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Digital innovation Lufthansa

Part 6: The Ambidexterity Challenge

Although the idea of the ambidextrous organization has been around since more than 25 years, digital transformation has exacerbated the well-known structural conflict between the logic of radical innovation and established structures and processes.

Dealing with these fundamentally different paradigms is particularly hard for organizations whose business model is based on process optimization. Businesses such as airlines or power plants, for example, require risk minimization. Their very existence is based on a zero-tolerance for failure; procedures and products must be designed for 100% safety.

Lufthansa is proud to be continuously ranked among the world’s safest and most reliable airlines, and customers would not like to have it any other way. Achieving such a record requires a super risk-averse mindset in areas such as flight operations, logistics, and maintenance, which is deeply ingrained in the company’s DNA.

Digital innovation, on the other hand, means embracing risk – especially if it is not just incremental but strives to change the rules of the game. It requires the willingness to accept failure and to learn fast, as experimentation and iteration are at the core of dealing with uncharted waters. The DNA of innovators is based on a courageous, daring mindset that defies convention. Or, to say it with the famous motto of the Starship Enterprise: “To boldly go where no man has gone before”.

This holds true not only for industry-shattering ideas that open up entirely new markets and opportunities; a risk-embracing mindset is also necessary when it comes to abandoning encrusted organizational systems and processes, letting go of control and truly empowering employees, or when experimenting with new ways of collaboration and customer interaction.

It is key to deal productively with the different rationales of “exploiting” and “exploring” and to creatively orchestrate the dynamics between emerging businesses and the existing mainstream organization.

The clash between these two paradigms is unavoidable and lies at the heart of the ambidexterity challenge – an issue which all established organizations face. To leverage its potential for transformation, it is key to deal productively with the different rationales of “exploiting” and “exploring” and to creatively orchestrate the dynamics between emerging businesses and the existing mainstream organization.

To do so, requires structural agility. Folding innovative hopefuls into the Procrustean bed of existing rules and regulations will quickly destroy their potential; keeping them totally separate and on their own makes it impossible to leverage their change energy.

With other words: This conundrum cannot be solved with the binary logic of either-or; managing ambidexterity requires accepting and supporting a portfolio of multiple operating models and many different types of micro-organizations both inside and outside the corporation. The issues most large organizations face when they try to leverage the innovative power of start-ups are a great example of this challenge.

The Challenge of Working with Start-ups

Strategic investments in or partnerships with start-ups have always been an important element of corporate innovation strategies. The challenges of digital transformation have turbo-charged this approach; connecting with the start-up ecosystem has become a mantra for many as they hope to find breakthrough ideas and an antidote for their slow and cumbersome operating models.

As a result, traditional corporate venturing is now enriched through innovation hubs, accelerators, shark-tank formats, and more. And it’s not only about getting early access to innovative products and solutions; companies equally hope that some elements of the much-revered start-up culture are rubbing off and cross over to infect the corporate mainstream culture, for instance the spirit of entrepreneurship, and the agility that the “old” organizations crave.

Some examples from the sample of companies we talked to include:

  • Lufthansa’s award-winning Innovation Hub in Berlin which works at the interface between the corporation and the Travel and Mobility Tech scene with the goal to identify and analyse opportunities quickly and convert them into new business for the company. They test, for instance, partnerships with other mobility providers like Daimler’s mytaxi.com; develop technologies that allow travelers to automate the check-in process for any airline; and they make Lufthansa data available to pioneers in the digital market via the Lufthansa Open API.
  • Siemens’ Next47, which has been named after the year Werner von Siemens founded the company. The unit, which is generously funded, serves as a coordinating platform for all corporate Venture Capital activities of the global conglomerate. The idea is to combine the speed and agility of an independent investor with the breadth of Siemens’ business and technology, connecting entrepreneurs to domain knowledge and a global customer ecosystem. This way, Siemens strives to foster a mutual strategic and organizational learning and development process.
  • Daimler’s Lab 1886 (named after the year Gottlieb Daimler invented the car) that serves the nucleus of a global innovation ecosystem where new business models are conceived, tested and made fit for the market. Successful examples of the Lab’s output are for instance car2go, a flexible free-floating car sharing service, or moovel, an app comparing mobility offers of different providers for the optimum route from A to B.

What all these initiatives have in common – and the many more that happen in most large corporations – is that they may be hotbeds of new ideas and new ways of work, but their impact on the mainstream organization remains limited and is riddled by structural conflicts as the ambidexterity challenge raises its ugly head.

Things work fine, as long as new ventures stay outside the parent organization; the moment corporations try to fold them into the rules and regulations of traditional corporate governance, mutual immune systems kick in – and the antibodies of the established mainstream organization tend to be much stronger than the virus of the new.

This makes it a challenge for large organizations to fully harvest the innovative power of external entrepreneurial ventures. Efforts to integrate new businesses often result in the destruction of what the initiative originally was valued for, as the alignment with corporate standards and rules suffocates entrepreneurial spirit and the start-up culture of work.

In our future work, we will look closer at the leadership capabilities and organizational design artistry it takes to successfully tackle this challenge.

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This article is the sixth part of a LinkedIn series about Digital Transformation Challenges in Large and Complex Organizations. It is based on a qualitative study conducted by the Center for the Future of Organization at the Drucker School of Management at Claremont Graduate University.

If you would like to get immediate access to the entire analysis of our findings, you may download an electronic copy of the report at no cost here, or get it as a physical booklet here. In return, we’d love to learn about your perspective – feel free to comment and/or share your experience with the subject. Thank you!

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