An Ambidextrous Organization is a concept coined by R. Duncan (1976) to indicate 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.
The ambidextrous organization concept is based on the idea that successful organizations need to find a balance between exploration and exploitation. Exploration refers to trying out new things and taking risks in order to innovate, while exploitation means using existing resources and knowledge to maximize efficiency and profitability.
The concept of ambidexterity has been found to be useful in explaining the success of many organizations, particularly in high-tech industries where change is constant, and innovation is essential for survival.
Being Ambidextrous Is Difficult
Many companies strive to be ambidextrous, but few are successful at implementing an ambidextrous strategy. One reason for this is that it can be difficult to strike the right balance between exploration and exploitation. Too much focus on one or the other can lead to problems. For example, if a company focuses too much on exploitation, it may become efficient and profitable in the short term but will eventually fall behind rivals who are innovating and exploring new markets. On the other hand, if a company focuses too much on exploration, it may never achieve the level of efficiency and profitability that is necessary to survive in the near term.
While the concept of ambidexterity can be useful, it is important to keep in mind that not all organizations need to be ambidextrous. In some cases, it may be more advantageous to focus on either exploration or exploitation. For example, a seed-stage start-up will be almost entirely focused on exploration. The decision of whether or not to pursue ambidexterity should be based on a careful analysis of the organization’s specific situation and needs.
Balancing Exploration And Exploitation
Ambidexterity in an organization can be achieved by balancing exploration and exploitation, which allows the organization to be creative and adaptable, while also continuing to rely on more traditional, proven methods of business. Exploration includes things such as search, risk-taking, experimentation, customer discovery, and innovation, whereas exploitation includes such things as efficiency, implementation, and execution.
The key to successful ambidexterity is to balance these two conflicting approaches so that they complement each other, rather than working against each other. For example, an organization that is focused on exploitation may need to encourage exploration in order to find new ways to increase efficiency and profitability. Likewise, an organization that is focused on exploration may need to encourage exploitation in order to ensure that its innovations are put into practice effectively.
The following are some tips for balancing exploration and exploitation:
- Encourage a culture of innovation: Organizations should encourage employees to be creative and innovative. This can be done through things such as offering incentives for producing innovative ideas, encouraging out-of-the-box thinking, and providing opportunities for employees to experiment. For more information on how corporations should innovate check out our blog on Corporate Innovation Challenges
- Allocate resources appropriately: Organizations should allocate enough resources to exploration so that it can be carried out effectively, but not so much that it comes at the expense of exploitation.
- Encourage communication and collaboration: Effective communication and collaboration between the exploration and exploitation sides of the organization are essential for successful ambidexterity.
- Encourage learning: Organizations should encourage employees to continuously learn from well-structured hypothesis testing.
Organizational Ambidexterity
Organizational ambidexterity refers to an organization’s ability to effectively manage the balance of exploitation and exploration. Just as being ambidextrous means being able to use both the left and right hand equally, organizational ambidexterity requires the organizations to use both exploration and exploitation techniques to be successful
Ambidextrous organizations need management systems to overcome the tension between exploitation and exploration functions. Effective management systems mitigate tension and enhance the performance of the company.
One way to deliver ambidexterity is through organizational design. For example, companies can create separate units that are responsible for each activity. This allows distinct parts of the organization to focus on different objectives without conflict. Another way to encourage both exploration and exploitation is through the use of incentives. For instance, companies can give employees bonuses for producing innovative ideas or for finding ways to improve efficiency.
Benefits Of Ambidexterity
The benefits of organizational ambidexterity are:
- Adaptability: Ambidexterity allows organizations to be more adaptable to change. This is because ambidexterity encourages innovation, which helps organizations to find new ways to respond to changes in their environment.
- Avoidance of stagnation: Stagnation is a major problem for organizations. It can lead to a loss of market share, employee turnover, and decreased profitability. By encouraging exploration and innovation, ambidexterity can help organizations to avoid stagnation.
- Increased profitability: Organizational ambidexterity can also lead to increased profitability. This is because exploration can help organizations to find new ways to increase revenue or reduce costs. In addition, exploitation can help organizations to optimize their operations and improve their efficiency.
Drawbacks Of Ambidexterity
There are also drawbacks to organizational ambidexterity:
- It can be difficult to balance exploration and exploitation.
- Ambidexterity can lead to conflict between distinct parts of the organization.
- Ambidexterity can be expensive to implement.
Market Orientation Is Important
Market orientation has been proven to impact the relationship between ambidexterity and performance. In other words, it is important for organizations to be market-oriented if they want to reap the benefits of ambidexterity. A study by Kyriakopoulos and Moorman (2004) showed that market orientation positively moderates the impact of pursuing high levels of exploitative and exploratory marketing strategies on new product performance; however, firms that pursue an ambidextrous orientation without strong market orientation display a significant reduction in new product financial performance.
Organizational Resources
Another factor that impacts ambidexterity’s effect on performance is the size of a firm’s resources. A large organization with many resources at its disposal is likely to be more successful in implementing an ambidextrous strategy than a smaller firm with fewer resources. This is because a large firm will have the ability to invest more in both exploration and exploitation activities, as well as be able to better manage the trade-offs between the two.
The resource-based view (RBV) of the firm provides a useful framework for understanding how resources can be used to create ambidexterity. The RBV implies that firms are heterogeneous in terms of their resources and capabilities and that these resources and capabilities can be a source of competitive advantage. The key insight from the RBV is that firms must manage their resources and capabilities in a way that matches their strategic intent. In the context of ambidexterity, this means that firms must allocate and use their resources in a way that supports both exploration and exploitation.
Key Takeaways
- Being Ambidextrous is Difficult.
- Maintaining an appropriate balance between exploration and exploitation is important to short and long-term company success.
- Tensions exist between exploration and exploitation functions.
- Organizational design and market orientation are key factors in achieving ambidexterity.
