Ambidextrous Innovation

Porter (1985) states: “Competitive advantage grows fundamentally out of value an organization can create for its buyers that exceeds the organizations cost of creating it. Value is what buyers are willing to pay, and superior value stems from offering lower prices than competitors for equivalent benefits or providing unique benefits that more than offset a higher price”. Competitive advantage is important for organizations due to increased competition and fast-changing market forces. With the increasingly volatile and uncertain market environment, most organizations have put their strategic emphasis on how to do new things which places innovation as one of the strategic priorities in the organization.

To flourish in the long run, organizations need to maintain a variety of innovation efforts to drive the growth of productivity for further competitiveness of the organization. In this sense, organizations need to implement ‘innovation ambidexterity’ to maintain long-term competitive advantages. Innovation ambidexterity refers to organizations pursuing both exploratory and exploitative innovation simultaneously (He and Wong, 2004; Yang et al., 2015). Although the inherent characteristics of exploratory and exploitative innovations are contradictory, Atuahene-Gima (2005) argues that pursuing both are closely linked to new product performance. 

Reflecting the importance, research has focused on identifying the means to enhance ambidexterity. In this pursuit, many researchers have paid attention to a variety of perspectives, but literature on ambidexterity in the light of product strategy and innovation is limited. Especially considering the context of the current digital economy. The critical question on how an organization should balance exploitative and explorative product strategy is difficult to answer. Therefore, I posit the following research question for this paper:

This series review explores different theories of ambidexterity and innovation and uses logical argumentation to combine theories into a framework. The framework can help organizations to analyze and substantiate how and when an opportunity for innovation arise for their organization.

Ambidextrous innovation
The concept of “ambidexterity” was introduced in 1976 by Robert Duncan. The research field has grown broader as the phenomenon has been studied in several contexts such as organizational learning, strategy, management, and technological innovation. The term ambidexterity has been used in many ways.

Research on ambidexterity tells us the difficulty to cope with balancing the tension between exploration and exploitation (Tushman & O'Reilly 1996; Raisch & Birkinshaw 2008). This can be explained by the fact that exploration reduces the speed of improvements in organizations, and exploitation makes experimentation less attractive (Levitt & March, 1988). Most organizations tend to focus more on exploitation that largely can be explained by the need for short-term success where the return is positive and predictable. Exploration in contrast, is uncertain and distant and often more ineffective as the pursuit of discontinuous innovation has longer time horizons and more diffuse effects. Exploitation has a tradeoff relation with exploration, as most organizations tend to focus more on one of them (Andriopoulos & Lewis, 2009; Sinha, 2015). Extant research illustrates this tendency, also called myopia, that organizations overestimate exploitation and underestimate exploration (Levinthal & March, 1993).

If organizations do not manage to balance the two inherent tensions and overemphasise one of them, they will be insufficient in the long run. Subsequently, exploration and exploitation function as a paradox, “a situation where two seemingly conflicting or mutually exclusive factors seem to be true at the same time” (De Wit, 2017, p.14). Hence, several researchers have stressed the importance of balancing exploration and exploitation to secure both short-term and long-term success (He & Wong, 2004; Andriopoulos & Lewis, 2009; O'Reilly & Tushman, 2013; March, 1991; Teece, Pisano, & Shuen, 1998).

Different arguments on the need for both exploration and exploitation are well accepted. Gupta et all. (2006) argues that exploitation and exploration require fundamentally different architectures and capabilities, and both compete for scarce resources. Exploitation involves refinement and extension of existing knowledge, skills, and technologies, whereas exploration involves the experimentation with new alternatives and acquisition of new knowledge, skills, and technologies (Katila & Ahuja, 2002; March, 1991). Many research focusses on the paradox between the two. Some argues about the different tradeoffs, others about the simultaneous pursuit and integration within an organization.

I use the definition of Birkenshaw, J,. Gibson, C,. 2004 as they describe ambidexterity as the capacity to simultaneously achieve necessary alignment (exploitation – excellence in daily operations) and adaptability (exploration - referring to the organization’s ability to innovate and change in response to the changing demands in the environment). To ensure long-term success, an organization needs to be able to master both adaptability and alignment. Focusing too much on alignment can often make an organization lose long-term vision, while emphasizing adaptability over alignment means building tomorrow’s business at the cost of todays.

References

Duncan, R. B. (1976). “The Ambidextrous Organization: Designing Dual Structures for Innovation,” The Management of Organization Design: Strategies and Implementation, 1, pp. 167-188.

Birkhinshaw, J., Gibson, C. (2004). “Building Ambidexterity into an organization. Mit Sloan Management Review Summer 2014

He, Z.-L. and Wong, P.-K. (2004). “Exploration vs. Exploitation: An Empirical Test of the Ambidexterity Hypothesis,” Organization Science, 15 (4), pp. 375-497.

Gupta, A. K., Smith, K. G., & Shalley, C. E. (2006). The interplay between exploration and

exploitation. Academy of Management Journal, 49(4), 693–706.

Katila, R., & Ahuja, G. (2002). Something old, something new: A longitudinal study of search behavior and new product introduction. Academy of Management Journal, 45(6), 1183–1194.

March, J. G. (1991). “Exploration and Exploitation in Organizational Learning.” Organization Science 2 (1): 71–87.

Tushman, M. L., & O'Reilly, C. A., III (1996). Ambidextrous organizations: Managing evolutionary and revolutionary change. California Management Review, 38, 8-30.