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 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.
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.
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 Leadership says: “Courageously exploring the new over efficiently exploiting the old.”