Achieving Ambidextrous Innovation Leadership: Driving perform and transform innovation for step change business results

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Achieving Ambidextrous Innovation Leadership: Driving perform and transform innovation for step change business results
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Professor John Metselaar
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Setting the Stage – The Need and the Challenge for Ambidexterity in Innovation Leadership Today, and Tomorrow

Ambidexterity conveys the two-handed finesse to successfully take on a task with deft touch and wise judgement to deliver a smooth solution.

Such an approach captures the challenge innovation leaders face in today’s de-globalizing, VUCA-on-Steroids world. This new world will see companies aiming to balance profitability with purpose. Innovation leaders are likely to be pivotal in making this transition a reality.

Our study is based on interviews and discussions with heads of innovation at 20 major international companies enabling us to identify Ambidextrous Leadership (AL) is required to achieve the optimal balance between what we call “Perform & Transform” to drive step-changed business results.

The innovation chief needs to guide both: on the one hand, performing practices to ensure incremental productivity improvements, and on the other, transforming the business by focusing on creating, developing, and commercializing ideas into new revenues, tapping into, a plethora of new technologies in the digital and biological area in particular, rapidly changing customer expectations, and a society that can feel in revolution.

The old habit of single-handedly reverting to safe perform strategy wins needs to be dropped. Indeed, our work highlights the urgent need for innovation leaders to become truly ambidextrous, significantly dialing up the transform hand to generate new growth opportunities. Experience, and our interviews, have shown this is, for the vast majority of (innovation) leaders, an enormous challenge – performing (doing more of what you know how to do today and doing it better, and driving efficiency, essentially) and transforming (creating something totally new and different, often from scratch) require totally different attitudes, competencies, and skills.

Five Steps to Ambidextrous Innovation

Based on our extensive research and the interviews with innovation practitioners referred to earlier, we have identified five key steps required to implement an ambidextrous innovation approach. The five steps involve the following management actions:

  1. Realign Performance Metricsto transform not just perform innovation activities. Few firms have a balanced, tailored approach to metrics – yet. Perform often has established financial metrics; these tend to work against entrepreneurial Transform projects.
  2. Hitting the Innovation Sweet-Spotwithin the boundaries set by the innovation leader. First, the boundaries for the innovation focus must be set by the leader. Second, creating the best mix of management sponsorship, operational autonomy, and team priorities provides the optimal conditions for ambidextrous leadership to take root.
  3. Integrate to Identify Solutions.The innovation leader needs to break through organizational silos, integrating business unit priorities with innovation efforts early. Adding diversity of experience and thinking can ensure honed, consumer-relevant solutions.
  4. Think and Live Outside!The ambidextrous leader should refocus internal linear innovation processes towards more agile, strategic, selective external ecosystem management. As corporate boundaries blur external partnerships, expertise and insights are critical to powering integrated customer solutions. The innovation leader must adopt brave and courageous external relationships to enable this deep organisational shift.

Empowered Small, Focused Teams. The leader must play a vital role in shifting towards a “safe” learning culture. Creating a new norm across the innovation community which embraces (early) failure toward transformational innovation should be top of the leaders’ agenda. This shift in mindset can move the needle on embedding innovations across the world.

Figure 8.1. Five Steps to AIL

(The Conference Board (Europe), 2019)

Let us discuss each of these five pillars in some more detail.

What It Takes to Get to Ambidextrous Leadership

Realign Metrics

Human behaviour is frequently connected to the benefits on offer. In the world of innovation things are no different. In the past there has been a significant focus on improving performance. In turn innovation leaders were rewarded for improved process and products to fuel business grow. As we have noted above the world is now changed. Firms need to reimagine metrics. To create more balance between perform and transform.

As one innovation leader told us “Our performance innovation is good we know how not to boil the ocean but maybe this is because our incentives are aligned to perform and not transform”. Currently, few firms have a balanced tailored approach to metrics in innovation. In many organisations, financial reward metrics well established. Innovation chiefs point to this imbalance working against transform initiatives. In short, innovation teams have not been rewarded for breakthrough innovations driving a focus on performance.

This is now becoming well recognised issue to address. “To ramp up our efforts around transformational innovation we have adopted new non-financial metrics” one innovation leader told us. The aim is to reimagine metrics in two ways. First is to re balance perform and transform so that tailored incentives can at work across both these areas driving the right behaviours. Second, once this balance has been achieved, is to look at the types of incentives that are offered. Again, all research points to a shift away from pure financial metrics and rewards. What we see today is a much more nuanced picture, whereby employees looking for other non-financial benefits to augment their pay. For instance, what is the culture of the organisation; how does the purpose of the organisation translate into making a difference to the world; what new skills and experiences might I gain from working with this innovation organisation. As Unilever CEO puts it: “we can only high the brightest and best today by living our purpose.”[1]

Many of the innovation leaders we spoke with. Have prioritised the re-imagining a metrics as one of the fundamental building blocks required to allow their innovation teams to both perform and transform. Without this re balancing achieving these goals will be very challenging.

[1] Alan Jope, CEO, Unilever in conversation with Marc de Swaan Arons from Institute for Real Growth on Vimeo

Innovation Sweet Spot

Technology has changed many things in business. However, judgement continues to be a critical part of leadership. Understanding how best to manage up and down in the organisation is still a valuable skill required by senior leaders. Creating the best blend of trust and autonomy allows senior executives to tread a successful pathway for them and their team.

This is one of the most critical levers to be utilised in achieving ambidexterity in innovation. The Innovation Sweet Spot is where an innovation leader brings together three key elements of the innovation process: a supportive senior sponsor at board level; a degree of operational autonomy to act independently and finally, a mix of innovation capability (both perform and transform). Let’s take each in turn.

First, senior sponsorship. If a project is going to succeed, as many will have experienced in business, it requires an engaged board or Executive Committee member with a suitable budget. Ensuring an initiative is plugged into the wider strategic direction of the organisation is also an imperative. The relationship between the innovation leader and senior sponsor is pivotal. As a head of innovation commented “this is my most important relationship in the entire business and I ensure I devote the required time to making it work”. This invested time needs to yield two key benefits. A strong bond of trust between the sponsor and the innovation head.

If this trust is in place it leads to the second benefit being the innovation head gains a degree of operational autonomy which is critical to build an ambidextrous organisation. As we will see in Step 3 “Living outside”, to enable an organisation to deliver BOTH perform and transform innovations this will require outside-in inputs. Think, tech-start-ups, university labs or think tanks organisations.

Third, to find the sweet spot requires a mix of inputs from the innovation team. Often referred to as the R&D team – innovations teams need to span of capabilities from blue sky thinking and deep tech through to commercialisation. The innovation head needs to curate a blend and skills and functions across their innovation empire. A lack of diversity is likely to drive perform innovation behaviours. Let us make incremental improvements to our existing processes and products. So rather than a single group of predominantly scientists and engineers – a cadre of data scientists, marketeers and operational experts might be added to this innovation gene pool. Many innovation leaders have told us this need for a diversity of skills has caused them to change up to a third of their headcount over the last two years.

Finding the innovation sweet spot is best summed up by the innovation head at a major European business: “We need to create a paradox: have trust from senior business leaders but at the same time distance and autonomy.”

Thinking and Living Outside the Box

As we discussed in stage one – a key area of focus to achieve ambidextrous innovation leadership is creating a balance in incentives to drive transform innovation. Shifting the focus through incentives alone is unlikely to bring new innovations to market, however. What is required is to bring the outside world in. It is here the innovation heads must lead by example. To quote a head of innovation: “transformational innovation required joint ventures and partnerships, rather than traditional approaches.”

The radical transformation of the mobility market is an excellent case in point. In the car industry, Tesla has brought radical change shifting the whole industry from combustion engines to a focus electric vehicles. In turn this has caused VW, the German Headquartered behemoth, to invest over €35 billion over the next 10 years into electric vehicles – even inviting Elon Musk CEO of Tesla to test drive their ID3 model in an aircraft hangar near Berlin. But electric cars are not the only story in town, in terms of decarbonisation. Trucks for ferrying goods around only account for one-in-fifty vehicles on the roads, but for an estimated 22 percent of all emissions. Hydrogen powered trucks are one a possible solution. Daimler, another German based vehicle manufacturing giant, has been unable to sufficiently innovate alone in this area. Therefore, it has decided to join forces with arch-rival Volvo to develop hydrogen powered trucks. While in France, PSA has teamed up with Michelin to innovate around a hydrogen power commercial van (Financial Times, 2021). Each example illustrates how market scale innovation and commercialisation is now required through engaging outside the boundaries of the firm – even with your greatest rivals.

What this means in practice is a fundamental shift in the innovation process. Traditional R’n’D functions focused on a linear process of research and commercialisation stage gates to bring products to market. The failure rates in the early stages of this process were high, but also lacked external inputs until later in the process. So, if consumers didn’t particularly like a product, this was only established after significant amounts of investment and effort.

Consider a process which brings the outside world into the early part of the concept and product design. This enables the potential new products to have greater alignment with consumer needs and behaviours – designing in these factors to create a more marketable product or service.

Sounds simple. Well, of course, nothing is easy. What is required is for the innovation and team to engage with a range of organisations outside the traditional boundaries of the firm. Universities, think tanks, research firms, tech start-ups, consultancies, government agencies, not-for-profits and many others. In essence, live outside the firm.

To be fully immersed in this valuable thinking requires time, effort and above all, creates a degree of risk. But this blurring of the boundaries of the firm is necessary to inject the ideas and thinking which can create transformational innovations. Ideas and, even, IP will flow across the organisation’s boundaries. The judgement of the head of innovation is critical in creating the conditions for this to happen to maximise the benefits and limit the potential risks. The trust and relationship built with the senior sponsor is critical to facilitate this active and move the innovation process from linear to the management of an outside in strategic innovation ecosystem.

De-risk the Innovation Process

Deep in the HQ in the major European industrial company, the innovation chief has hatched a new plan. He has been challenged by the Executive Committee to drive more breakthrough innovations which can be commercialised. Achieving this goal using the existing methods, team and processes won’t cut it. Thinking laterally, he redesigns the entire innovation process, pipeline and the associated commercialisation processes. Digital technology is the key to this new way of working.

First, it involves creating a platform for innovation commercialisation. He established five separate platforms each focused on a specific part of the business. And, critically aligned to the needs and goals of the firm’s operating units and customers. Rather than using a linear staged gate approach, the platform takes ideas and iterates the IP to test various concepts.

Second, a key part of this process is the creation of digital twins. Rather than building life size and scale prototypes – engineers create digital twins and test these in the market. This shift vastly reduces the wasted time testing products all the way up to final launch before they fail.

De-risking the innovation process by a complete re-design is a bold move. But rather than living on marginal gains created by each new prototype, the innovation can play a value business partnering role with each of the stand-alone operating units. This allows the senior leaders of the business unit to co-create products, inputting their knowledge of customer requirements directly into the innovation process. As one head of innovation put it “our mission is to support the Business Unit CEO – developing options for transformational innovation”. These new approaches to innovation and co-creation with the business are an important criteria in building an ambidextrous innovation capability.

Placing People at the Heart of Ambidextrous Innovation Leadership

Senior executives know they must hone the skill of managing up and down at the same time. That situation has not changed. What has changed is the content of those conversations – both up and down the hierarchy. Let’s take each in turn.

Building trust amongst the senior leadership of the firm to deliver on a new, often bold, innovation strategy is a tall order. Clearly the CEO and others require differentiating innovations to create the products and services which will boost future revenues and drive up the share price. As we all know, the numbers matter.

The journey to get there is now more nuanced. One innovation chief captured the situation perfectly: “new innovations can alienate senior management; we need to be careful as it is a delicate situation”. Challenging the need for existing products and replacing these with new versions can create tension at the top table. The innovation leader is not only managing expectations, but also looking to gain the permission to fail (fast). “Failure (early) needs to become the accepted cultural norm for learning to happen, and (transformational) innovation to be identified!” is the cogent analysis of one innovation leader. The Executive Committee need to grant the permission not only to fail, but also to blur the boundaries of the firms to co-create with third parties. This is a delicate balance for the innovation leader to achieve.

Once, they have left the boardroom, the innovation leaders must head straight to a huddle with their team leaders. We have explored in this chapter how people are looking for permission to be trusted and to work with those outside the firm. This can be engaging and exciting work. Employees will only take these risks is they feel the head of innovation will be protective and supportive. So, the innovation leader must build the trust to allow innovation hub teams to work across global regions to pursue new thinking and products. But most of all – to hit dead ends and recognise the value in doing so. “To permit different and disrupt behaviour, is to make progress” is how one enlightened innovation chief put it. Humanising innovation might be another way of saying it.

All these stages are required to achieve the full business benefits. A key finding of our study is that AL is critical to ensuring a firm can re-orient its business model to compete in post-COVID marketplaces. We have identified three pillars which underpin our Ambidextrous Innovation model.

Pillars to Underpin Ambidextrous Leadership

Time is of the essence and innovation leaders need to move fast. Holding up the mirror to reflect on how they lead is imperative, as a critical first step. Our study identifies three supporting pillars which need to be in place to allow innovation chiefs to unleash the full potential of AL.

  1. Entrepreneurial Mindset. The first pillar to develop is bringing greater entrepreneurial spirit into the innovation team, AND the business. Innovation leaders are often renowned for their technical prowess. In these times that aptitude is not enough; the innovation leader needs to bring commerciality to their portfolio of skills. Often cited by contributors to this study was the pull from the business for a greater commerciality from the innovation team. Recall, the (or a) definition of Innovation is “Converting Knowledge and Inspiration into New Value” – without business value extracted from your R&D efforts, there is no (successful) innovation!
  1. Psychological Safety.A second pillar for innovation leaders to put in place is a culture characterised by psychological safety. This requires a shift towards what Harvard Professor Amy Edmondson calls, a ‘fearless organization’ providing psychological safety for all people in the team. This is an absolute pre-requisite for success. The innovation leader needs to create the conditions for growth with deft touch using both metrics and a fearless, safe learning culture. As Edmondson puts it: “leaders who are approachable and accessible…can do much to establish and enhance psychological safety in their innovation teams. Powerful tools, indeed.”

Resilient Teaming. Today’s business world is extremely volatile, and full of uncertainty. Recoding team behaviors to do the right thing in upholding ethics and policy can create greater resilience, beyond getting better results. It also requires better sensing of organizational dynamics. Functional silos need to be broken through and agile, multi-functional teams with the appropriate autonomy and empowerment need to become the norm. Steering a course which takes on board the views of people from across the business is essential. In sum, as New York-based thinker Steven Johnson has noted: “innovation does not just come from giving people incentives, it comes from creating the environments where their ideas can connect.”

Background to Our Study

Our study was based on interviews and discussions with 20 major international companies across many industries, including software; luxury; FMCG, mining, oil & gas; chemicals; construction; internet infrastructure; banking; pharma and healthcare, across 2019/20. These household names have brought countless new products to market which have shaped everyday modern life. Our contribution to new knowledge in the leadership space builds on the work of Edmondson, Christensen, Adner, and Mayer. May you be supported in your efforts to embrace and express ambidexterity in your leadership principles and behavior – to allow you Perform & Transform into the future.

Acknowledgment

Note of Thanks to Olivier Van Duren for his inspirational talk at the Conference Board Innovation Council in June 2019 at Dow, Zeeland, The Netherlands.

References

Accenture. (2019). Scale Digital Innovations Like a Champion.

Bloomberg.com. (2020). Stock prices. Bloomberg.com.

Bloomberg.com. (2021, Jan 8th). Market Prices.

Edelman. (2021, January). Global Trust Index.

Edmonson, A. (2018). The Fearless Organisation.

Financial Times. (2021, March 10). Car groups throw spanner in the works of EU's hydrogen drive. The Financial Times.

Gentle, C., & Metselaar, C. G. (2020, April). Achieving Ambidexrous Innovation. California Mangement Review, Insights.

Johnson, S. (2010). Where good ideas come from: A natural history of innovation.

Mochari, I. (2016). Why Half the S&P500 will be replaced in the Decade. Inc.

The Conference Board (Europe). (2019, October). Ambidextrous Innovation.

The Economist. (2020, Jan 16th). A new human coronavirus has appeared in China. The Economist, 71-72.

The Economist. (2021, Feb 21). Economic & Financial Indicators. The Economist, 80.

World Energy Council. (2020). Global COVID Pulse Survey . Insights.

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