The Ambidextrous Organization

4 Paths to a Sophisticated Innovation Strategy

In december I reached out to both Alexander Osterwalder and John Bessant and asked them what is the most important organizational skill for engaging continuously with innovation. Their answers were almost the same:

  • Osterwalder mentioned that every board should consist of both a Chief Executive Office and a Chief Entrepreneurship Officer.
  • Bessant noted that organizations should always find a balance between innovators and innovation managers.

Shorty after, I read an article by Ayse Birsel, on Inc.com1. She also talked to asked Alexander Osterwalder and asked him the question why ‘designers who are fluent at business strategy’ and ‘business people who are fluent at design’ are so different to each other. He could easily name 8 differences between the two of them, but the article concluded with the statement that organizations are in need of both explorers and exploiters – or evolutionaries and revolutionaires2.

In management theory, this has long been referred to as organizational ambidexterity: > the ability of an organization to both explore and exploit—to compete in mature technologies and markets where efficiency, control, and incremental improvement are prized and to also compete in new technologies and markets where flexibility, autonomy, and experimentation are needed.3

I discussed this construct briefly in an article last September.4. The construct usually deals with exploration on the one hand, and exploitation on the other hand. But reading the comments of Osterwalder and Birsel, and some other material that appeared online in December, I wasn’t exactly sure if exploration could be compared with ‘designer’ and exploitation could be compared with ‘business people’. I started to draw upon that idea, talked to a few people and figured that the construct of ambidexterity could actually be described in more detail when taking into account all 4 of these:

Business Model Generation meets Strategy Creation

This may need some clarification and finds it origin in Trkman & DaSilva’s 2014 work on What is a business model and what is not?5. Trkman & DaSilva argue that while strategy creation is an activity that focuses on the long-term, business model generation is something that focuses on the short-term:

We concur that “every organization has some business model” and “not every organization has a strategy” (Casadesus-Masanell & Ricart, 2010, p. 206), we further emphasize that strategy reflects what a company aims to become, while business models describe what a company really is at a given time.6

Trkman & DaSilva7

This leads to the following two extremes on the horizontal axis. Following scientific evidence on ambidextrous organizations it could be stated that magic happens when business model generation meets strategy creation.

  • Exploration: creating a long-term strategy;
  • Exploitation: creating business models;

Design meets Business

This part is more in line with the discussion I had with Alexander Osterwalder and John Bessant. Among researchers, the intersection of design and management (science) has long been a topic of discussion. There is a growing group of scientists, mostly in business (engineering) that believe that management science is in fact a design-oriented science and that the two are as such inextricably intertwined with each other. Especially in the field of Entrepreneurship, there are findings that this is true:

We conclude that the interaction between the two (creative rdesign and scientific validation) can drive the continual renewal of the entrepreneurship field and unlock the potential of an inclusive body of knowledge that is both rigorous and relevant. (Romme & Reymen, 2018)8

In order to elaborate on the magic that happens when design meets business we should therefore look at theory on entrepreneurship that deals with this magic. One of the most relevant theories on that is the ever-lasting battle between Schumpeter and Kirzner. The Schumpetarian approach argues that organizations try to create something new9, while Kirzner argues that it’s about seizing existing opportunities10. Research has shown that organizations deal with different strategies over time and that organizational design takes a more flexible approach in order to simultaneously deal with both effectuation and causation11 12., which can be seen in the following example:

Ferreira et al.14

This leads to the following two extremes on the vertical axis.

  • Creating opportunities: a design-oriented approach to innovation;
  • Seizing opportunities: a business-oriented approach to innovation;

Capabilities for a sophisticated innovation strategy

John Bessant and Joe Tidd created a model for developing and testing innovation capabilities in their 2009 work Managing Innovation.13 In 2015, Ferreira et al tested the assumptions and different capabilities Tidd & Bessant proposed and draw conclusions on the most interesting measurable capabilities for a sophisticated innovation strategy.14. A few of the most important capabilities were:

  • Organizations that create and share an explicit innovation strategy – and communicate clear goals – can achieve high innovation performance;
  • An innovation-friendly environment constituted in the organizational culture are fundamental to achieving high innovation performance;
  • Companies that are actively involved in outside-in activities can boost their innovation performance.

Haanaes, Reeves & World argue that only 2% of the companies are part of the elite group of organization who understand that you have to excel at both efficiency and innovation. They find that the above-mentioned may be true: “Maintaining an outside-in perspective starts by continuously scanning the market, both demand and supply.”15

In the visual I’ve included 28 capabilities that drive innovation on each of the extremes of the innovation landscape. Balancing the focus between them brings you closer to the 2%.

4 Paths to Ambidexterity

Each organization may have a different starting point, so each path to ambidexterity should be personalized. But roughly, we could distinguish four types of organizations with their corresponding paths to ambidexterity:

Example of the Scale-up Path
  1. The Start-up Path: startups are usually driven by business creation: with a new technology, patent of idea they are seeking to create new markets and blue oceans to implement their idea with short cycles of experimentation. This means they are usually strong at creating opportunities and exploitation. In order to become more sophisticated they should focus more on the capabilities of seizing opportunities and exploration, starting with developing a stronger business sense and developing a long-term strategy.
  2. The Scale-up Path: scale-ups usually have a strong sense for their long-term objective: they set far-away goals and nothing gets in their way of achieving that: they are excellent at managerial causation and usually strong at creating opportunities and exploration. In order to become more sophisticated they need to find the right balance and focus more seizing opportunities and building strong business models.
  3. The SME Path: both technological and non-technological small-sized and medium-sized enterprises, which also includes family business, are usually very capable at entrepreneurial effectuation. They are ad hoc businesses who deal with everything that comes on their way. In order to become more sophisticated they need to focus more on creating opportunities using a design-oriented methodology and exploration creating a long-term strategy.
  4. The Corporate Path: large, established organizations are usually strong at business innovation by exploring scenarios and strategies for the long-term and by managerial, business-wise approach. They could become more agile, sophisticated organizations by focusing on a design-oriented approach to innovation and customers on the one hand and business modeling on the other hand for more short term results.

Below, you’ll find an example of the Scale-up Path and the capabilities they could strive for.

Further reading:

  1. ↩︎

  2. ↩︎

  3. O’Reilly, C. A., & Tushman, M. L. (2013). Organizational ambidexterity: Past, present, and future. Academy of Management Perspectives, 27(4), 324–338. ↩︎

  4. ↩︎

  5. DaSilva, C. M., & Trkman, P. (2014). Business model: What it is and what it is not. Long Range Planning, 47(6), 379–389. ↩︎

  6. DaSilva, C. M., & Trkman, P. (2014). Business model: What it is and what it is not. Long Range Planning, 47(6), 379–389. ↩︎

  7. DaSilva, C. M., & Trkman, P. (2014). Business model: What it is and what it is not. Long Range Planning, 47(6), 379–389. ↩︎

  8. Georges Romme, A. L., & MMJ Reymen, I. (2018). Entrepreneurship at the interface of design and science: Toward an inclusive framework * Entrepreneurship at the interface of design and science: Toward an inclusive framework, 10. ↩︎

  9. De Jong, J. P. J., & Marsili, O. (2010). Schumpeter versus Kirzner: An empirical investigation of opportunity types. ↩︎

  10. Kirzner, I. M. (2009). The alert and creative entrepreneur: a clarification. Small Business Economics, 32(2), 145–152. ↩︎

  11. Reymen, I. M. M. J., Andries, P., Berends, H., Mauer, R., Stephan, U., & Burg, E. (2015). Understanding dynamics of strategic decision making in venture creation: a process study of effectuation and causation. Strategic Entrepreneurship Journal, 9(4), 351–379. ↩︎

  12. Gibson, C., & Birkinshaw, J. (2004). Building Ambidexterity into an Organization Topic: Leadership and Organizational Studies. Reprint 45408, (4), 47–55. ↩︎

  13. Tidd, J., & Bessant, J. (2009). Managing innovation: Integrating technological, market, and organizational change. Chichester, England: John Wiley & Sons. ↩︎

  14. Ferreira, J. J. M., Fernandes, C. I., Alves, H., & Raposo, M. L. (2015). Drivers of innovation strategies: Testing the Tidd and Bessant (2009) model ☆. Journal of Business Research, 68, 1395–1403. ↩︎

  15. ↩︎

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