In today's rapidly changing business environment, it's important for organizations to be able to adapt and innovate in order to stay competitive. One way to do this is through the concept of ambidexterity, which involves balancing exploration and exploitation in order to pursue both new opportunities and maximize existing strengths. In this blog, we will discuss what ambidexterity in business is and how it can be implemented in your business. We will also provide some tips and strategies for achieving this balance and staying agile in an ever-changing market.
Ambidexterity in business refers to the ability of an organization to simultaneously pursue both exploration and exploitation. Exploration involves taking risks and trying out new ideas in order to innovate and grow, while exploitation involves focusing on existing strengths and maximizing efficiency. Being ambidextrous means being able to balance these two competing priorities, and adapt to changing market conditions and opportunities. This can help organizations stay competitive and dynamic in a rapidly changing business environment.
A distinction is made within organizational ambidexterity between temporal, contextual, and structural ambidexterity.
Here is a brief summary of the three types:
In temporal ambidexterity, the explorative and exploitative forms alternate one after the other. Thus, both forms are never present at the same time, but only one at a time. For example, at the beginning, a company can be explorative. That is, the company focuses strongly on exploring new business areas and the emergence of innovations. However, as time goes by and the company grows, it may change to an exploitative form. Processes that have already been established in the company are analyzed and trimmed for greater efficiency. Such a change of form can be repeated constantly, e.g. when the competitive situation on the market changes or crises burdens the company.
This type of organizational ambidexterity differs from the previous one in that exploration and exploitation occur simultaneously. However, in contextual ambidexterity, organizational factors (e.g. leadership style, value system, goals, and norms, etc.) change from situation to situation. However, this dynamic duality makes it difficult for employees to deal with it productively, as organizational factors (can) change all the time. Thus, it is the task of management to ensure a good balance between exploration and exploitation. Contextual ambidexterity is particularly applicable in research-intensive areas and in the late stages of high-growth, young organizations (e.g. start-ups).
In structural ambidexterity, there is a strict organizational separation of exploration and exploitation. Both forms therefore each have their own organizational unit. However, there is often the danger that the two forms are completely separated from each other, e.g. through spatial separation, and thus the spill-over effects do not occur. The problem can be solved, for example, by forming two teams of organizational units (cf. Gard, J. (2015)) that ensure the necessary knowledge transfer of both parties.
Examples are a good way to learn about abstract topics. Therefore, we would like to show you three cases of how small and medium-sized companies, as well as corporations, have successfully implemented ambidexterity. You will see the effect this has on both corporate culture and performance.
In order to step out of the usual routine and think about new ways of working, it can already help to keep a few hours or even a day free for reflection at regular intervals. This is what the Swiss company SIGA does, as reported by the business magazine Brandeins. On their "workshop days" they look for ways to make work processes more efficient or to eliminate mistakes in them.
Toyota's unique corporate culture is arguably its key success factor, as the company manages to be above average in efficiency and innovation over the years. One reason for this is Toyota's special value system: Toyota constantly sets itself unattainable goals. This helps to break employees away from long-established ways of working and to think about new approaches to try to achieve the goals. Furthermore, there is a spirit of experimentation throughout the company. Employees are encouraged to leave the familiar path and take new, unfamiliar directions. Failures are not seen as such but are even welcomed in order to learn from them.
When employees work on tackling seemingly unattainable goals, they always think carefully, take small steps and never give up. This entrepreneurial thinking has a positive impact on staff efficiency and knowledge building.
"Be at the vanguard of the times through endless creativity, inquisitiveness, and pursuit of improvement" - Sakichi Toyoda
But what contributes most to the ambidextrous structure is the culture of contradictions:
One example is the extreme thriftiness and constant spendthrift attitude of management towards certain areas. Among other things, the lights are always switched off during the lunch break and there are no partitions in the open-plan offices. On the other hand, generous investments are made in production facilities, dealer networks, and personnel development. Another example is that constructive criticism is explicitly welcome. Reasoned opposition to orders in order to avoid wrong decisions is normal and seen as a duty of employees. Nevertheless, there are strict hierarchies in the company, whereby tasks are distributed from top to bottom.
Probably the best-known example, however, is Google. The technology giant encourages its employees to spend 20% of their working time on implementing their own ideas. By giving employees time to think about things other than their current projects, they become creative. The results of this practice were, for example, Google Maps or Google Mail. One of these new products was allegedly even created in one night. Whether this corporate principle alone is responsible for Google being as innovative as a start-up despite its size is difficult to say. But it is clear that it significantly promotes the spirit of entrepreneurship and innovation.
So what can you learn from these examples?
As you can see, ambidextrous structures offer crucial advantages: Whether your company needs to be more competitive and adaptable, you want to have a better culture of learning and making mistakes, or you want to encourage your employees to adopt an entrepreneurial mindset.
A study by Charles A. O'Reilly and Michael L. Tushman has shown that there are some commonalities among great innovators that you can implement. The result of their study was that a clear vision and a common identity, in which both exploitation and exploration are equally represented, distinguish successful companies.
Therefore, develop values that fit your company culture and that your employees value. Make sure that there are no contradictions or even conflicting goals in your value system that are too extreme.
What else can you learn from the examples?
You can give your employees the opportunity to think about your work or department for a certain amount of time. Your employees often know themselves which processes can still be improved. By "reserving time", you ensure that this new practice also finds a place between the usual routines. Maybe you even manage to give your staff an extra room for it? This way, innovation becomes a new task and area of responsibility for your staff.
You can also form a team of creative and experienced employees who are solely responsible for innovating and creatively rethinking the existing company culture. The team should also help shape the future leadership of your company. However, not only the team but also the managers should be familiarized with ambidextrous structures. Part of an ambidextrous manager's job is to create opportunities for experimentation and innovation and to hand over responsibility to employees. Offer employees opportunities for active design and a chance for co-determination.
Last but not least, you should have understood from the examples that mistakes are part of an innovation process. Therefore, enable a feedback culture so that your employees (and also the management) can learn from their mistakes. Do not punish mistakes. On the contrary, communicate clearly through the company's value system that employees are allowed to make mistakes.
Unfortunately, there is no one-size-fits-all approach to promoting ambidexterity in your organization. Therefore, the motto here is to get into action. Start with small steps to build up ambidextrous structures and do not immediately tear down all the usual ways of working in the company. Rather, integrate agile methods alongside classic organizational and management systems. In this way, you create a hybrid organization that works both efficiently and innovatively.
Now that you have learned about the benefits of implementing ambidexterity in your business, it is important to also consider the benefits of internal mobility. Internal mobility, also known as lateral movement, refers to the ability of employees to move within the organization to different roles, teams, or projects. But what are the benefits and potential use cases for it. Find out the advantages of internal mobility in our guide.
edyoucated is funded by leading research institutions such as the Federal Ministry of Education and Research (BMBF), the Federal Institute for Vocational Education and Training (BIBB), Federal Ministry for Economic Affairs and Climate Action (BMWK).