, profitable rut. But as the 1990s progressed, storm clouds appeared on the horizon. Slater, The Effect of a Market Orientation on Business Profitability, Journal of Marketing 54 (October 1990): 2035. Without people like Tom Curley, Karen Jurgenson, Glenn Bradley, and Adrian Huntermanagers who can be, as one of them put it, consistently inconsistentUSA Today and Ciba Vision would have had little chance of success. 5. He arranged corporate funding, found a subcontractor to develop the software and then piloted the module in his own operations. The contrast between these two companies raises three critical points: First, there is no single pathway to ambidexterity: Renault achieved it by building a performance context around its existing social support; Oracle built a performance context first, then looked for ways of building support and trust across the organization. That is the worst of both the country-club and burnout syndromes and constitutes a low-performance context in which ambidexterity is impossible. In each business, we interviewed midlevel managers about their companys alignment and adaptability, asking them to rate a variety of factors. As one executive explained, Moving at this high rate of speed makes it impossible to maintain formal processes. Pasternack, P.F. The company would need to find ways to apply its existing news-gathering and editing capabilities to entirely new media. Ambidextrous Organization - Balance Business Needs - Change Logic A large beverage companys marketing manager for Italy was primarily involved in supporting a newly acquired subsidiary, and she was frustrated with the lack of contact she had with her peers in other countries. Adaptability, in other words, had taken precedent over alignment, and the subsequent crash in the telecom industry meant that Ericsson was hit harder than most. Many people will perform well for a limited time in such a scenario, but its depersonalized, individualistic and authority-driven nature typically results in a high level of employee turnover, making ambidexterity difficult to achieve. At the organizational level, contextual ambidexterity can be defined as the collective orientation of the employees toward the simultaneous pursuit of alignment and adaptability. While their work focused on the individual level of analysis, there are strong parallels with our work on contextual ambidexterity. Lloyds TSB Bank Plc, based in the United Kingdom, delivered spectacular shareholder returns throughout the 1980s and 1990s, in large part through CEO Brian Pitmans single-minded focus on return on equity. Nine were set up as cross-functional teams, groups operating within the established organization but outside the existing management hierarchy. Firms that execute it successfully are able to generate organic growth that outperforms growth through acquisition. Bradley knew that attempting to manage these projects under the constraints of the old organization would not work. Ciba Visions Bradley asked some of the executives overseeing the traditional business to leave when they fought the decision to reallocate R&D investments to the new units. 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. So, the left hand innovation unit is independent to the right hand, with its own people, processes and culture. In a nutshell, an ambidextrous organization takes care of current core businesses with the right hand, while taking care of innovation with the left hand, as physically separate business units. 2 (2004): 209226. Innovator's Dilemma + Ambidextrous Organizations Explained - LinkedIn Ambidextrous Organizations: Managing Evolutionary and Revolutionary For example, Scotch decided to focus on levers intended to bolster its social support side of the equation: professional development, knowledge transfer and a more participative strategic-planning process. To test this, we undertook a series of regression analyses, which showed that (a) ambidexterity is correlated with performance, (b) organizational context is correlated with ambidexterity, (c) organizational context is correlated with performance and, the critical step, (d) when ambidexterity and organizational context together are analyzed as predictors of performance, only ambidexterity has a significant influence. Williams, Leadership as an Institutional Trait, Strategy+Business 26 (second quarter 2000): 11. For executives who are seeking to build an ambidextrous organization, there are five key lessons that emerge from our work. 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. These approaches avoid the extreme form of separation that is typical of dual structures. See B.J. After an abortive merger with Volvo in 1993, Renault gained control of a struggling Nissan in 1998 and, to the surprise of many observers, quickly turned around its performance. Companies that use ambidextrous structures are nine times more likely to create breakthrough products and processes than those using other organizational structureswhile sustaining or even improving their existing businesses. Lawrence and J.W. In almost every instance in which an ambidextrous structure was used, the competitive performance of the existing product either increased or held steady. How to Create an Ambidextrous Organization - LinkedIn In a nutshell, an ambidextrous organization takes c. In 1999, he decided that USA Today should adopt a network strategy, in which it would share news content across three platforms: the newspaper, USAToday.com, and Gannetts 21 local television stations. Organizational ambidexterity was defined as an organization's ability to be aligned and efficient in its management of today's business demands as well as being adaptive to changes in the environment at the same time. In lower-performing companies, front-line employees rated elements of organizational context an average of 1.5 points lower on a 7-point scale than did their top-management counterparts. Action learning and the ambidextrous organization - Emerald Insight Over the next five years, Ciba Vision successfully launched a series of contact-lens products, introduced a drug for treating age-related macular degeneration, pioneered a new lens-manufacturing process that dramatically reduced production costs, and overtook J&J in some market segments. General managers and corporate executives should be able to relate. As one manager said, There is no overarching vision, each division devises its own vision and objectives. In another company, there was evidence of a lack of follow-through when using management systems (making it hard to create discipline). Curley launched the effort by appearing at a company meeting dressed as a cyberpunk, complete with blue hair. The organizational structure of an ambidextrous organization typically includes the following elements: (1) Exploration Unit: This unit is responsible for developing new products, services, or processes and focuses on innovation and creativity. 4 (1996): 830; and C.A. Levine, Flexibility Versus Efficiency? Ten years later, its sales had more than tripled, to over $1 billion, and the new drug, transferred to Novartiss pharmaceutical unit, was on its way to becoming a billion-dollar business. 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. The failure to achieve breakthrough innovations while also making steady improvements to an existing business is so commonplaceand so fascinatingthat it has become a battleground of management thought. Stated slightly differently, the emphasis during the transition was placed on performance management but building on the social support that had existed in the early 1990s. But while adaptability is important, it is not enough. The eventual goal should be reintegration with the mainstream organization as quickly as possible. The extended-wear team remained in Atlanta, though in a facility separate from the conventional-lens business, while the daily-disposables team was located in Germany. Unless lower-level employees genuinely understand the initiatives of top management, the initiatives will have a minimal impact on individuals capacity for ambidexterity. . How can managers begin to think about building contextual ambidexterity into their organizations? Inevitably, conflicts over the allocation of human and financial resources would slow down and disrupt the focus needed for breakthrough innovations. Like USA Today, Ciba Vision also revamped its incentive system, rewarding managers primarily for overall company performance rather than for the results of their particular units. This diversity requires firms to be ambidextrous, because no single approach to strategy is applicable to a large firm in its entirety and over time. The Ambidextrous Organization is a proven approach to managing these tensions. 1. See R.B. For example, many large companies, including British American Tobacco, Royal & SunAlliance and British Airways, established corporate venture units during the dot-com boom to nurture new business ideas, but as those units lacked sufficient connective tissue with the core business, most eventually became isolated and irrelevant to the companys strategy.8. For example, the operations manager in France for a major coffee and tea distributor was initially charged with making that plant run as efficiently as possible, but he took it upon himself to identify new value-added services for his clients. They possess the attributes of rigorous cost cutters and free-thinking entrepreneurs while also maintaining the objectivity required to make difficult trade-offs. Earn badges to share on LinkedIn and your resume. Making matters worse, in 1987 J&J brought out a new, disposable contact lens that threatened Ciba Visions sales of conventional contacts. For example, a demanding, results-driven orientation that lacks social support will create a burnout context. Another important lesson from the USA Today and Ciba Vision stories is that a companys senior team must be committed to operating ambidextrously even if its members arent ambidextrous themselves. At the same time, Curley made larger changes to the organization and its management.