Exploring the Ambidextrous Organization through the EUMian lens
Introduction & Background
To Exploit versus To Explore
It was the economist J Schumpeter, who in 1947, referred to a familiar threshold for any firm in its growth journey, where it has to often choose between either learning to adapt and exploit old certainties (old technology, old knowledge or old craft) or becoming creative and innovative and explore new possibilities.
James March in 1991, picked up this inherent tension between ‘exploit’ and ‘explore’ as two distinct processes of organization learning, and wrote a foundational paper on the construct of ‘the Ambidextrous organization’ that can co-hold this tension as opposed to mere binary of either/or.
March’s paper was foundational and led to a series of insightful stances, including an HBR paper by Charles O’Reilly and Michael Tushman in 2004 titled — ‘The Ambidextrous Organization’, where the authors explore Innovation, and prescribe how it can be institutionalized through Organization design and structure.
In this paper, they emphasize that senior leadership is perhaps best suited to co-hold and manage the exploitative dimension of innovation (Incremental innovation) and the exploratory dimension (radical or breakthrough innovation). One of the authors — Tushman, a few years later, changed this stance and published another HBR paper titled ‘the Ambidextrous CEO’ in 2011, emphasizing that only the CEO has the wherewithal to straddle and to contain the inherent tension between the two processes when it comes to innovation, and can prevent the firm from splintering or fragmenting.
The choice of the term — ‘Ambidextrous’ to typify an organization that is able to co-hold ‘exploiting’ and ‘exploring’ tensions is intriguing. Intuitively, most of us as Indians, not just identify with this tension, but seem energized and alive to play with it. Jugaad for example lies somewhere between incremental and radical innovation.
I thought it important to offer an Indian lens of exploring this notion of ambidexterity within the firm, and its inherent political tensions, the link between the tasks and the culture, and the nature of leadership required. I firmly believe that the EUM Lens, as created by Ashok Malhotra, is most appropriate to do so.
This blog essentially seeks to map the following shifts from the western literature:
a) The Ambidextrous Organization — Identity processes of transformation and inherent challenges
b) Exploit and / versus Explore — Designing and Aligning the sentient systems with the nature of contracting tasks & throughputs
c) Transforming ‘Cross-Contamination’ into ‘Cross-fertilization’ as opposed to treating these as ‘Either/Or’
Part 1: Choosing the Framework
EUM — A lens and a toolbox at the same time!
The EUM framework, and its underlying theoretical axioms, is unique for it integrates both — a way of mapping the phenomena of self and systems (or Lens) and offering a set of management tools including design of dialogue spaces, policies, strategic choices etc. (as Toolbox) for the stakeholders such as leadership or OD practitioners. If organizations are complex socio-political systems, and pluralistic in their very essence, the EUM is the best lens to view this inherent complexity. And if managers and leaders are concerned with choices of alignment, transformation, and effectiveness, again the EUM framework offers solutions both at the individual and the organizational level.
Like Ashby’s law of requisite variety, the EUM explores the inherent plurality, if not multiplicity, within the organization at both an identity level and its business models, with an interplay of six lens. These six lens or compounded vision metaphorically invites the leader to emerge with complex identity patterns, inherent dilemmas and paradoxes, and transformation challenges. Of the six lens that Ashok has built into the framework, I am intending to use four such lens to look at the Ambidextrous Organization given the three shifts stated earlier.
I would also be using data from an organization which is in realty space and wishing to create new ways of doing business, to illustrate the nature of the conundrums and leadership challenges. I must admit that I was tempted to explore the phenomena through my IT clientele — who find it easier to relate to exploit versus explore but resisted this temptation, for many others who are not a part of this industry believe that traditional organizations rarely encounter the threshold and challenge of ambidexterity.
Part 2: Mapping the Ambidextrous Organization
Designing the Frame / Compounded Lens
2.1 Design of Tangible Systems / Contracts
Most literature on Organization Design describe Organization structure, the nature of contracts, and the nature of tangible systems that create value.
Value-Chains, Value streams, Throughputs, throughput networks, supply chain networks etc., are the terms deployed for defining tangible systems. All tangible systems are constructed on ‘contracts’ within employees and between employees / external stakeholders, and it is the philosophy of defining contracts where management theory maps an interesting continuum:
2.2 Design of Intangible Systems / Psychological Contracts
Intangible systems would include design imperatives around culture, values-in-action, leadership and managerial behavior, membership criteria around inclusion, exclusion, sentient systems etc. I would like to offer the following continuum as the case with tangible systems, especially when the organization is straddling the Exploit versus Explore thresholds that create stress and uncertainty, and offer how EUM captures this:
2.3 Building the Map & the Hypothesis
If these two continuums were to be juxtaposed with each other, the following map emerges that enables us to explore the nature of ambidexterity within the firm. Table 3 maps four energy fields that concurrently co-exist and impact the organizational energies.
Process 1: EXPLOIT
The North-west quadrant (titled as the Machine-Clan Quadrant) maps the ability of the Firm to anchor the ‘Exploit’ space. This quadrant has the visible tangible system or task contracts of ‘the Machine’, and which is bolstered by the psychological contracts reminiscent of the ‘Clan’.
Regardless of the individual pulls of the Machine or the Clan, this quadrant would value traditional ways of working and would not allow for new mindsets, new approaches, and new ways of Exploring.
Process 2: EXPLORE
The South-East quadrant (titled as the Network-Ecology Quadrant) maps the ability of the Firm to anchor the ‘Explore’ space. This quadrant invites the market mindset or contracting within the network on the tangible aspect — thus some of the strategies would be to offer a platform for buyers and sellers within the firm to interact, contract, and innovate. Simultaneously, the intangible or sentient system would be that of Ecology, reinforcing diversity, meaningfulness and intimacy necessary for breakthrough innovation.
However, it is the processes of Cross-contamination and Cross-fertilization that enables a better understanding of how the two realities of Exploit and Explore are aligned within. The South-west quadrant maps the threat of Contamination that either fragments the organization or slows down one or the other. This is best mapped and explored by how the Networked Tasks Contracts are negated by the Clannish psychological contracts.
Simply speaking, cross functional teams that anchor change contracts within the firm often claim to be networked in terms of tasks contracts, and yet get overwhelmed by clannish mindsets. The zone of Cross-contamination comes into being when the clannish psychological contracts sabotage the networked intents.
On the other hand, Cross-fertilization between bounded realities can only happen if the underlying psychological contracts are built around the Ecology contracts — where the systems responsibilities are more critical to mere job responsibilities. It is my belief that cross fertilization is seen as enabling a dialogue between bounded systems — where each system offers its understanding of existing task contracts but with a sense of co-creating something new. Thus, the North-East quadrant becomes a bridge between Explore and Exploit realities.
Case: The Innovative Realty Firm
Let me illustrate this through a recent experience of working with a realty firm that is focused on affordable housing. This firm has emerged with innovative designs around offering modern housing solutions to a large segment of people who live in traditional and impoverished conditions. The firm wishes to leverage new age technologies to offer solutions and a sense of well-being to a set of people who are used to deprivation.
Interestingly, the real estate industry in India is considered as not just traditional but ridden with legacies of inefficiency, non-transparency, non-customer centricity, unethical practices. This firm wishes to steer clear of such legacies.
The EUM data was most revealing for the firm:
The following emerges:
1. The Contracting of Tasks takes predominance over contracting of psychological contracts or sentient systems (121 > 61). This implies that this firm is heavily vested into defining tasks, processes, goals, roles, and visible systems. The firm appears to be pre-occupied with all processes that can be measured, and the sentient systems are not being given complete attention as yet.
2. The EXPLORE score (2.89) is the highest for all four quadrants, thus the leadership would be seen to be investing the highest energies towards generating new technologies, new models, and new innovation.
3. However, the Fears around CROSS-Contamination are much higher than the Opportunities for Cross-fertilization (2.39 > 1.69), which implies that much of the energies are invested into insulating the firm from ‘Exploit’ potentials. There is almost a taboo attributed to old ways of doing things, old traditions, and old technology.
Thus, the firm in its transformation charter, may be witnessing teams that take on change projects, but their hearts are more influenced by clannish contexts and need for safety. This may often lead to colluding with the larger vision.
4. The EXPLOIT score is quite high as well — but I am not sure whether this philosophy is given much credence or significance. In all probability, the Exploit context is energized when working with contractors and vendors.
5. Therefore, Opportunities for cross-fertilization (1.69) are perhaps not being valued and there may not be any real dialogue on how this firm wishes to engage with tradition, older models of creating value etc.
Thus, it is possible that Exploit and Explore worlds of this firm are fragmented, with huge fears around contamination, and low valuing of cross-fertilization.
It is necessary for the leadership of the firm to work with this conscious or even unconscious fantasy and look at redesign and recalibrating of both task and psychological contracting within the firm and between the firm and its partners.
Conclusion
This blog was written to illustrate how four realities co-exist within the firm when it comes to being ambidextrous. While the leadership has to demonstrate this ambidexterity as stated by the HBR authors, this blog invites the reader into examining how tasks are contracted and how sentient systems are built so that the firm can Exploit and Explore as opposed to treating this as a mere ‘either-or’.
Notes
- For those readers that are curious to know more about EUM, please visit www.eumlens.in or read Ashok Malhotra’s book on Indian Managers and Organizations — Boons and Burdens
- I would dedicate this BLOG to Prof Vish Krishnan, Professor and Chair at University of California and Harvard University Lab for Innovation Sciences — Vish was inspirational at ISB last week.
