Understanding an ambidextrous organisation is one thing, making it a reality is another. Imagine you had to do your work using both hands; sometimes the left, sometimes the right and other times both of them simultaneously. Imagine if everyone in your organisation faced the same challenge. Being able to use both of your hands adroitly is known as ambidexterity. And this is a phenomenon increasingly applied to companies where the tension between two different business models is described as “organisational ambidexterity”. The concept was first applied to managerial contradictions by the academic Robert Duncan in 1976 and has since entered various streams of research – in strategic management as alignment versus adaptability; and in operations management as flexibility versus efficiency; or in innovation management as radical versus incremental.
Research has shown that ambidexterity leads to higher performance but at the same time it emphasises that the tension between two distinct capabilities is a key challenge.
Exploration and exploitation:
The most accepted definition of ambidexterity is a balance between explorations and exploitation; organisations capable of exploiting their existing competencies while simultaneously exploring new opportunities. James March refers to this as the exploration of new possibilities and the exploitation of old certainties. Exploitation includes such things as choice, refinement, production, selection, execution efficiency and implementation. While exploration encompasses knowledge creation and analysis of future opportunities. Organisations that engage in exploration to the exclusion of exploitation are likely to find that they suffer the costs of experimentation but without gaining many of its benefits. These companies exhibit too many undeveloped new ideas and often too little distinctive competence. A well-known example of too much emphasis on exploration is Ericsson, the telecom giant that led the development last century of the global system for mobile communications. At its peak, its R&D organisation employed 30,000 people in 100 technology centres and with considerable duplication of work. Despite its strong focus on exploration, the company’s results went into steep decline. Ericsson laid of around 60,000 employees and closed most of its technology centres to put focus back on exploitation in order to return its businesses to profitability.
Conversely, organisations that engage in exploitation to the exclusion of exploration are likely to find themselves trapped in stable equilibrium; going nowhere fast but efficiently. Maintaining an appropriate balance between exploration and exploitation is a primary factor in the prosperity of any corporate system.
Most of the academic work and research has focused on trying to explain the problem of organisational ambidexterity. Julian Birkinshaw and Cristina Gibson in their 2004 article ‘Building Ambidexterity into an Organisation’, (MIT Sloan Management Review 2004), are among the very few scholars trying to provide a framework for businesses to become ambidextrous. They describe organisational ambidexterity as the capacity to simultaneously achieve necessary alignment (exploitation – excellence in daily operations) and adaptability (exploration – referring to the organisation’s ability to innovate and change in response to the changing demands in the environment). To ensure long-term success, an organisation needs to be able to master both adaptability and alignment. Focusing too much on that alignment can often make an organisation lose long-term vision, while emphasising adaptability over alignment means building tomorrow’s business at the cost of today’s.
Birkinshaw and Gibson explain that the two forms of organisational ambidexterity come under two categories – structural and contextual:
- Structural ambidexterity is all about creating separate organisations or structures for different types of activities – organisations that are either solely aligned or solely adaptive, where employees have clear mandates and then they are rewarded accordingly.
- Contextual ambidexterity is when individuals make choices between either the exploitation-oriented or the exploration-oriented activities in their daily work. And to allow this, it is necessary for the organisation context to be more flexible, allowing employees to use their own judgement as to how they divide their time between their adaptation-oriented and their alignment-oriented activities.
Unfortunately, in today’s world, very few organisations can afford to have independent structures to focus solely on exploration. This was the case for many companies which invested heavily in R&D (such as Ericsson). These companies usually had a fairly independent organisation, with its own management and own budgets, isolated from the core day-today business. But after the crisis and the resulting extreme focus on efficiency and cost control most of these independent structures have been drastically reduced or dismantled.
Prof Bagirathi Iyer,
Indira School of Business Studies