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Ideas for Leaders #748

Staying Competitive Today While Preparing Full-On for Future Success

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Key Concept

Companies must be ambidextrous: they must focus on winning the present while at the same time laying the foundation to win the future. The challenge is that emphasizing one priority can undermine the second. A recent study offers some guidelines for overcoming the challenge of ambidexterity by examining key factors – sometimes complementary, sometime conflicting – that enable companies to focus on the present and the future.

Idea Summary

Ambidexterity involves two goals that are often at odds: 
exploitation – successfully competing in the present with quality products and services, superior execution, and successful marketing; and 
exploration – preparing to win the future through investments in R&D and innovation and acquiring the knowledge to anticipate changes in the business environment. 

How can companies navigate the ongoing, conflicting demands of ambidexterity? Recent research examining the antecedents of ambidexterity – the factors in place at the company that will support exploitation, exploration or both — offers some guidelines.

The research analyzed four ambidexterity antecedents: the composition and size of top management teams; the existence of a clear, written vision; the extent of investment in R&D; and a commitment to a company-wide continuous improvement process.

The study, based on a survey of 422 small to medium-sized UK companies, showed that: 

  • The composition of the top management team makes a difference. Heterogeneity in the team, which brings in a wider set of perspectives and experiences, helps exploratory activities. The search for innovative ideas and approaches is likely to be wider with a more diverse team. At the same time, heterogeneity can cause some conflicts within the team, which are more likely to be overcome by a larger team.
  • Top management team heterogeneity also supports exploitation, although team size has no effect. The reason, according to the researchers: While many people might reduce exploitation to implementation and routine activities only, effective exploitation also requires the search for pertinent information and knowledge – a search enhanced by a more diverse top management team
  • Continuous improvement also benefits both exploitation and exploration. The latter resulted is somewhat unexpected: The incremental approach of continuous improvement would seem to be counter to the bold innovation and experimentation required for exploration. However, continuous improvement seems to support a culture of change and of questioning the status quo, which lays the groundwork for more radical innovation.
  • Another unexpected outcome of the research: a clear vision for the company is more useful to the organization when it concerns existing products and customers, but does not seem to make much difference to the success of a firm’s exploration tasks.
  • As expected, emphasis on R&D benefits exploration – R&D is after all is focused on preparing the future through innovation – and is of no benefit to exploitation. However, the researchers found that there is a point of diminishing returns in R&D. Managing a firm’s R&D efforts may be thus more complex than imagined. When the business environment creates a more urgent need for innovation in products, services and processes, a firm must recognize that over-spending on R&D and innovation will not only yield diminishing results, but will also divert attention from the effective exploitation required for the firm’s present success.

Business Application

The challenge for pursuing both exploitation and exploration is finding the right balance. This research highlights factors in a company that can cause a conflict between these two components of ambidexterity – for example, over-investment in R&D might benefit the company in the long-term but can undermine the company’s current success. 

On the other hand, the research also identifies complementary factors that benefit both exploitation and exploration, such as continuous improvement and a diversified top management team. Thus, leaders in organizations are no doubt aware of the tensions between exploitation and exploration, but they should also be encouraged to find the complementary managerial choices – recruiting a diverse top management team and implementing continuous improvement processes – that help their organizations win the present and prepare for future success.

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Authors

Institutions

Source

Idea conceived

  • March 2018

Idea posted

  • July 2019

DOI number

10.13007/748

Subject

Real Time Analytics