Exploration, Exploitation and Ambidexterity

Question 1

Definition Exploration

Answer 1

• Experimentation with new alternatives
• Uncertain, distant and often negative returns
• e.g. Ford (Car ownership/use, autonomous vehicles)

Question 2

Definition Exploitation

Answer 2

• Refinement and extension of existing competencies, technologies and paradigms
• Positive, proximate and predictable returns
• e.g. Ford (Small car challenge, infotainment software)

Question 3

The case for ambidexterity - General

Answer 3

Both exploration and exploitation are required for adaptation in incompletely known and changing environments to achieve persistent success.

Question 4

The case for ambidexterity - Exploitative

• Strategic intent
• Critical tasks
• Competencies
• Structure
• Controls, rewards
• Culture
• Leadership role

Answer 4

• Strategic intent: Cost, profit
• Critical tasks: Operations, efficiency, incremental innovation
• Competencies: Operational
• Structure: Formal, mechanistic
• Controls, rewards: Margins, productivity
• Culture: Efficiency, low risk, quality, customers
• Leadership role: Authoritative, top-down

Question 5

The case for ambidexterity - Explorative

• Strategic intent
• Critical tasks
• Competencies
• Structure
• Controls, rewards
• Culture
• Leadership role

Answer 5

• Strategic intent: Innovation, growth
• Critical tasks: Adaptability, new products, breakthrough innovation
• Competencies: Entrepreneurial
• Structure: Adaptive, loose
• Controls, rewards: Milestones, growth
• Culture: Risk taking, speed, flexibility, experimentation
• Leadership role: Visionary, involved

Question 6

Temporal ambidexterity (6)

Answer 6

• Organizations oscilate between different structures
• Exploration and exploitation are emphasized sequentially rather than simultaneously -> long phases of exploitation are disrupted by short bursts of exploration
• Particularly suited for small organizations due to limited resources
• Decentralization is used to ignite innovation and change
• Centralization is used to increase coordination and efficiency
• Main challenge: managing transition between exploration and exploitation

Question 7

Structural ambidexterity (7)

Answer 7

• Organizations are divided into separate units with different structures
• Flexible “innovative units” explore new areas for growth
• More formal “exploitative units” ensure efficient operation in the existing business
• Exploration/exploitation are adressed by different employees and organizational units
• Exploratory units are small, decentralized, loosely structured, and succeed by experimenting, creating small wins and losses
• Exploitative units are large, centralized, tightely structured, succeed by maximizing efficiency/control
• Main challenge: coordinating across units and managing tensions

Question 8

Contextual ambidexterity (5)

Answer 8

• Organizations create supplemental network structures to complement the formal primary structure
• Employees switch between the two types of structures depending on their respective tasks
• Both activities are adressed by the same employee in different structural environments
• Manage trade-offs by supporting a culture emphasizing both exploration and exploitation
• Main challenge: manage tensions within a group or individual

Question 9

Domain ambidexterity (4)

Answer 9

• Separates exploration and exploitation across firm boundaries (i.e. governance forms)
• Explore via R&D alliance/Exploit via outlicensing/explore via M&A
• Management of interfaces between functional domains is crucial
• Main challenge: degree of control over partner, sufficient absorptive capacity to realize benefits