Ambidexterity – A Must In Your Strategy Journey

For starters, what is Ambidexterity? According to Oxford dictionary it is the ability to use the right and left hands equally well. This applies to different skills. When the sword was the pivotal tool in face off fights hundreds of years back, an ambidextrous warrior was definitely at an advantage – this ability applies only to 1% of people at any given time!

But far from violent duels, can ambidexterity apply to the corporate world?

Many definitions point to the same construct: Ambidexterity is the organization’s ability to exploit and explore simultaneously. To call an organization ambidextrous it should balance how it applies its capabilities of innovation, creativity, exploration from one side and utilization, efficiency, and discipline from another.

But aren’t the two directions above contradicting? Not necessarily.

The classical perspective considered ambidexterity as a source of draining the organization’s focus. However, in today’s world, focusing and betting on one single approach towards your strategy is risky, and probably disconnected from the VUCA reality.

Can we do both – Harvest and Invest at the same time?

The answer boils down to what we continuously highlight at Strategy Platforms – CAPABILITIES.

How are both “hands” useful?

Short term, companies need laser focus on continuous improvement all the way to optimization. This exploitation of current resources, short term, organizations will continue to eliminate waste, stop leakage of losses, squeeze out more profits and nudge a few points closer to customer expectations. However, there is always a plateau for this addictive behaviour in many companies. The same applies for demanding more growth from sales teams while the market boundaries are not availing any more space for growth. Longer term, companies should always have parallel engines running at different speeds. Through exploration, new opportunities start to show themselves, creating new signals to create value and even avail space for new organizational capabilities to outmuscle competitors.

Practice of ambidexterity requires an integrative approach that should be tightly coupled to the organization’s strategy. Four questions are essential to address whether a company is serious about running exploration and exploitation in parallel or not:

• Organization Design: Do we have the right business structure? Will units’ separation produce better results? Should there be frequent interactions between the right hand and the left hand? Can we tolerate the costs of such structure? Will an ambidextrous structure still align with our strategy or are we facing lost in translation moments? Is a simple dual structure viable?
• Human Capital: Do we have ambidexterity champions? Do we have leaders who can resolve conflicts between both directions? Do we have thinkers who are able to get the best out of such conflict? Do we have system thinkers at CXO levels who can imagine a future where both approaches will continue to work effectively as a self-sustained mechanism without unhealthy interventions? Do we have leaders who demonstrate paradoxical thinking and show their teams how stability and change are manageable?
• Supporting Platforms: At the end, ambidexterity is not a philosophical perspective. It requires processes and systems to achieve its goals for next month and over the next two years. How are the internal processes related to change management, innovation measurement, performance measurement setup to integrate both views? Does the company have efficient tools that can bridge both approaches such as platforms of knowledge management, innovation project management and trends scanning? Are the standard “exploitation” ERP / CRM / eCommerce / Contact Center platforms providing data and insights to fuel exploration?
• Collaboration Capabilities: Can the organization extend its capabilities through effective collaboration? Is the organization well positioned in the ecosystem to distribute its exploitation and exploration needs across the different players? Is the organization confident enough to partner with suppliers, customers, competitors, regulatory bodies and others to amplify the effectiveness of both harvesting and investing?

Can start-ups also apply ambidexterity?

The journey of new ventures, and especially digital model-based start-ups, starts with focus on exploration where innovation and exploration are tightly coupled with the early investment phases of seed, series A and B. Unless, the new venture fails too early it is forced to pursue harvesting approaches to prove that its business model is not only creating customer value but also creating business value to shareholders.

This is the point where ambidexterity turns into a strategic imperative for a start-up. The new company focuses more on refining value propositions, improving customer experience and feedback, in addition to building capabilities in operational excellence and creating additional margin month over month. Ambidexterity acts as a safety valve that protects the startup from burning cash imprudently with no short-term returns and from being too myopic looking into its bottom-line trends.

Amazon – Incumbent, Start-up & The Ambidexterity Behind Amazon Web Services (AWS)

In 2000, Amazon started to face the scalability challenge as an emerging e-commerce company. In this struggle, Amazon was helping third-party merchants like Target or Marks & Spencer to build online sites based on Amazon’s e-commerce engine. The outcome turned into a messy complicated and unsustainable infrastructure.

To resolve this, the company focused on developing more organized API (application programmable interfaces). This set the foundation for Amazon to develop into a technology services company (a new venture out of mixed exploration and exploitation).

As mentioned on its website, Amazon Web Services was launched in 2006, to rethink IT infrastructure.

To overcome the problem of scale, Amazon started to build common infrastructure of databases to accelerate its development of projects instead of building separate databases with different architecture from scratch. Amazon looked at an opportunity with an Invest mindset and said – why not, how can we do it although our eCommerce business cannot do it?

The dynamic capability here is based on integrating its existing resources (digital experts), learning from their experiences in development and converting this to a new value proposition for its customers and partners. The courage of Amazon leadership at the time to position itself as a technology services company played an important role in believing in such dynamic capabilities when the opportunity with 3rd parties availed itself.  This is a spot-on example of paradoxical thinking. The genius in Amazon’s case was the balance to grow new ventures without dropping the focus on operational excellence or its original eCommerce global business.

As of 2019, AWS has 32% of cloud computing global market share. As Q1, 2024, AWS remained the leader with 31% market share despite the aggressive competition from Microsoft and Google.

Conclusion

Coming up with an effective strategy is a tiring yet rewarding journey. Execution requires building capabilities, alignment, measurement, governance. Probably, an office with strategy management capabilities is essential for organizations above specific thresholds of revenue, geographies and employee count. Strategy requires opposing capabilities to maintain its course. In this strategy toolbox, ambidexterity is frequently a forgotten tool. Harvesting and investing do need to be mutually exclusive; instead, this paradoxical thinking should open doors for both exploration of the future and exploitation of the present.