Tag: ambidexterity

The Case for Dual Innovation
The first time I was advocating the idea of a dual innovation approach, here also referred to as organizational ambidexterity, is now more than 5 years ago. At this time it became pretty obvious to me that this concept – academically worn-out but deficiently or not at all put into practice in most organizations – would be of increasing importance in the time to come. It turned out compelling to me, given the inherent conditions a large company operates in, that decoupling explorative innovation (such as the development of new-to-the-company technologies and/or business models) from innovating the existing core business is mandatory for an organization in order to establish a balanced and sustainable innovation capability. As recently outlined, I consider organizational ambidexterity to be a key innovation issue for organizations in 2016 and beyond. And it looks like I have a point here…

After being discounted by many innovation practitioners in my sphere for some time, the concept of organizational ambidexterity is now finally gaining traction with rising speed. It’s encouraging to see a couple of research studies, recently conducted by different well-known consulting firms, backing the ideas I’ve been passionately supporting for many years. Let’s sum up some relevant findings of these studies, making the case for dual innovation management:

BCG: Most Innovative Companies 2014

Evaluating breakthrough innovation cultures and organizations, BCG concludes in their annual 2014 study:

By definition, breakthrough innovation is the introduction of new ideas that drive a different way of doing things. This requires risk taking, of course, since no one can foresee the outcome or results of such initiatives. Breakthrough innovators are willing to make decisions and choices as much on the basis of intuition and insight as on data and forecasts – they bet on people rather than manage a process.

In our experience, a dedicated environment is required to promote this kind of approach. And indeed, across all companies and industries, there is a growing trend toward a centralized approach to innovation and product development – meaning that these functions and processes are either controlled and driven by a centralized organization, or a centralized organization conducts R&D and passes the framework for new products and services to business units or regional units for development and launch. This trend is even more pronounced among strong innovators, with those pursuing a centralized approach rising from 68 percent in 2013 to 71 percent in 2014. Similarly, about 70 percent of disruptive innovators also lean toward a more centralized approach. Two-thirds of all breakthrough innovators stated that all innovation and product development is controlled and driven by a centralized organization, at least in its initial stages. More than 70 percent have a different organizational entity for managing radical innovation. (…)

Another approach enjoying increasingly wide trial is the corporate incubator. Incubators more or less evaporated when the dot-com bubble burst, but BCG research indicates that they are making a comeback – with a twist. The new generation of incubators is focused on incubating ideas that can have a direct impact on the sponsoring company’s business, not just creating stand-alone companies. The start-ups selected for incubation have interactions with their corporate sponsor that go beyond simple cash support, including access to R&D, supply chains, and important customers at both the corporate and the business unit levels.

Accenture: 2015 US Innovation Survey

Accenture finds in their recent study that companies need to reassess their approach to innovation execution:

Companies need to develop agile innovation operating models that enable companies to not only test new ideas quickly, but also absorb new capabilities and talent from other industries. Flexibility is especially important, considering how many of today’s innovations have no organizational home. Companies that cling to rigid innovation approaches are more likely to fail at creating space for disruptive innovation or nurturing new ideas.

A two-engine operating model holds particular promise for companies looking to achieve flexibility, as well as higher returns from their innovation investments. With this dual model, innovation engine 1 is laser-focused on making existing products and capabilities continually better. Engine 1 supports a company’s steady pace of evolution, and is a critical enabler of the incremental changes that propel a business forward. Innovation engine 2, on the other hand, drives big-bet innovations such as the introduction of entirely new product or service categories, an expansion into new markets, or the development of a new business model. Engine 2 efforts are disruptive and potentially game changing. When executed correctly, these innovations deliver a step-change improvement in organizational performance and competitive advantage.

Source: Accenture

Deloitte: Radical Innovation and Growth – Global Board Survey 2016

The latest Global Board Survey from Deloitte, brought to my attention by Paul Hobcraft, also calls for a dual innovation approach by establishing a dedicated “Division-X”, separated from core business and reporting to the board:

Our experience tells us and substantial research sustains (eg. 2014, Salim Ismail, Exponential Organization) that making new business creation inside a corporation is hard and often doomed to fail. The “immune system” of the core operation is soon to take over any great idea that might cannibalize it and thus even if the right decision is to disrupt yourself from within, it is almost impossible in practice.

We therefore want to know how many companies actually own a so-called Division-X or the equivalent of one (a division with the goal of finding radically new products or services). If they own one, we want to know for how long they have been in operation. 22% of respondents say “yes”, leaving 78% to say “no”. 30% of those with a Division-X have had one only for a year, 27% for two years and 24% for 5 years. 17% have owned a Division-X for 10 or more years. A correlation between turn-over, size, operation and industry reveal that these are largely midsized to very large companies from 1) Consumer Products & Services, 2) Technology/Media/Telecom, and 3) Industrial. (…)

Whereas, it is too early for the relatively sparse sample of global boards having experimented with a Division-X to harvest their fruits we are truly delighted to find that 75% of the companies that report an above 10% growth expectation for the coming 24 months also own a Division-X (or the equivalent hereof).

Source: Deloitte

Detecon: Die Innovationskultur von Konzernen (2016)

The german consulting firm Detecon just published a study (in german) based on interviewing and surveying more than 70 german corporate innovation experts. Some of the findings were:
- 100% of the surveyed experts agreed that defining an ambidextrous innovation strategy is an important management responsibility and critical to corporate innovation capability.
- Explorative initiatives and strategies should be pursued in dedicated units, decoupled from core business.
- The integration of disruptive ideas is the biggest challenge in german corporations. How can interfaces between dedicated units and core business be properly designed in order to develop disruptive ideas up to commercialization?
Source: Detecon

Conclusion

Taken together these outcomes, there hardly seems doubt anymore that appropriate ambidextrous approaches to innovation are required for most established organizations in order to stay competitive. In fact, it’s now a question of how they can be adequately organized, governed and operationally implemented. While the aforementioned studies clearly make the case, if not an imperative, for dual innovation management, they still lack a more detailed advice on the implementation issues. Jeffrey Phillips aptly comments on the recent Accenture study:

Accenture’s recommendation, the two engine solution, is appropriate but not new. Their suggestion is to define a path for incremental ideas, and a separate methodology and philosophy for radical or disruptive ideas. In this manner the ideas would be treated differently. What’s missing is a portfolio approach, which would indicate how many ideas of each type are valuable or necessary. (…) But until there’s clear sponsorship for disruptive ideas, funding and risk tolerance for those ideas and clear metrics and measurements, all ideas will eventually become incremental.

Another critical issue to be elaborated in each individual case is how to set up a dedicated unit for explorative innovation (vs. exploitative innovation in core business) in terms of its scope and openness. While the traditional notion of “ambidextrous organizations” assumes a strong “inhouse” focus, where exploration is mainly fed through internal strategic initiatives, ideas and intrapreneurship, a modern understanding of organizational ambidexterity also involves an appropriate degree of external engagement and co-creation, in particular by means of collaborating with startups. Michael Docherty also gets this point straight in his recent call for a “hybrid innovation engine for growth“:

We need to move beyond the myth of the ‘ambidextrous’ organization – large companies need to work on transformative innovation both internally and through engagement with the startup ecosystem. Learn to embrace disruption through collaboration.

In the past, systematic dual innovation management approaches have often been discounted due to falling short of expectations or lacking prevalence across the sum of companies. Both reasons, however, don’t necessarily imply the basic concept is inappropriate or even wrong. Adequate buy-in on part of executive/senior management and proper implementation of these approaches are mandatory prerequisites in order to make them live up to their potential and – as a consequence – increasingly trusted and applied. The above studies clearly reveal: Organizational ambidexterity proves to be a necessary condition for outstanding corporate innovation capability. Company boards may ignore it at their peril.

Takeaway

Let’s stop arguing whether dual innovation and organizational ambidexterity are required in today’s business world. Apart from a couple of exceptions, they seem mandatory for the majority of organizations, facing increasing pace for required reinvention and adaptation to changing environments. Instead, let’s shift our focus on how those approaches can get properly implemented in order to deliver much-needed impact. Going about this issue particularly entails
- accounting for dual innovation in strategy definition
- providing management sponsorship and well-suited organizational anchoring of dedicated exploration units
- decoupling of leadership, funding, staffing and metrics between exploration unit and core business
- balancing separation and integration between exploration unit and core business
- organizing operational interplay and designing proper interfaces between exploration unit and core business
- defining complementary innovation scopes for exploration unit and core business
- driving explorative innovation through a balanced portfolio of internal and external initiatives
- applying well-suited tools and processes for exploration initiatives
In a following post, I will be attempting to introduce a model for modern, dual innovation management. How can we get essential organizational ambidexterity from myth to going? Looking forward to your ideas and thoughts!
30 April 2016
How to Use Polarity Management to Support Innovation
What are Polarities?

When it comes to breathing, if you had to pick one would you prefer to only inhale or only exhale?

The question is, of course, absurd. To live, we must do both. Inhaling and exhaling are opposites, but they work together as part of a system. This is the metaphor that Barry Johnson uses in his book Polarity Management to illustrate what polarities are:

Polarities are interdependent pairs that support a common purpose and one another. They are energy systems in which we live and work.

Here is how the breathing polarity works:

Johnson explains:

I would like you to try a guided experience. Inhale slowly and deeply for 10 seconds, then hold it! If breathing is a problem to be solved by choosing to either inhale or exhale, I have just provided you with a solution by telling you to inhale. Though inhaling is essential and feels good at first, you soon find yourself sinking into the downside of inhaling, filling up with too much carbon dioxide.

Now exhale slowly during the next 10 seconds, then hold it! Notice the relief as you clean out the carbon dioxide. Though exhaling is essential, you soon find yourself sinking into the downside of exhaling with a need for fresh oxygen. Now inhale again and breathe naturally.

You do not solve the exhale/inhale polarity by choosing to either inhale or exhale. You manage it by getting the benefits of each while appreciating the limits of each. It is not a static situation. It is a process—an ongoing flow of shifting emphasis from one to the other and back again. Managing this polarity requires choosing both inhaling and exhaling.

This is an important concept for a few reasons:
- Either/or choices are often false dichotomies – more often they represent opposite poles in a polarity.
- People often view one pole as the way to solve the problem of its opposite.
- To succeed, we need to gain the positive elements of both poles.
In other words, polarity management is a pretty good way to think of organisational ambidexterity for innovation.

Stability and Change

One of the polarities that Johnson uses is stability/change – it looks like this:

One of Johnson’s key ideas is that often people only see the positive aspects of one pole, and the negative aspects of the other. This leads to conflict. When it comes to change, some will only want stability – either because they value the upsides of stability, or fear the downsides of change. Those that want change have similar views from the perspective of their favoured pole.

This leads to fierce arguments between the two camps – but Johnson calls this the One Pole Myth:

Do you know the old truism that our fears are often self-fulfilling prophecies? That is what is going on with this myth. The paradox is that those who are deeply afraid of the downside of change end up experiencing the downside of change. Their fear results in an overemphasis on stability and neglect of the need for the upside of change. The resulting stagnation, if experienced long enough, undermines Loyalty as people wonder if the organization is really going anywhere. There is “Felt” Job Insecurity as people experience the lack of New Perspectives and the lack of New Challenges. Desperation can set in and people who had been Unwilling to Take Risks end up Taking Foolish Risks. The result of fearfully clinging to the Stability pole is first the downside of Stability, then eventually, the downside of Change as well. Nothing breeds chaos like stagnation.

That’s exactly what happens when firms run into the innovator’s dilemma. It is also why being risk-averse actually increases your risk.

Polarity Management for Innovation

The polarities for innovation are similar to those for stability and change – I’ve sketched out a version that compares execution and innovation:

You can see that it is similar to Johnson’s stability-change polarity.

Here is how you can use this idea to support innovation management:
- Use it to engage everyone in the process. One of the blocks that we run into is that there are always some people that resist change of any sort. While you may never win them over, by acknowledging the downsides to both poles, it makes it easier to bring the people that are neutral along with you. Polarity management can be an essential tool for getting a majority of people in an organisation supporting a new innovation initiative – not just the ones that are natural change agents.
- We don’t spend all our time at one pole – healthy organisations fluctuate. People often view fluctuations as failures, but if you understand the necessity of managing both poles, you can see how organisations will naturally spend some time emphasizing one pole, then some time working on the other. This happens with execution and innovation, with centralised and de-centralised decision making, cost effectiveness and excellence, and so on.
- People that seem like blockers add value to the innovation process. Johnson calls blockers “tradition bearers”, and says:
  
  Those tradition bearing make three contributions to the managing of this dilemma: They identify the upside of the present pole, which are things that should be maintained or preserved. They identify the downside of the opposite pole, which are potential problems they want to avoid. They provide the energy necessary to preserve the upside of the present pole and to avoid the downside of the opposite pole.
The key to managing a polarity is to recognize when you are drifting into the negative region of one of the poles and take corrective action as soon as possible.

We can’t spend all our time doing what we do well. As the environment changes, we will become increasingly out-of-step with it requires. This means that we need to spend some time exploring as well. In the same way, though, we can’t spend all of our time looking for new ideas – then we never have the time or skills needed to execute the great ideas that we find.

To win, we have to do both. That’s the very nature of a polarity.

Note: I’d like to thank Kate Morrison and Scott Thomas for feedback that made this post better. Also, you can get a good 14 page pdf summary of Polarity Management written by Barry Johnson through the link here.
29 September 2015
Integrative Innovation
This post was first published as opening post to my new blog, titled Integrative Innovation.

Some people I’ve been collaborating with have recently encouraged me to open up an own blog. After having given it some thought, I decided to do so. I’m launching a new site and platform titled “Integrative Innovation” to share ideas and perspectives on innovation.

You might ask: why “Integrative Innovation”? Is this yet another buzzword?

I don’t think so. I rather think integration plays crucial role when it comes to successful innovation initiatives. I’ll share my view on this as well as the intention and purpose behind this new site.

Sustainable innovation management is a complex capability that requires dynamic integration of various aspects. Quite often though, discussions about innovation focus on a selection of factors, such as technology, R&D, customers or processes, without taking the bigger and systemic picture into account. Scott D. Anthony is absolutely right in saying: point solutions do not address a systematic challenge. Instead of following one-size-fits-all or one-sided concepts, integrative innovation approaches are needed for organizations to succeed. The need for integration is manifold – I see at least four major issues in this context:
- Integration of Directions of Impact
- Integration of Stakeholders
- Integration of Capabilities
- Integration of People
Integration of Directions of Impact

Innovation management requires a balance of different – often opposing – objectives, strategies and approaches. Examples of these tensions are:
- Incremental vs. radical innovation
- Scale vs. craft
- Strategic short term vs. long term focus
- Exploiting existing business models/technologies vs. exploring new ones
- Structured vs. emergent and experimental processes
It’s essential to understand that those opposing poles are inherently different but equally important. Succesful companies and innovation workers in the time to come will be able to operate integratively and balanced, regardless of their individual inclinations.

Integration of Stakeholders

Organizations find it increasingly impossible to tackle innovation on their own. It tends to be accomplished within open partnerships, networks and communities – including customers. In particular, systemic challenges, such as energy, healthcare, mobility depend on successful collaboration among complementary stakeholders. The future will belong to organizations and people that thrive in interconnected ecosystems. Consequently, successful orchestration of diverse stakeholders is going to be a mandatory capability.

Integration of Capabilities

Innovation management is an integrated discipline. It requires working openly across competencies and organizational functions. Thriving operating models don’t care about organizational boundaries and functional silos. They integrate functional capabilities to form value-creating cross-functional capabilities, as Paul Leinwand and Cesare Mainardi point out:

Indeed, mono-functional excellence will almost never guarantee success. The most distinctive, differentiating capabilities are almost always cross-functional. P&G’s vaunted ability to launch breakthrough products isn’t just a matter of R&D; it requires an integration of competencies, including consumer insights, engineering, external partnerships and brand marketing. Similarly, IKEA’s capability in creating and selling stylish but utilitarian furniture combines functional expertise in design, sourcing, manufacturing, packaging, logistics, the design of customer experience in its retail stores, and cost management; all of these reinforce each other.

Integration of People

Innovation management is people management. Depending on the direction of impact, we need to have the right mix of people, skills and mindsets aboard. Particularly, for exploring novel opportunities with a potential to revolutionize the status quo and existing business models, a high diversity of viewpoints and ideas is conducive. This, in turn, implies that innovation workers and leaders act as brokers, integrative thinkers and catalyzers for collaboration. They must be skilled to hire and allocate adequate human resources. Moreover, they have to feel comfortable balancing consent and dissent as well as associating direction and meaning out of people diversity.

In this sense, Integrative Innovation intends to provide a platform for ideas that help tackle the holistic nature of innovation. In face of ever increasing interrelations, we should beware of not seeing the big picture or overemphasizing certain elements. My purpose is to provide value through integrative thinking and concepts as I deeply believe this is imperative for successful innovation management in the time to come.
22 February 2013