Companies are striving to turn into “ambidextrous organizations” to become future-proof.

Yet still very few know how to make it work- sustaining the core business and building new business concurrently.

At our recent Innov8rs Unconference, we discussed these topics with Ralph-Cristian Ohr (Founder and Managing Partner at Dual Innovation), who introduced 'Dual Innovation', a forward-looking approach to how ambidexterity can effectively and sustainably be implemented in organizations. Building upon this, Eva Mitterreiter (Head of New Business Building & Innovation, Consulting at Bosch Engineering) then shared how Dual Innovation principles have been put into practice at Bosch. Here's a summary of their session.

What Does It Take To Make Ambidexterity Work In Organizations?

“Ambidexterity” is the strategic and organizational capability to pursue and optimize the existing business model (exploitative or incremental innovation) and search for new opportunities and business ideas (explorative or radical innovation) simultaneously.

"Ambidexterity was nice to have in the 20th century, but it has become essential in the 21st century” – Steve Blank, entrepreneur, educator, author, and speaker.

Building an ambidextrous organization is challenging because exploration and exploitation are usually incompatible and can’t be (easily) pursued in the same environment. To accomplish both simultaneously – to be an ambidextrous company – requires not only separate organizations for each function but also diverse operating models, competencies, systems, processes, incentives, and cultures. It requires a different way to manage a company and another way to organize it.

In short, making ambidexterity work can be boiled down to three questions: Why – What – How?

1. “Why” Do You Need To Become An Ambidextrous Organization?

Finding your “whys” equals creating awareness and legitimacy to implement ambidexterity in the broader organization. Without clear reasons, you’ll have a hard time getting your organization to accept ambidexterity first and exploration consequently.

And it's a leadership task to legitimate explorative innovation and set the stage for its further implementation throughout the organization. Leaders must define an overarching, compelling vision and values for this "dual challenge". In addition, top management is also responsible for creating a shared identity: all employees, both those operating in the explore field and those working in the exploit field, have to feel like one team.

2. “What” Is The Future-Proofing Aspiration To Explore?

What does exploration mean to you? What do you want to achieve? How far do you want to move from the core (what’s your risk propensity)? How does exploration buy into the future of our core business?

Explorative innovation goes beyond existing markets and capabilities and requires an entirely different strategy. Nevertheless, the “new business strategy” must be aligned to the existing strategy: exploration just makes sense if it buys into the future of the current core business. Otherwise, you operate in a silo and you'll have difficulty getting it adopted throughout the organization.

The new strategy should then highlight strategic search fields or hunting zones. These real guardrails identify which areas companies can explore in alignment with their strategy.

3. “How” To Organize Ambidexterity?

Implementing ambidexterity is an organizational issue that comes down to balancing new business separation from – and integration with – the established core business effectively. On the one hand, you want to protect the new business autonomy. On the other hand, to be fully successful, you must leverage existing assets and integrate the new business with the pre-existing management system (and with its rules and processes).

Yet finding this balance is challenging. The “Dual Innovation” approach can come in handy in such a context. Dual Innovation builds on ambidexterity and adds a layer – Reshape the Core – to Explore and Exploit. The aim is to bring the capabilities of both areas together and create a neutral interface where their characteristics can be combined. As a result, Dual Innovation requires mastering three (rather than two) Playing Fields:

  • Optimize the Core (Exploit): driving incremental innovation within existing business units, markets, and capabilities.
  • Create the New (Explore): exploring non-incremental innovation and new business building. The focus here is separation from the existing business to provide and ensure autonomy and protection to fledgling ventures.
  • Reshape the Core (Exploit/Explore): integrating and connecting scaling-up ventures with the core business for strategically aligned reshaping. The goal is to generate innovation impact by designing and managing the interplay between the core and exploration.

Dual Innovation is about balancing “separation” and “integration”. It reconciles sustaining existing business and building new business. So, how do you implement Dual Innovation successfully?

Implementing Dual Innovation

To ensure new business autonomy and protection (separation) and connection with the core business (integration), you need to have some key measures in place:

Key separation measures:

  • It’s essential to have a dedicated explore environment – with ad-hoc metrics, processes, cultures, and governance mechanisms – for the exploration unit to have room to discover, validate, and eventually scale up new ideas.
  • The exploration unit also needs dedicated resources like full-time staffing with appropriate skills and mindsets, as well as earmarked funding.

Key integration measures:

  • Establishing a venture board that protects and guides the ventures along the way while managing the interplay with the core business with respect to shared objectives, priorities, and access to unfair advantage, has proved to be of immense success for many companies.
  • Deciding in advance how the scaling-up setting will look helps manage the scaling-up process: will it be integrated into existing business units? Will it be a stand-alone new business unit inside the core business? Will it be a spin-out (i.e., a stand-alone business unit outside the core business)?
  • By default, exploit and explore systems are incompatible: confronting inherent tensions and conflicts, rather than avoiding them, helps to bridge the gap between exploration and exploitation.

Dual Innovation: Lessons From Bosch

Founded in Stuttgart in 1886, Bosch today operates in over 60 countries and employs more than 35,000 people. Like many other big companies, Bosch has started its journey towards an ambidextrous organization. Eva Mitterreiter shared how they’ve applied Dual Innovation principles, the measures they’ve introduced, and some lessons learned.

1. “Why”: Ambidextrous Organizations Are Needed For Transformation

Why does Bosch need ambidexterity? Bosch is a big company whose products range from mobility solutions to heating systems, from power tools to appliances. Like many hardware-based companies, Bosch is undergoing massive transformations. And the first lesson Bosch leaders learned is that to sustain its future and face the market’s challenges the company needs to introduce new business models.

“It is of tremendous importance that the company capitalizes on its own strengths and products while continuously reinventing its business to prevent the attack of disruptors” – Volkmar Denner, former CEO at Bosch.

2. “What”: Explore And Exploit Describe Different Ways Of Innovating

Strategy and innovation are closely linked at Bosch. So, no matter if it’s exploitative or explorative innovation. It always has to be aligned with the overall strategy.

Yet, for sure, explore and exploit describe different ways of innovating, are based on different mindsets, processes, and KPIs, and need to be treated differently. At Bosch, incremental innovation usually happens within the traditional business units frame, whilst explorative innovation finds room within existing business units if it's closer to the core but still refers to new customers or changed customer needs and/or new value propositions. If it's further away from the core, it’s arranged in different incubation vehicles. We’ll dive more into those in a moment.

3. “How”: Bosch Innovation Framework (BIF) As Explore Framework

To transform a first idea into a successful product – or to stop it early – Bosch has implemented an end-to-end innovation process called the Bosch Innovation framework (BIF). This framework is based on the entire life cycle of an innovation and consists of eight iterative phases starting with the definition of the strategic framework and the identification of relevant customer problems. In the following phases, initial solutions and ideas are developed and validated.

After successfully validating the concept, the incubation phase begins. A reproducible sales process closes the gap between early adopters and the mass market. After completing the incubation phase, the series development of the new product starts.

BIF is used for exploring innovations. But not all the ideas that make it to the incubation phase show the same level of strategic fit to the core. Furthermore, Bosch constantly incrementally innovates its core. So, how does the company manage Dual Innovation and bridge exploration and exploitation? In other words, what does their “Reshape the Core” field look like? The interplay between the two takes the form of four incubation vehicles in which innovations converge according to their proximity level to the core:

  • Business Area: innovation very close to the core with technology and strategy fit to a specific business unit.
  • Project House: ideas promoted by top management that supposedly have great future potential for Bosch. These ideas are further away from business and require high investments, new talents, technology, and partnerships.
  • Grow Platform: radical, bottom-up innovations that don't fit into daily business or development areas. New competencies, own space, and processes are frequently required to incubate quickly
  • Spin-off: radical innovations that don’t fit into core activities because of branding, strategic, or financial reasons.

In Summary

Making ambidexterity it work– innovating and optimizing the core while searching for new opportunities– is essential for organizations to stay competitive but it’s not that easy.

By reconciling the need to sustain existing business and build new business in a unique way, “Dual Innovation” is a forward-looking approach that helps you implement ambidexterity effectively and sustainably in organizations. Resting on ambidexterity notions, Dual Innovation goes beyond and teaches companies how to "Reshape the core" and generate innovation impact by designing and managing the interplay between the core and explorative innovation.

Putting into practice Dual Innovation principles has given Bosch the needed capabilities to start the journey towards an ambidextrous organization.