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Universia Business Review ISSN: Portal Universia S.A. España Adler, Paul; Heckscher, Charles The Collaborative, Ambidextrous Enterprise Universia Business Review, núm. 40, 2013,

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Universia Business Review ISSN: Portal Universia S.A. España Adler, Paul; Heckscher, Charles The Collaborative, Ambidextrous Enterprise Universia Business Review, núm. 40, 2013, pp Portal Universia S.A. Madrid, España Available in: How to cite Complete issue More information about this article Journal's homepage in redalyc.org Scientific Information System Network of Scientific Journals from Latin America, the Caribbean, Spain and Portugal Non-profit academic project, developed under the open access initiative 34 Paul Adler 1 Harold Quinton Chair in Business Policy and Professor of Management and Organization Management and Organization Department Marshall School of Management University of Southern California, USA The Collaborative, Ambidextrous Enterprise La Empresa colaborativa y ambidiestra Charles Heckscher Director of The Center for Workplace Transformation School of Management and Labor Relations Rutgers University, USA 1. INTRODUCTION What kinds of organizations can support high levels of performance in the contemporary world of work? As many observers have pointed out, work is increasingly knowledge-intensive, because knowledge is replacing land, labor, and capital as sources of wealth (Nonaka, Toyama, and Nagata 2000; Grant 1996). Moreover, work is increasingly solutions-oriented, because the interactive co-production of services is replacing the mass production of standardized goods (Applegate, Austin, and Collins 2006; Galbraith 2002). And finally, competition has grown more dynamic, less predictable, and more global. As a result, many organizations have found that whereas in the past they could focus on just one dimension of performance either innovation, flexibility, and the exploration of new opportunities, or efficiency, control, and the exploitation of existing capabilities today they must find ways to improve on both dimensions simultaneously. In other words, they must become ambidextrous. Achieving ambidexterity is difficult; some doubt it is even possible. Management theory teaches us that organizational performance is a function of the fit between the organization s goal and its internal design its structures of authority, staffing and compensation policies, decision-making systems, etc. An organization whose strategy requires excellence in innovation should adopt an organic JEL CODES: M00, M10, M19 Received: April 26, Accepted: September 9, 2013. 35 executive summary This article aims to advance our understanding of the organizational prerequisites of ambidexterity. Ambidexterity is the ability simultaneously to exploit existing capabilities and to explore new opportunities. Prior research suggests that ambidexterity requires a strong bond of trust among the relevant actors. However, trust can also stifle innovation. We resolve this contradiction by developing a typology of trust, differentiating the traditionalistic (clan) type from the charismatic, contractual, and collaborative types, and we show how this last, collaborative type supports ambidexterity by its distinctive values (based on contribution to a shared purpose), norms (based on interdependent process management), and congruent authority and economic systems. We illustrate our argument with a case study of Kaiser Permanente, a large health system in the USA. RESUMEN del artículo Este artículo persigue avanzar nuestra comprensión sobre los prerrequisitos organizativos de la ambidestreza. La ambidestreza es la habilidad de explotar las capacidades existentes y explorar nuevas oportunidades de manera simultánea. Investigaciones previas sugieren que la ambidestreza requiere de una fuerte dosis de confianza entre los actores relevantes. Sin embargo, la confianza también puede axfixiar la innovación. Nosotros resolvemos esta contradicción desarrollando una tipología de confianza que soporta la ambidestreza por medio de sus valores distintivos (basados en la contribución a un propósito compartido), normas (basadas en la gestión de procesos interdependientes), y una autoridad y sistemas económicos congruentes. Ilustramos nuestros argumentos con un caso de estudio de Kaiser Permanente, una gran empresa del sistema de salud de EE.UU. The Collaborative, Ambidextrous Enterprise 36 Ambidexterity depends on building a specific type of trust, one that is open and flexible. We call this this type of trust collaborative (Heckscher & Adler, 2006). Collaborative trust is based on institutionalized dialogue and shared purpose organizational form, whereas an organization aiming for excellence in efficiency should adopt a more mechanistic form (Burns & Stalker, 1961). Many management theorists have therefore argued that if an organization attempts to compete on two dimensions at once, it can achieve at best only mediocre levels of performance on either dimension. Many organizations under performance pressure have sought ways of organizing that mitigate this trade-off. Early efforts in this direction took the form of partitioning the organization into functionally differentiated subunits: R&D units focused on innovation and adopted an organic form, and operations units focused on efficiency and adopted a mechanistic form. More recently, some firms have sought to develop ambidexterity by partitioning business units into business-line subunits, each with its full complement of dedicated functions one subunit pursues innovation goals and is more organic, and the other pursues efficiency goals and is more mechanistic. And some organizations aim to develop ambidexterity more widely within the organization: they create functional subunits within which organic and mechanistic features are combined, and where, as a result, R&D units become more efficient in their innovation work, while operations units become more innovative in their efficiency-oriented work. However, any of these forms of ambidexterity can only succeed if the efforts of the differentiated subunits or roles are effectively integrated. If the people in differentiated subunits and roles focus only on their own parochial goals, if they hold each other at arm s length and respond defensively to their partners needs, if they do not trust each other, then the organization s performance will indeed be mediocre in both performance dimensions. Trust is therefore a critical ingredient to successful ambidexterity. But not all trust is helpful in this context: some high-trust organizations are inwardly focused and resistant to change creating a context hardly conducive to ambidextrous innovation. Ambidexterity depends on building a specific type of trust, one that is open and flexible. We call this this type of trust collaborative (Heckscher & Adler, 2006). Collaborative trust is based on institutionalized dialogue and shared purpose. It differs from the three, more familiar forms of trust: the traditionalistic clan type based on status, loyalty, and Paul Adler & Charles Heckscher deference; the charismatic type based on an shared emotional bond to a transcendent idea and an exemplary leader; and the contractual type, both of whose variants (bureaucracy and market) are based on individual autonomy, financial incentives, and administrative authority. (This typology of trust and the corresponding organizational models builds on sociological theories of Weber (1978) and his typology of social action.) It is important to discriminate among these types of trust because each supports a different type of strategic goal, as shown in Exhibit 1. Here we differentiate strategic goals depending on the importance they give to exploitation (extending existing capabilities via incremental innovation for greater efficiency and control) and/ or exploration (radical innovation for the creation of new capabilities and greater flexibility). Key Words Collaborative model, ambidexterity, trust, case study Palabras Clave Modelo colaborativo, ambidestreza, confianza, caso ilustrativo 37 Exhibit 1. Different types of trust support different strategic goals Exploitation Goals: Trust: Goals: Trust: Efficiency, control Contractual-bureaucratic Stability Traditionalistic Ambidexterity Collaborative Innovation, flexibility Contractual-market or Charismatic Exploration Traditionalistic trust helps businesses whose goal is stability but handicaps those pursuing either efficiency or innovation. Charismatic trust facilitates intermittent radical innovation but impedes efficiency. Contractual trust encourages a commitment to performance relative to contractually specified rules and/or output goals: such trust can provide either efficiency/control (via a focus on rules in the bureaucratic variant) or innovation/flexibility (via a focus on outputs characteristic of the market variant), but not both at once. To achieve simultaneous improvements in both innovation and efficiency, organizations need a collaborative type of trust in which commitment is to contributing to fulfilling the organization s purposes and to developing the best working procedures to that end. The Collaborative, Ambidextrous Enterprise A NEW MODEL OF ORGANIZATION COLLABORATION How then can an organization create and sustain the collaborative type of trust? The extent and type of trust in an organization are a function of organization s characteristics in four dimensions. The two most obviously relevant are the organization s shared values and its norms; but no less important are the organization s authority and economic structures. (Here, we are adapting Parsons (1971) classic AGIL framework). Using this four-dimensional framework, we can contrast the collaborative model of organization with other, betterknown models by synthesizing the results of a considerable body of management research and the lessons of many organizations organization design efforts. Values. In the values dimension, the key feature of the collaborative model is a commitment to values that privilege contribution to the organization s shared purpose. As suggested above, this marks a strong contrast with the traditionalistic clan model, which places primary value on loyalty to the group; it contrasts with the charismatic model, which values the emotional bond to leaders and to the transcendent values they represent; it contrasts with markets, which value autonomy and pecuniary gain; and it contrasts with bureaucracy, which values conformance and control. These last two contrasts are particularly important: the collaborative model accords its highest praise not to people who meet their numbers but to those who are able to look beyond their specific roles and who do whatever is needed to advance the common purpose. We call this orientation the ethic of contribution. Moreover, to sustain collaborative trust, this shared purpose must be rationally established open to pubic debate and subject to regular review through participative and dialogical strategy processes. This differentiates collaborative values from those characteristic of the contractual model, where the organization s purposes are dictated from above or by the market; from the traditionalistic model, where purposes are taken for granted; and from the charismatic model, where the commitment to purposes is emotionally rather than rationally grounded. Norms. For any model to function effectively as a social system, its shared values (whatever they may be) must be buttressed by corresponding norms that is, by behavioral expectations that guide working relations among people playing differentiated roles. Collaborative norms are distinctive in creating what we call interdependent process management, exemplified in processes Paul Adler & Charles Heckscher such kaizen, process mapping, brainstorming, participatory meeting management, and multi-stakeholder decision-making. These norms enable people in differentiated roles and subunits to manage their interdependencies through direct dialogue; such dialogue is supported by formal procedures; and all these people, whatever their hierarchical level or affiliation, have a genuine voice in designing and refining these procedures. Interdependent process management buttresses with more formalized norms the informal organization, which has long functioned as a kind of hidden complement to formal bureaucratic mechanisms. Like bureaucracy, interdependent process management has standards, procedures, specialized roles, and authority ranks; but in the collaborative model these are used in the service of the shared purpose rather than as means of top-down control. In contrast to any of the other models, the collaborative model is in this way able to mobilize sizeable cross-functional and cross-unit teams towards the organization s goals, and people can move more fluidly between such teams. (Ainamo 2007; Heckscher 2007). Authority. Ambidexterity requires that contributors attend simultaneously to exploration and exploitation goals. When organizations attempt to orchestrate such efforts by relying on the familiar bureaucratic hierarchy of authority, the result is typically an overemphasis on just one of these goals. Sustained ambidexterity in any larger-scale organization therefore requires a distinctive authority structure the matrix, with multiple accountabilities (Galbraith, 1994). Matrixed authority is difficult to sustain, and many organizations that have tried it have given up in frustration. However, the key reason for failure is not that the matrix violates some law of nature its failures have been due to a deficit of collaborative trust. Competitive demands for ambidexterity increase the payoff to firms who have mastered this challenge. Indeed, among successful organizations, there has been an evolution over recent decades towards expanding the number of dimensions in the matrix (Heckscher, 2007; Galbraith, 2008; Strikwerda and Stoelhorst, 2009). To sustain the trust required for effective matrix structures and ambidexterity, the collaborative model relies on an authority structure that is both participative and centralized. Exploratory innovation often results from a highly decentralized structure in which people have room to experiment without prior approval from above; but if the organization as a whole is going to benefit from these exploration 39 The Collaborative, Ambidextrous Enterprise 40 efforts, some centralization is needed to ensure their strategic guidance and systematic exploitation. This tension can only be managed if centralization takes a highly participative form. Participative centralization may appear paradoxical if we assume that centralization and participation are polar opposites; but they are not. A collaborative enterprise coordinates activity across the whole organization in that sense, it is centralized; but it achieves this result participatively, by involving those whose work is affected by the decisions. The resulting emphasis on interdependence contrasts with the market and bureaucratic models emphasis on dependence and independence. In a bureaucracy, each job has its own autonomous sphere of action, and higher levels establish the boundaries of autonomy for lower levels. When excessive centralization causes communications slowdowns and rigidity, many organizations respond by turning to the market model and creating independent business units. But this rarely solves the problem: it exacerbates the difficulty of achieving coordination and trust across the units. Many large corporations therefore go through cycles of centralization and decentralization in search of an elusive balance. A collaborative enterprise, by contrast, treats its components as interdependent: all its members must consider how their actions affect others who are engaged with them in pursuing the shared purpose. Participative centralization thus contrasts with the decentralized structure of authority of the contractual-market model, which supports exploration but not exploitation. It also contrasts with the low-participation, highcentralization structure of the contractual-bureaucratic model, which support exploitation but not exploration. It contrasts with the low participation and low centralization of the traditionalistic model, which is characterized by fiefdoms of semi-independent, autocratic power. And it contrasts with the charismatic model, which is characterized by a low degree of functional specialization and a simple hierarchy centered on a leader from whom innovation flows. Each of these falls short in structuring the combination of creative exploration and disciplined exploitation that constitutes ambidexterity. Economics. The economic dimension in organizations has two aspects: capabilities and incentives. As concerns capabilities, the collaborative model requires a T-shaped set of technical skills deep knowledge in one s own specialty combined with some knowledge of related technical specialties and the corresponding process and social skills to enable effective teamwork. Such Paul Adler & Charles Heckscher T-shaped skill sets afford the common ground critical in cross-unit collaboration and learning. The capabilities required in the other models are more narrowly specialized. As concerns incentives, the collaborative model requires incentives that reflect the basic value-orientation of contribution to the organization s purpose. Here, rewards are based on a mix of personal performance, team performance, and the entire organization s progress towards its purpose. Insofar as the collaborative model differentiates rewards by individuals, the key criterion is the individual s contribution to that purpose. Because formal supervisors cannot be aware of the entire range of activities of their subordinates when these latter are engaged on multiple projects and contributing on cross-cutting dimensions, collaborative organizations rely on multisource ( 360 degree ) assessments. In both the criteria and process, the other organizational models have very different reward systems: the traditionalistic model relies on status; the charismatic model, on the leader s approval; the bureaucratic model, on procedural conformance; and the market model, on market outcomes. Inter-organizational relations. So far, our discussion has focused within the organization; but ambidexterity often also requires a collaborative approach to relations between organizations, whether these relations take the form of supply chains, associations, alliances, or regional clusters. Such relations often rely on traditionalistic ties based on loyalty, on charismatic ties based on personal appeal, on contractualmarket ties based on instrumental self-interest, or on contractualbureaucratic ties based on complex contracts: but they can also be based on collaborative ties grounded in shared commitment to common purposes. Even though collaborative ties are often undermined by inter-firm competition, it is this collaborative type that offers the greatest potential for inter-firm networks aiming for ambidextrous excellence in both exploration and exploitation (Hagel et al. 2010; Miles et al. 2009) THE COLLABORATIVE MODEL COMBINES MECHANISTIC AND ORGANIC FORMS To return to the point made in the introduction, ambidexterity requires that firms somehow combine organic and mechanistic forms of organization. Building on the preceding section, Exhibit 2 describes how firms can achieve this synthesis in a way that avoids compromising performance on either exploration or exploitation dimensions of performance. The Collaborative, Ambidextrous Enterprise Exhibit 2. Synthesizing Mechanistic and Organic forms 42 MECHANISTIC COLLABORATIVE ORGANIC Rigid departmentalization Narrow spans of control High formalization Clear chain of command Centralization Low decision participation Employees have their own specialized tasks, but they focus on contributing to the common task and often go beyond their formal job descriptions There is a clear structure of authority and accountability, but is often multidimensional (matrixed) Processes are formalized,
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