Innovation Streams and Ambidextrous Designs: On Building Dynamic Capabilities

Michael TushmanWendy Smith

George WestermanRobert Wood

Charles O’Reilly

Research Question:

What are the Strategic, Organizational, and Senior Team Roots of Dynamic Capabilities?

Building Dynamic Capabilities is Difficult? (Wiggins and Ruefli, 2002)

IBM(1993-2004) Firestone NCR

Kodak Kuhn Loeb Boeing

SSIH/Asaug Bausch & Lomb Philips

Sears U.S.Steel Levi Strauss

Kidder Peabody Oxford Health Polaroid

Ciba-Geigy Intertype/Varityper DEC

Worldwide Watch Production

1955

1977

1978

1979

1980

1982

1985

2,316

1,021

979

867

861

730

600

70,026

54,825

52,669

46,716

46,998

38,200

32,000

1945

1950

1960

1965

1970

1975

1976

Year

1,863

2,167

1,927

1,618

1,169

1,083

Number ofFirms

80,000

60,239

74,216

83,922

89,448

62,567

55,182

Employees

Number of Firms and Workers inthe Swiss Watch Industry,

1950-1985

2,500

Sources: Rubber Manufacturers Association, “Tire Shipments by Construction,” Tire Industry Facts(Akron, Ohio, 1990); Firestone Tire & Rubber Company, “Sales Forecasts,” Corporate Archives (Akron, Ohio, 1980).

Citation:Sull, Donald. “The Dynamics of Standing Still: Firestone Tire & Rubber and the Radial Revolution,” Business History Review, 1999, pp. 430-464.

Percentage of Tires Shipped by Construction Type: 1961-1989

1976 1981 1986 1991 1996

14”

8”

5.25”

3.5”

2.5”

Control Data, IBM, Memorex,Diablo, DEC, Ampex

Shugart, Micropolis,Priam, Quantum

Seagate, Miniscribe, Maxtor,Micropolis, Computer Memories

Conner, Quantum, Maxtor,Western Digital, Seagate

Prairietek, Quantum,Conner, Western DigitalMarket

Size

Disk Drive Industry Evolution146 firms founded; 125 failures

Disk Drive Industry Evolution146 firms founded; 125 failures

Henderson and Clark, ASQ, 1990.

– Photolithography Industry

– Contact aligners (Cobuilt, Kasper)– Proximity aligners (Canon)– Scanners (Perkin-Elmer)– Steppers– 2nd generation steppers (Nikon)

– Subsystems and linkage mechanismslightlensalignment systemmechanical system

Innovation Streams

Incremental change with existing product

Non-incremental defined by change in

technology markets

Innovation Streams

Incremental change with existing product

Non-incremental defined by change in

technology markets Markets

Current Customers

New Customers

Emerging Market

IncrementalInnovation

ArchitecturalInnovation

DiscontinuousInnovation

ExistingConventional Lens

Solution

InnovationDaily DisposibleExtended Wear

Process Innovation

Technology

InnovationPharmaceutical

(Visudyne)

InnovationFashion Lenses

CIBA VISION

Dynamic Capabilities and Innovation Streams

The Challenge:

March (1991), Levinthal (1997): Explore and Exploit

Weick (1979): Learn and unlearn, hypocritical

Thompson (1967): efficiency and flexibility

Abernathy (1978): productivity dilemma

The Response:Ecology/Selection:

Spin-outs (Christensen, 1997; Baghai et al, 1999)ICV, New Business Groups, Skunkworks

(Van de Ven, 1999; Burgelman, 2002)

Contingency and Punctuated Change:Romanelli and Tushman (1994)Siggelkow (2001)Miller (1990)

Switch Between Modes: Louis and Sutton (1989)Duncan (1976)- initiation vs implementationBrown and Eisenhardt (1998)-loose and tight

semistructures linked in time, incremental change, choreographed transitions, edge of

chaos

Plural, Dual, or Ambidextrous Designs: Explore and Exploit

Tushman and O’Reilly (1997), Nonaka (1988),Bradach (1998), Adler et al (1999), Sutcliffe et al (2000)

High Structural Differentiation: Intra Unit ContradictionsLimited/Tactical Structural IntegrationStrong Senior Team Integration

Not switch back and forth, but simultaneous exploit and exploreNot spin out, ICV, but internally contradictory architecturesNot semi structures, but ambidextrous designsNot induced and autonomous, but strategic innovationNot incremental or punctuated, but both

On Innovation Streams and Dynamic Capabilities

Products/Services As Systems: Subsystems and Linking Mechanisms

1860 1950s 1970 1980

Spring Battery Battery Battery Battery

Escapement Escapement Tuning Fork Quartz Quartz

Gears Gears Gears Gears Electronics

Analog Analog Analog Analog Digital

Gold Gold Gold/Plastic Gold Plastic

Energy

Oscillation

Linkage

Face

Case

Subsystems

Subsystems: Core and Peripheral

Henderson and Clark, ASQ, 1990.

– Photolithography Industry

– Contact aligners (Cobuilt, Kasper)– Proximity aligners (Canon)– Scanners (Perkin-Elmer)– Steppers– 2nd generation steppers (Nikon)

– Subsystems and linage mechanismslightlensalignment systemmechanical system

FanSmall CopiersSmall Radio

ContactAligners

ProximityAligners

Architectural innovation

Rosenbloom and Christensen. Industrial and Corporate Change, 1994.

Disk drives industry: 14”, 8”…3.5”(Winchester, Seagate, Conner)

“Issue in disk drives may be relative abilities of incumbents to change strategies (value networks), not technologies.”

Markets

Technology

New

Existing

Incremental

Discontinuous

Disk Drives (8”… 3.5”)

14’’

Architectural

Innovation Streams and Dynamic Capabilities

New

Existing

Markets

Incremental Architectural

Discontinuous CD/Core NCA/Core

• Dynamic Capabilities Rooted in Innovation Streams.

Types of Innovation

Flat Bed ScannerConventional lensUSATodayBias Ply TiresContact AlignerMechanical WatchIBM Micro: ASIC

Proximity Aligner

HP/WandaFashion Lens

8” Disk DrivesIBM Micro: Network, Imaging

Radial TiresDisposable LensExtended Wear Lens

USAT.com

Quartz WatchVysodyneHP/Zorro

Organizational Architectures & Innovation Streams:Multiple Selection Environments

Selection

Exploration: Variation

General Managers and Senior

Team

mfg./salescompetencies

tight/formalorganization

arrangements

tightculture

tightprocesses

R&D/entrepr.competencies

looseculture

looseprocesses

looseorganization

arrangements

Exploitation:Retention

Ciba Vision /Vysodyne, Daily DisposablesSeiko/QuartzUSAToday.comIBM Network Tech/TransportHP Scanner/Zorro

Tasks

OrganizationArrangements

IndividualsInformal

Mgmt. Team

Mgmt. Team

Tasks

OrganizationArrangements

IndividualsInformal

Mgmt. Team

Strategic Re-orientations,Discontinuous Change

Executive TeamMultiple strategies

Single visionFew Core Values

Exploration: Multiple failures, experiments, variants

Ciba Vision/Conv. Lens, Seiko/Mechanical,USATodayIBM Network/ ASICHP Flat Bed Scanner

Exploitation: Consistency, incremental change, and continuous improvements

Ambidextrous Designs, Innovation Streams and Dynamic Capabilities

Ambidextrous Design

J. Kelley(Meta Manager)Group Executive

Mfg. Chris King (Ambidextrous Manger)Network Technologies

ASIC(Exploitation)

Network(Innovation Manger)

Transport(Innovation Manger)

Senior TeamTactical

Integration

Exploration

Wireless

Research Design

Multi Case Design (Van de Ven, 1999; Brown and Eisenhardt, 1997)Chose Sites Based on Innovation StreamsBusiness Unit as Level of AnalysisLongitudinal Data (Lewin et al, 1999)

Sample15 Business Units (9 Industries)24 non-incremental innovations36 Innovation Episodes 7 Business Units with multiple non-incremental innovations11 innovations with multiple innovation- episodes5 out of 6 types of non-incremental innovation

Data Collection6-12 Interviews per firm (106 in all): open ended and targetedMini-cases5 coders independently coding • differentiation (distinct unit, physical location, culture, rewards, competencies) .92

• strategic integration (general manager support, relationship, on senior team) .91

• innovation performance (technical, market, and commercial) .86

Methods

Table 1: Sample Description

# of Non-Incremental Innovations Innovation Episode

Perfor-

mance1Industry Dates

Number of Interviews

Handheld Scanner (A) 2.25 Jan 91 - Mar 96 Handheld Scanner (B) 4.75 Oct 96 - Mar 98 Handheld Scanner (C) 2.67 Aug 98 - Apr 99

News.com(A) 3.42 1995 - 1999 News.com(B) 2.33 1999 - 2000 CitySearch.com 4.67 1999 - 2000

Micro Display Chip (A) 1.63 1997 - 1999 Micro Display Chip (B) 3.42 1999 - 2000 Imaging Chip (A) 2.25 1997 - 1999 Imaging Chip (B) 4.00 1999 - 2000

Daily Disposable 5.00 1992 - 1997 Extended Wear 5.00 1992 - 1997

Visudyne (A) 5.00 1992 - 1997 Visudyne (B) 5.00 1997 - 2002

USAT.com (A) 3.42 1995 - 2000 USAT.com (B) 4.39 2000 - 2001 Direct (A) 1.67 1990 Direct (B) 4.25 2000 - 2001

1 On-Site Power Plants 4.56 Steady Energy 1986 - 1995 11

1 Color Ultra-Sound 4.78Managed Decline

Health Care 1986 - 1990 10

Continued on next page

Medical Imaging Div.

2

2 Semiconductor

Power PlantsUtility Company

10Eye Care

11

Newspaper

2 Media8

Improving

USA Today

7Electronics

Regional News

Ciba Vision

Turner Technologies

Newspaper

ASIC Chip

Steady

Declining to Improving

7

Conventional Lens

Existing Product Perfor-mance

Steady to Improving

1

HP ScannersFlat Bed Scanners

Company/Existing Product

Media

B&W Ultra-Sound

3

Declining to

Steady

# of Non-Incremental Innovations Innovation Episode

Perfor-

mance1Industry Dates

Number of Interviews

Medical Devices 1 Integrated Healthcare System 2.50 Steady Health Care 1994 - 1999 4

Transport Chip (A) 4.56 Mar 99 - Mar 00

Transport Chip (B) 4.56 Mar 00 - Sep 00

Network Chip (A) 4.56 Mar 99 - Mar 00

Network Chip (B) 4.56 Mar 00 - Sep 00

1 Web Based Middleware 4.83 Improving Software 1998 - 2000 11

Advanced Collaboration 2.67 Jun 00 - Dec 01 Knowledge Management 3.17 Jun 00 - Dec 01

E-Learning 2.00 Jun 00 - Dec 01

1 Radial Tires 4.22Managed Decline

1970 - 1976

1 Radial Tires 1.44 Declining 1970 - 1976

1 Radial Tires 2.78 Declining 1970 - 1976

Helios (A) (High Resolution Medical Imaging Film)

2.00 1986 - 1988

Helios (B) 1.67 1988 - 1996

Digital Camera (A) 2.00 1980 - 1989

Digital Camera (B) 2.33 1990 - 1996

15 24 36 9 106TOTALS:

3 Data for Polaroid innovations are principally from Tripsas and Gavetti (2000).

Software Co.

2 Data for Goodyear, Firestone and Goodrich innovations are principally from Sull (1999).

2

1 Performance = a composite scale (1 - 5) based on Technology Learning; Market Learning; and Commercial Success.

IBM Network Technology

2 Semiconductor 10

Medical Products Co.

Sample (cont.)

Company/Existing Product

Existing Product Perfor-mance

Analog Camera

Integrated Collaboration

Bias Ply Tires Tires

Declining to Improving

COBOL / CICS

ASIC

IBM Middleware:

Goodyear2

Firestone2

Declining

4

3 Software 12

Polaroid3

Steady to Declining

Photography

1

BF Goodrich2

Secondary Sources

Item/Factor ICC IRRChron. Alpha N Mean

Std. Dev.

Structural Diff.

Strategic Integ.

Distinct Unit N/A N/ASeparate Physical Location N/A N/ADistinct Culture .83 .84Distinct Reward System .82 .90Human Resource Capabilities .91 .90 Structural Differentiation 0.87 351 N/A2 N/A2

Ambidextrous Manager Support .75 .91AM-IM Relationship .79 .94 Senior Team Integration 0.92 35 N/A2 N/A2 .34*

Market Learning .81 .86Technology Learning .77 .82Market Success .91 .85 Performance 0.90 35 3.4 1.22 .38* .79***

1 We did not code Visudyne B as we did not have full information about the organization during this innovation episode. 2 Structural Differentiation and Strategic Integration are both standardized with mean = 0, SD = 1.

*p < .05, ***p < .001

Descriptive Statistics Correlations

Table 2: Item Reliability and Descriptive Statistics

Item Reliability

Non-Incremental Technological Change

Results: Innovation Streams

RESULTS

Innovation Streams exist

No performance difference by:

• technology (t=.87, ns)

• markets (F=2.14, ns)

RESULTS

Innovation Streams exist

No performance difference by:

• technology (t=.87, ns)

• markets (F=2.14, ns)

Software Co: E-Learning

Regional News: City Search.com

HP Scanner: Handheld Scanner B, C

Regional News: News.com A, B

USA Today: USAT.com A

Ciba Vision: Visudyne A, B

Firestone: Radial TiresGoodyear: Radial TiresBF Goodrich: Radial TiresUtilityCo: On Site Power PlantsCiba Vision: Extended WearCiba Vision: Daily Disposable

IBM Middleware: WebsphereMedical Imaging: Color

UltrasoundMedical Products: Integrated

Healthcare System

HP Scanner: Handheld Scanner A

Turner Technology:Imaging Chip A, BMicro Display Chip A, B

IBM Network Technology:Network Chip A, BTransport Chip A, B

Incremental Architectural Discontinuous

Current Customers

New Customers

Emerging Market

USA Today: Direct A, BUSA Today: USAT.com B Software Co: Knowledge ManagementSoftware Co: Advanced CollaborationPolaroid: Helios A, BPolaroid: Digital Camera A, B

Polaroid: Analog CameraSoftware Co: ICEIBM Software: COBOLMed. Imaging: B&W UltrasoundUtilityCo: Power PlantsCiba Vision: Conventional LensIBM Network Tech: ASICTurner Technology: ASICGoodyear: Bias Ply Tires Firestone: Bias Ply Tires BF Goodrich: Bias Ply Tires Regional News: NewspaperHP Scanners: Flatbed ScannersUSA Today: NewspaperMed. Product: Medical Devices

Target Market

3.48 3.243.80

0

1

2

3

4

5

1 2 3GoodyearFirestoneBF GoodrichUtilityCoMedical ImagingIBM MiddlewareHP ScannerMedical Products

Regional NewsTurnerUSA TodayIBM Network TechnologyPolaroid

CIBA VisionSoftware Co.

Innovation Performance

(N=8) (N=5) (N=2)

RESULTS

No difference in performance by number of innovations in innovation stream:

One vs. Multiple (t= .21, n.s.)

RESULTS

No difference in performance by number of innovations in innovation stream:

One vs. Multiple (t= .21, n.s.)

Innovation performance by number of non-incremental innovations

HP Scanners: Handheld Scanner BUSA Today: USAT.com BUSA Today: Direct BRegional News: City Search.comRegional News: News.com ATurner Technology: Micro Display ATurner Technology: Imaging BIBM Middleware: WebsphereUtilityCo: Power PlantsIBM Network Tech: Network Chip BIBM Network Tech: Transport Chip BCIBA Vision: Extended WearCIBA Vision: Daily DisposableCIBA Vision: Visudyne A Polaroid: Helios B

Structural Differentiation

LOW

HIGH

Senior Team

Integration

LOW HIGH

Cross-Functional Teams

HP Scanners: Handheld Scanner ARegional News: News.com BTurner Technology: Micro Display ATurner Technology: Imaging AFirestone: Radial TiresBF Goodrich: Radial TiresSoftware Co: E-LearningSoftware Co: Knowledge ManagementSoftware Co: Advanced Collaboration

USA Today: USAT.com APolaroid: Digital Cameras BUSA Today: Direct A HP Scanners: Handheld Scanner C

Medical Imaging: Color UltrasoundGoodyear: Radial TiresIBM Network Tech: Network Chip AIBM Network Tech: Transport Chip A Medical Products: Integrated Health

Care SystemPolaroid: Helios APolaroid: Digital Cameras A

N=9

Unsupported Teams

Functional Design Ambidextrous Design

N=7

N=4

N=15

Results: Does Ambidexterity Exist?

Characteristics of Ambidexterity

J. Kelley(Meta Manager)Group Executive

Mfg. Chris King (Ambidextrous Manger)Network Technologies

ASIC(Exploitation)

Network(Innovation Manger)

Transport(Innovation Manger)

Senior TeamTactical

Integration

Exploration

Wireless

Characteristics of Ambidextrous Forms

• Structural differentiation of explore/exploit units

• Integration at senior team level

• Investment by ‘Meta Manager’

• Targeted integration of functional resources

• Common fate rewards system

• Overarching vision of senior team including both explore and exploit

• IM internal/external, staff external

Characteristics of Ambidextrous Forms

• Structural differentiation of explore/exploit units

• Integration at senior team level

• Investment by ‘Meta Manager’

• Targeted integration of functional resources

• Common fate rewards system

• Overarching vision of senior team including both explore and exploit

• IM internal/external, staff external

VISION: # 1 Supplier of Network Technology chips by 2000

Table 4: Characteristics of Ambidextrous Organizational Forms

Healthy Eyes for Life

Inside

Inside

Inside

Yes

Yes

Yes

GM & Head of R&D / Inside

Ciba VisionExtended Wear Daily DisposableVisudyne (A)

A value creating, respected public

utilityOutsideYesGM / Outside

Utility Co.

On-Site Power Plant

“Beat BEA” InsideYesGM / InsideIBM Middleware

Web Middleware

#1 supplier of Network Tech by

2000Outside

Outside

Yes

Yes

GM / Inside

IBM Network Tech

Network (B)

Transport (B)

Be in top 10 manufacturers of semiconductors within 3 years

Inside

Inside

Yes

Yes

GM / OutsideTurner Technology

Micro (B)Imaging (B)

Primary information

source for city

Outside

Outside

Yes

YesPublisher / Inside

Regional NewsCity Search.comNews.com (A)

Local paper for global village Inside

Outside

Yes

Yes

GM / InsideUSA Today

.Com (B)Direct (B)

NONE InsideYesGM / OutsideHP Scanner

Handheld (B)

Overarching

AspirationInnovation Manager1

DistinctUnit

Ambidextrous Manager1

None OutsideYesCEO / InsidePolaroid

Helios (B)

Yes

Yes

Yes

Yes

No

Yes

Yes

No

Yes

Yes

No

Yes

Yes

Yes

Innovation Manager on

Sr. Team

Yes

R&D / Mkt.

Marketing

Software R&D

Mfg./

Sales

Mfg.

HR/Finance

EditorialAdvertising

Editorial

MIS/HR/Finance

TargetedStructuralIntegration

Sales

Joint /

Common Fate

Company based stock

options

Common team Incentives

Joint

Common Fate

No Data

Individual Incentive and

Joint Bonus

Joint Bonus / Common Fate

Joint Bonus

Senior Team Incentives

No Data

YES

YES

YES

YES

YES

N/A

NONE

YES

MetaManager

N/A

1 Inside & Outside refers to whether the manager came from inside or outside the business unit.

Figure 1: Innovation Space

Software Co: E-Learning

Regional News: City Search.com

HP Scanner: Handheld Scanner B, C

Regional News: News.com A, B

USA Today: USAT.com A

Ciba Vision: Visudyne A, B

Firestone: Radial Tires

BF Goodrich: Radial Tires

UtilityCo: On Site Power Plants

Ciba Vision: Extended Wear

Ciba Vision: Daily Disposable

[ Goodyear: Radial Tires ]

IBM Middleware: Web Based Middleware

Medical Products: Integrated Healthcare System

[ Medical Imaging: Color Ultrasound ]

HP Scanner: Handheld Scanner A

Turner Technologies:Imaging Chip A, BMicro Display Chip A, B

IBM Network Technology:Network Chip A, BTransport Chip A, B

Incremental Architectural Discontinuous

Non-Incremental

ExistingMarket

New Customers /

Defined Market

EmergingMarket

USA Today: Direct A, BUSA Today: USAT.com B Software Co: Knowledge ManagementSoftware Co: Advanced CollaborationPolaroid: Helios A, BPolaroid: Digital Camera A, B

IBM Network Tech: ASICHP Scanners: Flatbed ScannersCiba Vision: Conventional LensPolaroid: Analog CameraSoftware Co: Integrated Collab.IBM Middleware: Cobol / CicsUtilityCo: Power PlantsTurner Tech: ASICFirestone: Bias Ply Tires BF Goodrich: Bias Ply Tires Regional News: NewspaperUSA Today: NewspaperMed. Product: Medical Devices

[ Med. Imaging: B&W Ultrasound ][ Goodyear: Bias Ply Tires ]

NOTE: Ambidextrous Designs are in Bold

Product Substitutions are in [ ]

Target Market

Technological Change

HP Scanners: Handheld Scanner BUSA Today: USAT.com BUSA Today: Direct BRegional News: City Search.comRegional News: News.com ATurner Technology: Micro Display ATurner Technology: Imaging BIBM Middleware: WebsphereUtilityCo: Power PlantsIBM Network Tech: Network Chip BIBM Network Tech: Transport Chip BCIBA Vision: Extended WearCIBA Vision: Daily DisposableCIBA Vision: Visudyne A Polaroid: Helios B

Structural Differentiation

LOW

HIGH

Senior Team

Integration

LOW HIGH

Cross-Functional Teams

HP Scanners: Handheld Scanner ARegional News: News.com BTurner Technology: Micro Display ATurner Technology: Imaging AFirestone: Radial TiresBF Goodrich: Radial TiresSoftware Co: E-LearningSoftware Co: Knowledge ManagementSoftware Co: Advanced Collaboration

USA Today: USAT.com APolaroid: Digital Cameras BUSA Today: Direct A HP Scanners: Handheld Scanner C

Medical Imaging: Color UltrasoundGoodyear: Radial TiresIBM Network Tech: Network Chip AIBM Network Tech: Transport Chip A Medical Products: Integrated Health

Care SystemPolaroid: Helios APolaroid: Digital Cameras A

N=9Innovation Performance = 2.27

Unsupported Teams

Functional Design Ambidextrous Design

N=7Innovation Performance = 3.12

N=4Innovation Performance = 2.52

N=15Innovation Performance = 4.27

Design Choices and Innovation OutcomesRESULTS

Ambidextrous designs more effective than other designs:

• Main Effect of Senior Team Integration (F = 14.11, p < .01)

• Main Effect of Differentiation (F = 18.67; p < .01)

• No interaction Effect

Other forms not employed:• No skunkworks, VC

firms, spin outs

RESULTS

Ambidextrous designs more effective than other designs:

• Main Effect of Senior Team Integration (F = 14.11, p < .01)

• Main Effect of Differentiation (F = 18.67; p < .01)

• No interaction Effect

Other forms not employed:• No skunkworks, VC

firms, spin outs

Structural Differentiation

LOW

HIGH

SeniorTeam

Integration

LOW HIGH

Cross-Functional Teams

USA Today: USAT.com APolaroid: Digital Cameras BUSA Today: Direct A HP Scanners: Handheld Scanner C

Unsupported Teams

Functional Design AMBIDEXTROUS Design

HP Scanners: Handheld Scanner ARegional News: News.com BTurner Technology: Micro Display ATurner Technology: Imaging AFirestone: Radial TiresBF Goodrich: Radial TiresSoftware Co: E-LearningSoftware Co: Knowledge ManagementSoftware Co: Advanced Collaboration

Medical Imaging: Color UltrasoundGoodyear: Radial TiresIBM Network Tech: Network Chip AIBM Network Tech: Transport Chip A Medical Products: Integrated Health Care

SystemPolaroid: Helios APolaroid: Digital Cameras A

HP Scanners: Handheld Scanner BUSA Today: USAT.com BUSA Today: Direct BRegional News: City Search.comRegional News: News.com ATurner Technology: Micro Display ATurner Technology: Imaging BIBM Middleware: WebsphereUtilityCo: Power PlantsIBM Network Tech: Network Chip BIBM Network Tech: Transport Chip BCIBA Vision: Extended WearCIBA Vision: Daily DisposableCIBA Vision: Visudyne APolaroid: Helios B

Designs Shift Over Time

RESULTS

Net migration of designs over time to ambidextrous designs

• 6 move to ambidextrous form

• 3 move out of ambidextrous form

Net performance improvement for designs migrating to ambidextrous form:

(t =5.67, p<.03)*

IBM Network Technology.

* Note: Small sample size

RESULTS

Net migration of designs over time to ambidextrous designs

• 6 move to ambidextrous form

• 3 move out of ambidextrous form

Net performance improvement for designs migrating to ambidextrous form:

(t =5.67, p<.03)*

IBM Network Technology.

* Note: Small sample size SPIN OUT

Novartis Pharma Div: Visudyne B

β1Std. Err. t p<

Unsupported Teams -1.14 0.40 -2.86 0.01

Cross-Functional Teams -1.83 0.39 -4.62 0.01

Functional Design -0.29 0.43 -0.66 ns

Intercept 2.43 0.40 6.14 0.01

R 2 = .87

F(15,17) = 7.83 (p< .01)

Organization Designs and Innovation Outcomes (with firm dummies) (N = 33).

Table 6

1 β's describe the effects of alternative design choices compared to Ambidextrous Designs.

Organization Designs Over Time:HP Greeley, HP MicroelectronicsToronto StarIBM Network Technology

Meta Manager (eg Kelly at IBM Microelectronics, Bradley at Ciba Vision)

Boundary Conditions:Product Substitution (Goodyear, HP Medical)

Spin Outs: HP Handheld Scanner C Ciba Vision, Vysodyne (B)

Table 7: Existing Product Performance by Organization Form

• HP Scanner:Handheld Scanner (B)

• Turner Technologies : Micro Display (B), Imaging (B)

• CIBA Vision: Extended Wear,Daily Disposable, & Visudyne (A)

• IBM Middleware: Web Based Middleware

• IBM Network Tech: Network Chip (B), Transport Chip (B)

• HP Scanner: Handheld Scanner (C)

Am

bid

extr

ous

Des

ign

Non

-Am

bid

extr

ous

Des

ign

Fisher’s Exact Test, p = .05

• Regional News: News.com (A), City Search.com

• USA Today: USAT.com (B), Direct (B)

• UtilityCo: On-Site Power Plants

• HP Scanner:Handheld Scanner (A)

• Regional News: News.com (B)

• Medical Products: Integrated Health Care System

• Polaroid: Helios (A), Digital Cameras (A)

Declining• Polaroid: Helios (B)

• Turner Technologies : Micro Display (A), Imaging (A)

• USA Today: USAT.com (A), Direct (A)

• IBM Network Tech: Transport Chip (A), Network Chip (A)

• Software Co: Adv. Collab., Knowledge Mgmt., E-Learning

• Firestone: Radial Tires

• BF Goodrich: Radial Tires

• Polaroid: Digital Cameras (B)

7

1

Improving or Steady

13 8 21

12

9

Total5

8

• Multiple Inconsistent Alignments– Structure – Culture – Process– Competencies – Physical Location

• Tactical Integration (eg USAT editorial meetings) • Strategic Integration

– Integration at General Manager level– Ambidextrous Senior Teams and common fate– Consequences of strategic integration being too high or too low.

GM Too High Too LowCiba Vision/Disp HP/Handheld(C) HP/Handheld(A)USAT.com USAT/Live(A) Ancona/PolaroidHP/Handheld (B) Software Co./e

LearnToronto Star (A) Regional News (B)

Ambidextrous Organizations

Executive Teams, Innovation Streams

and Strategic Reorientations

Executive Team– Challenging, emotionally engaging (yet equivocal) vision– Stretch objectives– Continuity in CEO, heterogeneous, young senior team– Create variation, selection, project book, even with continuous

improvement– Autonomous teams report to general manager– Proactive reorientations

Ciba Vision:

Markets

Technology

Vysodyne

Daily DisposiblesExtended wearDiscontinuous Process Innovation (10¢ vs. 40¢)

Fashion lens

Conventional Lens

Size, shape, packaging

Organizational Evolution

• Through incremental change in exploitative unit coupled with proactive discontinuous change in exploratory unit (eg. Ciba Vision, IBM Middleware, USAToday)

• Or, periods of convergence with increasing congruence

punctuated by re-orientations, often requiring

new top management teams (eg. HP Handheld Scanners, IBM Network Technology, Goodyear)

How do organizations evolve?

Patterns in Organizational Evolution

Magnitude ofChange

Incremental Change

Discontinuous Change

Time

• Organization Evolution: Incremental and punctuated change or Periods of incremental change punctuated by discontinuous change

• Executive team succession often associated with discontinuous organizational change.

In Sum:

Innovation Streams Exist: Business Units Explore and Exploit Simultaneously

Ambidextrous Designs:Stable Organizational FormCan Be Learned Over TimeSet of Interrelated Dimensions—High Differentiation

Tactical Structural Integration Senior Team Integration

Role of General Manager Meta Manager

Ambidextrous Designs Permit Exploitation and Exploration:More Effective Than Other Designs and seems to facilitate

performance of existing product

Dynamic Capabilities not through:semi structurestight/loose couplingchoreographed transitionsspin outs, ICV, skunk works

Dynamic Capabilities through embracing contradictions through:High Differentiation-contradictory architecturesTargeted IntegrationSenior Team Integration: roles, processes, incentives, visionGeneral ManagerMeta Manager

On Organizational Evolution:Targeted incremental and punctuated changeOr, Organization-wide punctuated change

Boundary conditions:

Product SubstitutionProcess innovation?Service innovation (IGS/Canada)?

Senior Team Characteristics, Processes and Behaviors

Corporate Ambidexterity (EBO’s)

Next Steps

Markets

EXISTING

Innovation

Technology

InnovationSenior TeamSenior Team