HIM005/APT5: DESIGN
HEALTH SERVICE
DELIVERY OF THE FUTURE
All Learning Community Meetings & Lectures
,LCM1 - Ambidexterity, Networks & Design
04-02-2025
Ambidexterity, especially the exploitation and exploration phases, and how they relate in
relation to organizational development (innovation)
Source: O'Reilly III, C. A., & Tushman, M. L. (2013). Organizational ambidexterity: Past,
present, and future. Academy of management Perspectives, 27(4), 324-338.
Organizational ambidexterity: the ability of an organization to both explore and exploit – to
compete in mature technologies and markets where efficiency, control, and incremental
improvement are prized and to also compete in new technologies and markets where flexibility,
autonomy and experimentation are needed.
- An organization’s ability to simultaneously pursue exploration and exploitation.
Past: origins of the construct
- Different organizational forms are associated with different strategies and
environmental conditions.
- Firms operating in stable environments developed as “mechanistic management
systems” that were characterized by clear hierarchical relations, well-defined roles and
responsibilities, and clear job descriptions.
- Firms operating in more turbulent environments developed more “organic” systems with
a lack of formally defined tasks, more lateral coordination mechanisms, and less
reliance on formalization and specialization.
- For firms to succeed over time and in the face of environmental and technological
change may require them to change these structure alignments
o Trade-off between efficiency and flexibility as a paradox of administration
- The fundamental adaptive challenge facing firms was the need to both exploit existing
assets and capabilities and to provide for sufficient exploration to avoid being rendered
irrelevant by changes in markets and technologies.
o Exploitation is about efficiency, control, certainty and variance reduction
o Exploration is about search, discovery, autonomy and innovation
- The basic problem confronting an organization is to engage in sufficient exploitation to
ensure its current viability and, at the same time, devote enough energy to exploration to
ensure its future viability.
o The difficulty in achieving this balance is a bias in favor of exploitation with its
greater certainty of short-term success.
o Exploration is inefficient and associated with an unavoidable increase in the
number of bad ideas
- For long term survival, organizations need to accommodate both exploitation and
exploration.
Present: what does the evidence show?
Ambidexterity and firm performance
- Ambidexterity has been shown to be positively associated with sales growth, subjective
ratings of performance, innovation, market valuation, and firm survival.
Ambidexterity is positively associated with firm performance.
- These effects can be contingent on the firm’s environment, with ambidexterity more
beneficial under conditions of uncertainty and when sufficient resources are available,
which is often the case with larger rather than smaller firms.
- The evidence is that either under- or overuse of ambidexterity comes at a cost.
, - In uncertain environments, organizational ambidexterity appears to be positively
associated with increased firm innovation, better financial performance, and higher
survival rates.
How is Ambidexterity achieved?
- Organizations achieved ambidexterity in a sequential fashion by shifting structures over
time.
- In rapid change, sequential ambidexterity might be ineffective, and organizations
needed to explore and exploit simultaneous
o This could be accomplished by establishing autonomous exploration and
exploitation subunits that were structurally separated, each with its own
alignment of people, structure, processes, and cultures, but with targeted
integration to ensure the use of resources and capabilities.
- Organizations could be ambidextrous by designing features of the organization to permit
individuals to decide how to divide their time between exploratory and exploitative
activities.
- Contextual ambidexterity: the behavioral capacity to simultaneously demonstrate
alignment and adaptability across and entire business unit.
- Contextual ambidexterity was achieved by building a set of processes or systems that
enable and encourage individuals to make their own judgments as to how to best divide
their time between the conflicting demands for alignment and adaptability”
o Ambidextrous: aligned and efficient in their management of today’s business
demands, while also adaptive enough to change in the environment that they will
still be around tomorrow.
Evidence for three approaches of ambidexterity
1. Sequential ambidexterity. The view that firms can realign their structures to reflect
changed environmental conditions or strategies.
o Sequential ambidexterity may be more useful in stable, slower moving
environments (e.g. service industries) and for smaller firms that lack the
resources to pursue simultaneous or sequential ambidexterity.
2. Simultaneous or structural ambidexterity. The simultaneous pursuit of both using
separate subunits but entails not only separate structural units for exploration and
exploitation but also different competencies, systems, incentives, processes, and
cultures – each internally aligned.
o These separate units are held together by a common strategic intent, and
overarching set of values, and targeted linking mechanisms to leverage shared
assets.
o The key to ambidexterity is the ability of the organization to sense and seize new
opportunities through simultaneous exploration and exploitation.
o Structural ambidexterity consists of autonomous structural units for exploration
and exploitation, targeted integration to leverage assets, an overarching vision to
legitimate the need for exploration and exploitation, and leadership that can
manage the tensions associated with multiple organizational alignments.
3. Contextual ambidexterity. The tension through structural means could be resolved at
the individual level through contextual ambidexterity; the behavioral capacity to
simultaneously demonstrate alignment and adaptability across an entire business unit.
o The ability to balance exploration and exploitation rests on an organizational
context characterized by an interaction of stretch, discipline, and trust and
requires a supportive organizational context that encourages individuals to make
their own judgments as to how to best divide their time between the conflicting
demands for alignment and adaptability.
, o Ambidextrous defined as “aligned and efficient in their management of today’s
business demands, while also adaptive enough to changes in the environment
that they will still be around tomorrow”.
o Contextual different from sequential and structural ambidexterity:
§ Emphasis on individuals rather than units making the adjustment
between exploration and exploitation
§ Ambidexterity is achieved when individuals agree that their unit is aligned
and adaptable
§ What the organizational systems and processes are that enable this
individual adjustment is never concretely specified, other than that they
promote stretch, discipline, and trust.
o Key shortcoming: it does not really consider how a firm can simultaneously
conduct radical forms of exploration and exploitation. It simply assumes that
exploratory knowledge is produced somewhere and is available for use.
Why is it useful?
- Compete in mature & new markets
- Balance exploration & exploitation
- Drive innovation & adaptability
Although each of the three modes of ambidexterity were initially proposed as separate ways to
deal with the need for exploitation and exploration, the evidence clearly suggests that all three
are potentially viable.
- Exploration and exploitation need not always be competing activities but can and should
be complementary.
- A simultaneous approach may be more appropriate in dynamic markets where
conditions are changing, while in more stable environments firms may be able to afford
a sequential approach. Contextual ambidexterity within a business unit may promote
the local innovation and change needed to continually adapt to small changes in the
environment.
- It appears that structural ambidexterity is crucial in creating the context where
incumbent firms can explore in the context of their existing strategy and history.
However, once the exploratory units gain traction, firms may take advantage of this
capability by switching into more integrated structures.
Future: issues to be resolved / challenges
- Definitions
- Leadership
- Cultural differences
- External environment
HEALTH SERVICE
DELIVERY OF THE FUTURE
All Learning Community Meetings & Lectures
,LCM1 - Ambidexterity, Networks & Design
04-02-2025
Ambidexterity, especially the exploitation and exploration phases, and how they relate in
relation to organizational development (innovation)
Source: O'Reilly III, C. A., & Tushman, M. L. (2013). Organizational ambidexterity: Past,
present, and future. Academy of management Perspectives, 27(4), 324-338.
Organizational ambidexterity: the ability of an organization to both explore and exploit – to
compete in mature technologies and markets where efficiency, control, and incremental
improvement are prized and to also compete in new technologies and markets where flexibility,
autonomy and experimentation are needed.
- An organization’s ability to simultaneously pursue exploration and exploitation.
Past: origins of the construct
- Different organizational forms are associated with different strategies and
environmental conditions.
- Firms operating in stable environments developed as “mechanistic management
systems” that were characterized by clear hierarchical relations, well-defined roles and
responsibilities, and clear job descriptions.
- Firms operating in more turbulent environments developed more “organic” systems with
a lack of formally defined tasks, more lateral coordination mechanisms, and less
reliance on formalization and specialization.
- For firms to succeed over time and in the face of environmental and technological
change may require them to change these structure alignments
o Trade-off between efficiency and flexibility as a paradox of administration
- The fundamental adaptive challenge facing firms was the need to both exploit existing
assets and capabilities and to provide for sufficient exploration to avoid being rendered
irrelevant by changes in markets and technologies.
o Exploitation is about efficiency, control, certainty and variance reduction
o Exploration is about search, discovery, autonomy and innovation
- The basic problem confronting an organization is to engage in sufficient exploitation to
ensure its current viability and, at the same time, devote enough energy to exploration to
ensure its future viability.
o The difficulty in achieving this balance is a bias in favor of exploitation with its
greater certainty of short-term success.
o Exploration is inefficient and associated with an unavoidable increase in the
number of bad ideas
- For long term survival, organizations need to accommodate both exploitation and
exploration.
Present: what does the evidence show?
Ambidexterity and firm performance
- Ambidexterity has been shown to be positively associated with sales growth, subjective
ratings of performance, innovation, market valuation, and firm survival.
Ambidexterity is positively associated with firm performance.
- These effects can be contingent on the firm’s environment, with ambidexterity more
beneficial under conditions of uncertainty and when sufficient resources are available,
which is often the case with larger rather than smaller firms.
- The evidence is that either under- or overuse of ambidexterity comes at a cost.
, - In uncertain environments, organizational ambidexterity appears to be positively
associated with increased firm innovation, better financial performance, and higher
survival rates.
How is Ambidexterity achieved?
- Organizations achieved ambidexterity in a sequential fashion by shifting structures over
time.
- In rapid change, sequential ambidexterity might be ineffective, and organizations
needed to explore and exploit simultaneous
o This could be accomplished by establishing autonomous exploration and
exploitation subunits that were structurally separated, each with its own
alignment of people, structure, processes, and cultures, but with targeted
integration to ensure the use of resources and capabilities.
- Organizations could be ambidextrous by designing features of the organization to permit
individuals to decide how to divide their time between exploratory and exploitative
activities.
- Contextual ambidexterity: the behavioral capacity to simultaneously demonstrate
alignment and adaptability across and entire business unit.
- Contextual ambidexterity was achieved by building a set of processes or systems that
enable and encourage individuals to make their own judgments as to how to best divide
their time between the conflicting demands for alignment and adaptability”
o Ambidextrous: aligned and efficient in their management of today’s business
demands, while also adaptive enough to change in the environment that they will
still be around tomorrow.
Evidence for three approaches of ambidexterity
1. Sequential ambidexterity. The view that firms can realign their structures to reflect
changed environmental conditions or strategies.
o Sequential ambidexterity may be more useful in stable, slower moving
environments (e.g. service industries) and for smaller firms that lack the
resources to pursue simultaneous or sequential ambidexterity.
2. Simultaneous or structural ambidexterity. The simultaneous pursuit of both using
separate subunits but entails not only separate structural units for exploration and
exploitation but also different competencies, systems, incentives, processes, and
cultures – each internally aligned.
o These separate units are held together by a common strategic intent, and
overarching set of values, and targeted linking mechanisms to leverage shared
assets.
o The key to ambidexterity is the ability of the organization to sense and seize new
opportunities through simultaneous exploration and exploitation.
o Structural ambidexterity consists of autonomous structural units for exploration
and exploitation, targeted integration to leverage assets, an overarching vision to
legitimate the need for exploration and exploitation, and leadership that can
manage the tensions associated with multiple organizational alignments.
3. Contextual ambidexterity. The tension through structural means could be resolved at
the individual level through contextual ambidexterity; the behavioral capacity to
simultaneously demonstrate alignment and adaptability across an entire business unit.
o The ability to balance exploration and exploitation rests on an organizational
context characterized by an interaction of stretch, discipline, and trust and
requires a supportive organizational context that encourages individuals to make
their own judgments as to how to best divide their time between the conflicting
demands for alignment and adaptability.
, o Ambidextrous defined as “aligned and efficient in their management of today’s
business demands, while also adaptive enough to changes in the environment
that they will still be around tomorrow”.
o Contextual different from sequential and structural ambidexterity:
§ Emphasis on individuals rather than units making the adjustment
between exploration and exploitation
§ Ambidexterity is achieved when individuals agree that their unit is aligned
and adaptable
§ What the organizational systems and processes are that enable this
individual adjustment is never concretely specified, other than that they
promote stretch, discipline, and trust.
o Key shortcoming: it does not really consider how a firm can simultaneously
conduct radical forms of exploration and exploitation. It simply assumes that
exploratory knowledge is produced somewhere and is available for use.
Why is it useful?
- Compete in mature & new markets
- Balance exploration & exploitation
- Drive innovation & adaptability
Although each of the three modes of ambidexterity were initially proposed as separate ways to
deal with the need for exploitation and exploration, the evidence clearly suggests that all three
are potentially viable.
- Exploration and exploitation need not always be competing activities but can and should
be complementary.
- A simultaneous approach may be more appropriate in dynamic markets where
conditions are changing, while in more stable environments firms may be able to afford
a sequential approach. Contextual ambidexterity within a business unit may promote
the local innovation and change needed to continually adapt to small changes in the
environment.
- It appears that structural ambidexterity is crucial in creating the context where
incumbent firms can explore in the context of their existing strategy and history.
However, once the exploratory units gain traction, firms may take advantage of this
capability by switching into more integrated structures.
Future: issues to be resolved / challenges
- Definitions
- Leadership
- Cultural differences
- External environment
