#5 — Innovation and Organizational Setup
In the previous article (#4 — The Innovation Operating Model) I discussed an operating model for innovation — as also the title suggest :-) — and what that means.
To be able to handle this within an incumbent organization there is a need for something that we call organizational “ambidexterity”.
You may have come across the term ambidexterity when discussing organizations and how they work.
The term ‘ambidexterity’ was introduced by Duncan (1976) into innovation and organizational research to describe the ability of a firm to build dual organizational structures (also referred to as ‘structural ambidexterity’).
Ambidexterity (from Latin) means “mixed-handedness” (can also be translated as — “both right” or “both favorable”) and could also describe the ability of organizations to be both efficient and flexible.
Organizational ambidexterity in a broader sense means exploitation (of existing things) and exploration (of new things) done in parallel.
In short, what this means for companies is:
- Exploitation: optimization of the core business through solid structures — meeting the needs of existing customers or markets
- Exploration: innovation, creativity, breaking up silos, leaving old structures and familiar knowledge– to find new solutions
Organizations that master this challenge of handling and shaping exploitation and exploration processes simultaneously are often referred to as ambidextrous organizations. These companies are more agile, adaptable and thus better equipped for digital transformation and/or innovation.
Adaption and the need of ambidexterity within an organization is fundamental to be able to both handle disruptive non-linear innovation as well as more linear incremental innovation — or rather to be seen as transformation (discussed in earlier blog posts)
Some companies have been quite successful at both exploiting the present and exploring the future, and as we look more deeply at them we find that they share important characteristics. In particular, they separate their new, exploratory units from their traditional, exploitative ones, allowing for different processes, structures, and cultures; at the same time, they maintain tight links across units at the senior executive level. In other words, they manage organizational separation through a tightly integrated senior team.
These senior teams needs additional roles that bind / mediate between the two organizational structures. This role/-s are ambassadors that bridges the differences and makes the senior management stay on “both tracks”. As the two different teams/organizations consists of individuals that are diametrically opposed when it comes to characteristics — the integrational roles that bind them together are super important and also quite tough to manage.
Alex Osterwalder, the founder of Strategyzer and the inventor of the “Business Model Canvas” presented a rough future organizational chart in his session “Building Invincible Companies “ on Innoday (2019).
The Chief Internal Ambassador is Alex definition of the role that ties the senior level executive team together, and will be fundamental to make the company succeed in sticking with their ambidextrous effort.
He also defines the Chief Entrepreneur (CE) as someone who can lead the future of the company (exploration) while the CEO takes cares of running the existing business (exploitation). This is a huge divergence from the traditional norm for chief roles, but the CE is a necessary position of power to ensure that a company is prepared for the infinite game and to stay in the same game when disruption is needed/takes place.
This role is rebellious when looked upon from the traditional business and will need support/mediation from someone that can bridge the gap between the two structures. Without someone bridging this gap there will easily be a power battle between either the CE and the CEO or the CE and the CTO.
So which characteristics do you look for in this person?
He/she needs to be a lobbyist as well as a diplomat. He/she needs to have strong negotiation skills due to the need to negotiate brand, resources and access to existing customers. He/she also needs to be have strong capabilities in building trust mainly internally but also externally.
The foremost skill sought for is to be an effective and trustworthy communicator. Combining this with political skills and perseverance gives us our ideal candidate.
The role is as you might understand a difficult one, and needs clear endorsement from both the CEO and the CE (Chief Entrepreneur) to be successful.
But besides of this — the company must also form relevant KPI:s for the different units to be measured against. Because, while exploration may lead to an increase in the innovative performance, speed of delivery, and flexibility; exploitation may contribute to increased quality and decreased cost; but when combined strategies are applied all these performance indicators could be better.
Forming new KPI:s is truly essential for the exploration part of the company as they are breaking new ground.
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Through the articles published so far I have discussed the challenge of understanding that we as companies are involved in a infinite game, that needs purpose and cause to continue to be successful. The innovation culture that everyone so desperately looks for can not be formed without a new take; both as a redefinition of ourselves and why we are playing the game but also new operating models (Innovation Operating Model) and a new organizational structure that can help to create innovation.
So why do I in my role as Enterprise Architect (EA) discuss all of this? And how do I see the role of the EA change to fit within this? This I would like to start discussing in my next article.
