The Art of Ambidexterity

We are expe­ri­enc­ing a world in which it is “nor­mal that many things are chang­ing and are chang­ing more quick­ly than ever”, as Karl-Heinz Geißler so apt­ly put it. The per­ceived or real speed of life increas­es dai­ly dri­ven by fas­ci­nat­ing and some­times fright­en­ing tech­no­log­i­cal devel­op­ments from Arti­fi­cial Intel­li­gence to Blockchain. This is exert­ing enor­mous pres­sure on com­pa­nies to change and inno­vate. The half-life of prod­ucts and busi­ness mod­els is becom­ing short­er and short­er. This means that com­pa­nies have to rein­vent them­selves over and over again and at ever short­er inter­vals in order to sur­vive. In addi­tion to the effi­cien­cy and prof­itabil­i­ty that are always in the focus of today’s busi­ness, it must become the sec­ond nature of long-term viable com­pa­nies to bold­ly explore new oppor­tu­ni­ties and con­stant­ly test new busi­ness mod­els. But pre­cise­ly because today’s urgent busi­ness tends to dis­place the impor­tant explo­ration of tomor­row’s busi­ness, the sixth and final the­sis in the Man­i­festo for Human(e) Lead­er­ship says: “Coura­geous­ly explor­ing the new over effi­cient­ly exploit­ing the old.”

The bal­ance of pow­er is shift­ing toward con­sumers and away from com­pa­nies… The right way to respond to this if you are a com­pa­ny is to put the vast major­i­ty of your ener­gy, atten­tion and dol­lars into build­ing a great prod­uct or ser­vice and put a small­er amount into shout­ing about it, mar­ket­ing it.
Jeff Bezos

Build­ing a com­pa­ny around one prod­uct or one prod­uct fam­i­ly with one sin­gle busi­ness mod­el and oper­at­ing it prof­itably is a tremen­dous achieve­ment. Most com­pa­nies there­fore do not sur­vive this start-up phase at all. And those who actu­al­ly suc­ceed are busy expand­ing their busi­ness and improv­ing and enhanc­ing their prod­ucts. For some, it works as well as for Xerox with copiers, Kodak with films or IBM with main­frames. Steve Jobs describes very well what hap­pens in this phase of suc­cess: While in the ini­tial phase the com­pa­ny is man­aged and dri­ven by the prod­ucts and the pas­sion for great prod­ucts, mar­ket­ing and sales grad­u­al­ly take over. On the one hand, this makes sense in order to uti­lize exist­ing prod­ucts and busi­ness mod­els as well as pos­si­ble. On the oth­er hand, this is also the root of decline because the focus shifts from new and inno­v­a­tive prod­ucts and busi­ness mod­els to prof­itabil­i­ty in today’s business.

To pre­vent this, com­pa­nies set up research lab­o­ra­to­ries or research depart­ments. At Xerox, this was the well-known Xerox Palo Alto Resarch Cen­ter (PARC) in this phase of suc­cess. Xerox PAR­C’s list of inven­tions is com­pelling: “Xerox PARC has been the inven­tor and incu­ba­tor of many ele­ments of mod­ern com­put­ing in the con­tem­po­rary office work place: laser print­ers, com­put­er-gen­er­at­ed bitmap graph­ics, the graph­i­cal user inter­face, fea­tur­ing win­dows and icons, oper­at­ed with a mouse, the WYSIWYG text edi­tor, […], Eth­er­net as a local-area com­put­er net­work, ful­ly formed object-ori­ent­ed pro­gram­ming in the Smalltalk pro­gram­ming lan­guage […].” (Source: Wikipedia). The only flaw in this appar­ent suc­cess sto­ry is that Xerox was not able to turn these ideas into new busi­ness. Besides the laser print­er which was used suc­cess­ful­ly in laser copiers not many of the great inno­va­tions of Xerox PARC were used at Xerox.

For real ambidex­ter­i­ty, i.e. the abil­i­ty to exploit and explore at the same time, it is there­fore not enough to place two orga­ni­za­tion­al units next to each oth­er. The art lies in the seam­less inte­gra­tion of effi­cien­cy here and now and inno­va­tion for tomor­row. Xerox was very suc­cess­ful in its for­mer busi­ness mod­el with copiers and Xerox PARC was extreme­ly inno­v­a­tive in its research. The prob­lem was the trans­fer of ideas into new prod­ucts and busi­ness mod­els. Xerox was so focused on its well-known copi­er busi­ness that many of Xerox PAR­C’s break­through inno­va­tions were sim­ply too far away. Con­verse­ly, Xerox PARC was focused on tech­nol­o­gy and inno­va­tion and paid lit­tle atten­tion to imple­ment­ing it in busi­ness mod­els and inte­grat­ing it into Xerox.

To accom­plish great things we must dream as well as act.
Ana­tole France

Ama­zon, for exam­ple, is a bet­ter exam­ple of this ambidex­ter­i­ty. Ini­tial­ly, Jeff Bezos expand­ed the online book­seller’s prod­uct range into an online depart­ment store in the clas­sic way of exploita­tion. But then new busi­ness mod­els were devel­oped and Ama­zon became a plat­form with its Mar­ket­place, a logis­tics ser­vice provider by also offer­ing its logis­tics cen­ters and ser­vices to oth­er mer­chants, the lead­ing cloud ser­vice provider with AWS by also offer­ing its exist­ing cloud ser­vices for its own plat­form to cus­tomers, a hard­ware man­u­fac­tur­er and much more. Despite its size and despite its core oper­a­tional busi­ness, it is essen­tial for Ama­zon’s long-term suc­cess in an extreme­ly com­pet­i­tive and fast-mov­ing indus­try to think and act like a start­up and con­stant­ly exper­i­ment with new busi­ness mod­els and ser­vices, some of which involve sub­stan­tial invest­ments. The right bal­ance and the seam­less inte­gra­tion of opti­miz­ing the exist­ing busi­ness mod­el on the one hand and invent­ing new busi­ness mod­els on the oth­er is cer­tain­ly not an easy but cru­cial lead­er­ship task in a VUCA world. That is why the sixth and final the­sis in the Man­i­festo for Human(e) Lead­er­ship says: “Coura­geous­ly explor­ing the new over effi­cient­ly exploit­ing the old.”