Elena Revilla. Professor. IE Business School
2 October 2006
Today a company is required to operate on two levels. It must exploit proven knowledge in order to guarantee stability. But it also must explore new ideas if it wants to remain on the cutting edge of innovation.
As markets become more dynamic, companies are increasingly focusing on innovation and continuous professional development, enabling them to devise new formulas for success that replace the recipes of the past. Within this environment, both current literature and empirical evidence show that successful organisations are ambidextrous. In other words, they are capable of operating on two levels: They know how to maintain stability and remain in control while allowing for experimentation and improvisation.
The ambidextrous organisation, as originally defined by Thushman and O’Reilly, shies away from having to choose between pragmatic and visionary approaches. Instead, it seeks to reconcile the need to achieve results in the short term with the ability to adapt to a changing environment over the long term.
In terms of innovation, being ambidextrous requires introducing fresh policies and taking advantage of new opportunities. From a pragmatic point of view, it means using readily available knowledge to improve current operations in a bid to guarantee competitiveness in the short-term. New knowledge gives rise to new opportunities, thereby generating new ideas that replace the old know-how. In contrast, drawing on past knowledge and experiences reduces the margin of error by establishing familiar routines and reducing the need for experimentation.
A delicate balance should arise between exploring new ideas and exploiting well established knowledge. But the truth is companies tend to emphasise one aspect while relegating the other to a back-seat role. Focusing too heavily on management can stifle efforts to come up with new ideas for radical innovation. Similarly, too great an emphasis on the development of new ideas and large-scale innovations can endanger the continuous and systematic improvement of quality and costs.
For example, Apple, a company of renowned innovative capabilities, was on the verge of disaster after it failed to pay attention to short term results. Apple is an exception. Indeed, more than 70 per cent of executives acknowledge they would willingly sacrifice investments in the long-term performance of their company in exchange for improving quarterly results.
The skills required for exploiting the past are different from those for exploring the future—a fact that helps explain why one-sided organisations often exist, like those mentioned above.
Success lies in striking a delicate balance among people or teams who possess different but complementary sets of values that together form a single yet ambidextrous company. The executive team of a company plays a pivotal role in integrating these two facets of corporate life. It must use the time-tested strategies for ensuring current efficiency while legitimising new and innovative strategies as a way to guarantee the future.