Start-up versus corporation: How to combine efficiency and creativity with contextual ambidexterity in organizations.

The fast eat the slow: Are established companies inferior to innovative start-ups?

This impression of incompatibility is reinforced by the current behavior of many companies. An increasing number of companies is founding or buying start-ups or venture capital firms in order to increase their own innovative power. A strict separation between both organizations ensures that the innovative start-up is not associated with the company’s “established” cultural and procedural landscape. Otherwise one risks slowing down the innovative power of the valuable start-up. At the same time, the company staff questions whether its management is cable to take the necessary steps to prepare the company for the future. Another contradiction.

Ambidexterity describes the ability to use both hands and was applied to organizations in the 1970s.

This alleged incompatibility is opposed by a concept that has been debated in the area of strategic management for some time and is currently also an important topic in organizational theory. We are talking about ambidexterity, the ability to utilize the left as well as the right hand. In organizations, ambidexterity describes the ability to unite the opposites efficiency versus innovative power and exploit versus explore. In this context, the term organization transcends companies but includes them as a specific organizational form.

Either efficiency or innovative power was paramount at the beginning.

After Duncan’s concept (1976) was used for organizations for the first time in the 70s, a large number of studies that indicate how ambidexterity can be strengthened in companies are now readily available.  It is particularly interesting to note that structural ambidexterity was the main focus at the beginning. It refers to the assumption that organizations are not able to achieve efficiency and innovative power at the same time, but require different structures to achieve those opposing goals (Gibson and Birkinshaw 2004). For example, studies showed that a decentralized organizational structure has a positive impact on the organization’s innovative capability (Boumgarden et al. 2012). In contrast, greater centralization has a positive effect on its efficiency. This strategy is currently still pursued by many companies despite the fact that new findings question this “either/or” assumption. In the following, we are going to discuss these findings briefly.

Work environment and human capital influence ambidexterity.

New approaches in ambidexterity research focus on framework conditions as well as people instead of organizational structures. This is based on the premise that ambidexterity is a conscious decision by people to invest their time in efficiency and innovation. Processes and systems that support this “contextual ambidexterity” need to be supported specifically (Gibson and Birkinshaw 2004). For example, this can be achieved by activities that improve the work environment. The focus is on activities that strengthen trust and team work in the organization (Chang 2015). Another variable is the organization’s human capital. This can be developed by measures in the human resources development and in the area of Learning & Development. Personnel selection is also an adjusting screw that affects an organization’s human capital.

Discipline, performance orientation combined with individual responsibility, human resources development, and the willingness to share knowledge influence ambidexterity positively.

Gibson and Birkinshaw (2004) have arrived at the conclusion that companies with higher ambidexterity benefit from higher performance. This is achieved by discipline and performance orientation as well as individual responsibility, the willingness to share knowledge, and activities for personnel development. At large these factors describe the environment or the organization’s context. This influences the company as it were and affects whether employees further efficiency as well as innovative power.

Leadership is an influential variable for ambidexterity.

All aforementioned factors suggest that the topic leadership influences an organization’s ambidexterity. This concerns the framework conditions established by the management to strengthen the mentioned factors. This includes for example the introduction of team goals instead of individual targets and methods like job crafting that improve the individual responsibility of each employee.

Great behavioral complexity in the management team influences ambidexterity positively.

On the other hand, the management team influences the company ambidexterity as a group by their way of working together as well as how decisions are made (Carmeli and Halevi 2009). The focus is on the management team ability to quickly adapt to changing framework conditions. This requires that the management team is working well together as a group, i.e. a great level of trust prevails, a fundamental open-mindedness for innovation is present, and conflicts are solved collectively (Carmeli and Halevi 2009). If these pre-requisites are met, the leadership team is able to achieve a great level of behavioral complexity (Hart and Quinn 1993). This refers to the management team’s capability to deal with paradox situations and to set trends for efficiency and innovations accordingly.

Critical thinking, conflict ability, and the willingness to question the well-established are important driving forces in order to increase ambidexterity.

The question when a change is necessary from efficiency to innovation leads us to the last factor. Holmqvist (2004) reaches the conclusion in the study of a Scandinavian software company that the change from focusing (efficiency) to opening (innovation) is accompanied by phases that are characterized by dissatisfaction with the predominant conduct. It may be inferred that critical thinking, conflict ability, and the willingness to questions the well-established may not only improve and organization’s ambidexterity but also serves as important stimuli for organizational learning (Holmqvist 2004).

Characteristics that may seem incompatible at first may very well be able to complement each other. This is particularly true when new findings arise that question or complement the original understanding. Ambidexterity is a concrete example that we discussed here in detail. As usual the following applies: questioning well-established and accepted concepts is the basis for all progress and development.

References and further reading

Boumgarden, Peter; Nickerson, Jackson; Zenger, Todd R. (2012): Sailing into the wind. Exploring the relationships among ambidexterity, vacillation, and organizational performance. In: Strat. Mgmt. J. 33 (6), S. 587–610. DOI: 10.1002/smj.1972.

Carmeli, Abraham; Halevi, Meyrav Yitzack (2009): How top management team behavioral integration and behavioral complexity enable organizational ambidexterity. The moderating role of contextual ambidexterity. In: The Leadership Quarterly 20 (2), S. 207–218. DOI: 10.1016/j.leaqua.2009.01.011.

Chang, Yi-Ying (2015): A multilevel examination of high-performance work systems and unit-level organisational ambidexterity. In: Human Resource Management Journal 25 (1), S. 79–101. DOI: 10.1111/1748-8583.12061.

Duncan, R. B. (1976): The ambidextrous organization: Designing dual structures for innovation. In R. H. Kilmann, L. R. Pondy, & D. Slevin (Eds.), The management of organization (Vol. 1, pp. 167–188). New York, NY: North-Holland.

Gibson, C. B.; Birkinshaw, J. (2004): THE ANTECEDENTS, CONSEQUENCES, AND MEDIATING ROLE OF ORGANIZATIONAL AMBIDEXTERITY. In: Academy of Management Journal 47 (2), S. 209–226. DOI: 10.2307/20159573.

Hart, Stuart L.; Quinn, Robert E. (1993): Roles Executives Play. CEOs, Behavioral Complexity, and Firm Performance. In: Human Relations 46 (5), S. 543–574. DOI: 10.1177/001872679304600501.

Holmqvist, Mikael (2004): Experiential Learning Processes of Exploitation and Exploration Within and Between Organizations. An Empirical Study of Product Development. In: Organization Science 15 (1), S. 70–81. DOI: 10.1287/orsc.1030.0056.