Paper Outline
Introduction
Organizational Ambidexterity
Differentiation vs. Integration
Individual vs. Organization
Static vs. Dynamic
Internal vs. External
HRM Practices that promote ambidexterity
Conclusion
Introduction
One major concern of strategic management is to determine the composition of corporate strategy. Previous studies on strategy suggest that firms should choose their strategic mix from two distinct strategic approaches. These are exploration strategy related activities or exploitation strategy related activities. Exploration refers to a strategy that is directed towards developing new and unique product market areas. Exploitation on the other hand, is a strategy that is directed towards achieving efficiency and improvements in the current product market areas. Most of the previous studies have been characterized with two opposing sides, some in favour of exploration while others in favour of exploitation as the effective strategy for effective firm performance. However, recent studies determined that both strategies were important to the organizational effective performance based on the contingency theory. The main point of contention has been whether the pursuit of both strategies (hybrid strategy) is beneficial or detrimental to the organizational performance (Auh & Menguc, 2005).
On one hand, some scholars have argued that simultaneous pursuit of both strategies is detrimental to the firm’s performance, because of the tensions and conflicts resulting from the different approach requirements of the different strategies (Porter, 1996). On the other hand, some scholars have suggested that the tensions can be managed and that the hybrid strategy can bring more benefits to the organization compared to benefits realized when pursuing pure strategies (Tushman & O’Reilly, 1996). Subsequent studies on the effect of hybrid strategy on organizational performance have resulted in a range of results. Some have reported that it has positive results (Spanos, Zaralis & Liokas, 2004), some have reported no effect (Kyriakopoulus & Moorman, 2004), while some have found out that it has negative effects (Thornhill & White, 2007). However, all these findings need to be interpreted cautiously, because most of them ignored the role of organizational architecture. To manage the tensions related to the hybrid strategy effectively, it is impotent to consider an ambidextrous organizational structure.
Organizational Ambidexterity
This refers to the ability of an organization to simultaneously pursue the hybrid strategy and realize the targeted benefits (Teece, 2007). In order to determine the practicality of this view it is important to consider some of the four main tensions that are associated with ambidextrous organizations. These are put as research questions that show the gaps, which exist as challenges affecting the success of the hybrid concept. First, which is the most appropriate approach of achieving ambidexterity, integration or differentiation? Secondly, where does ambidexterity occur, at individual or organizational level? Thirdly, are organizations obliged to take either a static or a dynamic perspective on ambidexterity? Lastly, can organizations develop their ambidexterity from within or do they have to include external processes? (Raisch, 2008).
Differentiation vs. Integration
The tensions relating to differentiation and integration arise when scholars view the two as mutually exclusive ways of attaining ambidexterity. Differentiation refers to a situation, whereby an organization separates exploration and exploitation activities in to two distinct units within the organization. Integration on the other hand, refers to a situation whereby an organization sets up mechanisms that enable both exploitation and exploration activities to be pursued by the same unit in the organization. Those arguing for differentiation have suggested that the units pursuing exploration should be smaller, and more decentralized as well as flexible than the exploitation units (Tushman & O’Reilly, 1996). They explain that the differences in the unit structures is important as it helps in maintaining the different competencies that are used in dealing with inconsistent demands that arise from new and mainstream business opportunities (Gilbert, 2005).
Those arguing for integration have suggested that organizations only need behavioural mechanisms to be able to deal with exploitation and exploration activities in the same department. They explain that the behavioural integration of top management teams helps in facilitating the disparate demand that are important in attaining ambidexterity (Lubatkin et al, 2006). In their criticism to differentiation approach, they suggest that exploration and exploitation activities have to be combined to achieve ambidexterity (O’Reilly & Tushman, 2008). Therefore, having both exploitation and exploration activities in an organization is important. However, it is insufficient in attaining ambidexterity if the two cannot be combined in the same unit (Raisch, 2008). Proponents of differentiation approach have also criticized the integration approach. Bushe and Shani (1991), suggest that exploitation and exploration activities need different knowledge bases. Therefore, putting them together in the same unit will constrain the individual tasks of both approaches. Teece (2007) further adds that with the same unit both activities will share the same values, experiences and capabilities, which make exploration difficult.
The need to bring together exploration and exploitation activities has resulted in a paradox that is difficult to resolve. Combining exploitation and exploration activities posses the risk of tearing down the set boundaries between the two approaches that prevent exploratory activities from being influenced by mainstream business processes. However, putting them apart limits the benefits of ambidexterity. Therefore, no alternative solely provides the best solution. As a result, the management should determine the appropriate extent of integration and differentiation. The balance between the two approaches will depend on the importance of the exploitative or explorative activities at hand. However, it is important that both approaches be viewed as complementary and not alternatives to each other. There is also need for continuous managerial attention on the tensions that arise between the two approaches (Tushman & O’Reilly, 1996).
Individual vs. Organization
Research on ambidexterity usually focuses on organization structures as mechanisms that lead to ambidexterity, which may be formal structures or lateral coordination mechanisms Therefore, such studies focus on organizational structures that promote ambidexterity. For instance, a firm can become ambidextrous by setting up two different teams, whereby one pursues exploitative activities while the other pursues explorative activities. Each of the teams can further be subdivided, whereby individual team members are assigned different roles. Hence, the team will also become ambidextrous (Jansen et al., 2008). As a result, the firm’s structures will have been used to achieve ambidexterity, while individuals will be pursuing pure strategies. Therefore, some individuals will be working on explorative activities while some will be dealing with exploitative tasks.
However, some studies have reported that ambidexterity arises from an individual’s ability to carry out both exploitative and explorative activities simultaneously. They explain that structural mechanisms only help to facilitate the ambidexterity in individuals (Mom, van den Bosch & Volberda, 2007). The chance that a person can have the ability to handle both explorative and exploitative tasks poses a major challenge. One of these challenges is that people who pursue one of the approaches differ greatly in personality from those who pursue the other (Gupta, Smith & Shalley, 2006). Some studies suggest that the more a manager gains both top-down and boom up knowledge the higher the ability of handling simultaneous exploitative and explorative activities (Mom, van den Bosch & Volberda, 2007).
Although these studies satisfactorily explain how some managers are able to handle both approaches they do not explain why some cannot. Furthermore, the sum of personal ambidexterity in an organization is not equal to the organizations’ ambidexterity (Tushman & O’Reilly, 1996). This shows the need to consider the organizational structure perspective. There is need to provide a context that allows managers to think and act ambidextrously- to allocate their time between alignment -oriented activities and adaptability -oriented activities. This shows that, apart from personal characteristics, organizational factors also contribute to an organization’s ambidexterity (Gibson & Birkinshaw, 2004). From the above studies, it comes out that managers can exhibit ambidexterity, whereby they are able to carry out both explorative and exploitative activities. It is also evident that ambidexterity arises from both individual and organizational factors. Lastly, although individual ambidexterity contributes to organizational ambidexterity its sum does not amount to the organizational dexterity.
Static vs. Dynamic
Many studies have suggested that achieving ambidexterity should be a dynamic process, whereby an organization goes through temporary cyclic periods of alternating exploitation and exploration activities. Therefore, ambidexterity is realized from the dynamic sequential as well as temporary routines for alternating activities of exploitation and exploration (Nickerson & Zenger, 2002). On the contrary, most of the researches on organizational ambidexterity have defined it as a process, whereby both exploration and exploitation are pursued simultaneously (Gupta, Smith & Shalley, 2006). Most of these studies argue for a static perspective, whereby organizations attain ambidexterity by adopting some specific configurations (Tushman & O’Reilly, 1996).
However, the same studies explain that those configurations have to be aligned with the situations at hand. Alignment requires continuous monitoring and adjustment. Every organization faces changing demands in its internal and external environment. Therefore, the management will have to reconfigure their activities continuously to align them with the environmental changes (Siggelkow, 2002). Hence, an organization cannot design a steady-state configuration that will be able to deal with all the changes in the environment. There are however, examples that support both sides of the divide. Concerning structural ambidexterity, Siggelkow (2002), carried out a research that showed that firms used differentiated units of an organization to carry out exploration activities and then integrated them later when carrying out exploitation activities. The researcher also found out that some firms integrated some units in the initial innovation stages and differentiated them at later stages.
Conversely, Raisch (2008) found out that some firms have structurally differentiated units that remain autonomous through out the development process. He however, notes that, although the units remained differentiated over a given period, they had increased in the degree of integration. Dynamic element is also observed in the contextual ambidexterity. Adler, Goldoftas & Levine (1999), reports that a person’s attention to both exploitative and explorative activities can be either sequential or dynamic. For instance, on the simultaneous perspective, an individual can be involved in the task of identifying improvement opportunities, which is a non-routine task. On the other hand, the same individual can be switching between the tasks rather than deal with them simultaneously. From the above findings of different studies, it is apparent that managing of ambidexterity is more of a dynamic process rather than static alignment. It is also evident that different solutions may be used – contextual or structural – in sustaining ambidexterity.
Internal vs. External
Some studies have suggested that externalizing one or another combination of activities can be used to resolve the exploitative and explorative paradoxical requirements. This can be achieved by establishing alliances or by outsourcing (Rothaermel & Deeds, 2004). However, most of researches on ambidexterity have been directed towards dealing with exploitative and explorative activities internally. For instance, Benner and Tushman (2003) suggests that involving external parties in exploitation or exploration activities may be challenging, because of the difficulty of achieving strategic integration between independent firms. Proponents of externalization have instead emphasized the importance of obtaining external knowledge in exploration processes. They explain that a firm that acquires all its knowledge from within faces the risk of becoming obsolete. The studies further found out that exploration outside the organization had more impact than that from within (Rosenkopf & Nerkar, 2001).
Further research has also revealed that inter-organizational activities such as strategic alliances, customer relationships and corporate venturing can facilitate knowledge processes of both exploitative and explorative nature. Furthermore, firms can obtain external knowledge processes by establishing relational contexts that have an expansive source of resources (Rothaermel & Deeds, 2004). However, firms will only realize the potential of externally acquired knowledge, if they are able to absorb it and integrate in to their system. Tensions characterize the acquisition and absorption of external knowledge, which makes it difficult for firms to benefit from it.
Various studies have been done on acquiring and absorptive capacity. For instance, some researchers suggest that excessive dominance by either exploitative or explorative knowledge leads to dysfunctional of the other. In addition, activities directed towards boundaries creation and reinforcement should include boundary-spanning activities (Ancona & Caldwell, 1992). Therefore, managers seeking to achieve ambidexterity will not only be faced with the challenge of balancing exploitative and explorative activities but will also have to deal with the challenge of integrating external and internal knowledge (Hansen, 1999). In summary, it is noted that a firm’s ability to integrate internal and external knowledge will determine the degree of ambidexterity it achieves. In addition, external brokerage as well as internal absorption capacity will determine a firm’s ability to integrate external knowledge.
HRM Practices that promote ambidexterity
From the above analysis of tensions that are associated with attaining ambidexterity, it is apparent that both exploitative and explorative activities are important in achieving a higher organizational performance. In addition, organizations can have and use both approaches simultaneously, provided they are able to balance them appropriately. Therefore, it is also important to find out how the management can use HRM practices to attain ambidexterity within an organization. Most researches on ambidexterity have ca general agreement on the HRM practices that are appropriate for achieving ambidexterity in an organization. Adler, Goldoftas & Levine (1999) suggests that the management can create behavioural context, whereby employees feel free to make their own judgment on how to divide their working time between exploratory and exploitative activities. Briinshaw (2006), however, argues that individual ambidexterity arises from decisions made by the individuals rather than strategic decisions made by the management. He therefore, suggests four factors that can be used to attain individual ambidexterity, which include decentralization, standardization, incentives and skills.
Decentralization
This refers to delegation of the authority to make decisions to the lower levels of the hierarchical ladder (Briinshaw, 2006). Some researchers suggest that decentralization can help employees to change between exploitative and exploratory activities. At their sole discretion, they can pursue the regular work while being alert for any new opportunities that come up. The freedom that comes with decentralization allows the employees to communicate with their colleagues and develop new ideas, which they can experiment without seeking for permission. As a result, they will be able to pursue both exploitative and exploratory activities (Benner & Tushman, 2003). However, some studies have found that through decentralization, exploitation may be disadvantaged. Employees are free to do what they decide and hence there is a high likelihood that they will no longer focus on their routine jobs. In addition, explorative activities consume much time because employees think of new ideas and the process is associated with trial and error of the ideas (Adler, Goldoftas & Levine, 1999). As noted above decentralization leads to lack of discipline, which results in the need for specification of limits within which the employee must operate in (Adler, Goldoftas & Levine, 1999). This is referred to as standardization, whereby rules and procedures that provide guidelines on how exploitative activities are to be carried out on a daily basis are set. Standardization can be used to promote exploitative activities, whereby they increase knowledge across the lateral level, which is important in enhancing creativity. Therefore, standardization promotes exploitation by ensuring that employees are pursuing current agenda of the firm’s market and promotes explorative activities, which are directed towards changing the current product market agenda (Jansen, van den Bosch & Volberda, 2006). Incentives can also be used to encourage employees to balance exploitative and explorative activities. However, exploration activities are hard to measure objectively, because they require collaboration of employees. Therefore, the management needs to design a subjective method of appraisal (Gibson & Birkinshaw, 2004).
Conclusion
Hybrid strategies are beneficial to the organization, because they enable an organization to pursue both exploitative and explorative activities simultaneously. However, pursuing a hybrid strategy is challenging due to tensions that characterize the simultaneous pursuit of different and opposing strategies. An effective management can balance these strategies in such a way that none dominates over the other. As a result, the organization will have achieved ambidexterity, which is the ability to pursue simultaneously both exploitative and explorative activities to the benefit of the organization. Therefore, a firm can achieve organizational ambidexterity by addressing the concept as a dynamic process; considering both individual dexterity and organizational factors as contributors of ambidexterity; by combining both external and internal knowledge in the creation process. Individual dexterity can be promoted by HRM practices, which include decentralization, standardization and incentives.
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