GreyB - IP managing innovation
Discontinuous change can be a death sentence for companies, with Kodak, Blockbuster and Xerox examples of giants that have suffered or were finished because of this.
What does an organisation need to survive discontinuous change?
The answer is ambidexterity.
In business terms, this refers to a company’s ability to efficiently exploit its existing capabilities while also exploring avenues for innovation.
What is R&D ambidexterity?
According to Charles O’Reilly, Stanford Graduate School of Business:“Ambidexterity is not simply about whether a firm can pursue efficiency and innovation or compete in multiple markets but about developing the capabilities necessary to compete in new markets and technologies that enable the firm to survive in the face of changed market conditions.”
In 2004, researchers at Stanford Graduate School of Business focused on companies trying to launch breakthrough innovation while pursuing incremental innovation. They found that more than 90% of ambidextrous organisations achieved their goals.
How to make an organisation ambidextrous
Exploitation and exploration require different skillsets, processes and planning. The former is when an organisation competes in established tech areas. The latter requires flexibility, additional cash flow and a lot of experimentation. While the definition of ‘organisational ambidexterity’ is easy to understand, it is not easy to implement.
Below are the essential changes to make to become an ambidextrous organisation.
The role of leadership is crucial to becoming an ambidextrous organisation. Below are the responsibilities and initiatives that leadership must take on:
- structural changes;
- the separation of one process from another; and
- close collaboration and knowledge transfer between different departments, units and teams.
It is usually the CEO who must drive these changes with the help and support of top management.
Structural changes and organisational alignment
There are multiple forms of ambidexterity, the efficacy of which depends on the size of the organisation and type of market in which it operates.
This means switching between exploration and exploitation and works best for companies operating in a stable market.
The falls of Nokia and Motorola were due to their inability to simultaneously explore and exploit, to develop products for both the present and future.
This is when an organisation separates exploration from exploitation and creates different units, processes, cultures and structures to accommodate this, creating a seamless transfer of knowledge and resources between different units. This strategy is effective for companies operating in an ever-changing market.
For example, Tencent’s existing technology and skills act as a springboard for its innovation projects, allowing for minor and continuous improvement and a focus on user experience. This has led the company to deliver some of its star products (ie, QQ and Wechat) and gradually establish a clear lead over its competitors. Further, by encouraging spontaneous innovation, structural ambidexterity came naturally.
Contextual ambidexterity is about flexibility. It gives employees the freedom to divide their time between exploration and exploitation. Changes in processes, culture and structure encourage individuals to make their own judgements.
For example, by focusing on consumer demands, Alibaba has built a large empire by promoting integration across departments and allowing innovation in any part of the company.
Organisations can combine different types of ambidexterity to tackle changes. House and Price, in their book The HP Phenomenon Innovation and Business Transformation, share how HP Inc moved to laser printing after discovering an ink used for integrated circuits (contextual ambidexterity). This led it to start a separate print business (structural ambidexterity). Finally, Hewlett Packard changed again to align with the PC industry (sequential ambidexterity).
Promotion of cross-fertilisation
Close collaboration between managers and departments should make resource transfer seamless. However, alignment and realignment is not easy and it is up to leadership to drive this forward.
USAToday – how it introduced R&D ambidexterity
Following rapid expansion in the early 90s, Tom Curley, then-president and publisher of USA Today realised that consumers were flocking to internet and TV media outlets to consume news. He understood that in order to maintain growth, USA Today must go beyond the traditional print business and extend to an entirely new platform. Curley launched ‘usatoday.com’ and gave responsibility for it to Lorraine Cichowski, who built an entirely new division that catered to internet users (structural ambidexterity). However, the results were disappointing. By 1999, growth was slow and the new division had lost a great deal of money and was starting to lose staff. Curley recognised that he needed to introduce structural changes in order to foster greater collaboration between the new and old media platforms. As a result, USA Today adopted a network strategy in which print business, local TV stations and the online platform were tightly integrated to better leverage the strengths of different departments. Although the three units were kept separate – each had its own processes, culture and structure – the leadership worked closely together.
Curley also set out a new vision for the publication: “We’re no longer in the newspaper business – we’re in the news information space and we’d better learn to deliver content regardless of form.”
Further, he let go of many senior executives who did not share his vision and replaced incentive programmes and department-specific goals with ones targeted to all the company’s media channels, shaking up the HR department as well.
The three units remained physically separated and their uniqueness was maintained, but synergies between them were promoted. Because of their ambidexterity, when the dotcom bubble popped and others panicked, USA Today made $60 million.
Although Curley left the organisation in 2003, USA Today is still committed to keeping this ambidexterity alive. In 2017, the USA Today network announced another organisational change to focus on marketing solutions and consumer business.
- Organisations need to introduce a form of ambidexterity that will help them to detect areas for innovation.
- It is vital to ensure that this translates into management action and is spearheaded by leadership.
- Last but not least – it is tough but doable.