How does an enterprise innovate and find radical change, while simultaneously managing its existing world and existing products?
CEOs are constantly challenged with this contradiction: how to maintain efficiency across an organization, while simultaneously supporting strategies that can drive game-changing innovation.
“It’s the idea of changing your car's tire while driving down the highway at 60 miles an hour,” says Dr. Wendy Smith, an associate professor of management at the University of Delaware’s Alfred Lerner College of Business and Economics. Smith’s research focuses on this subject: strategic paradoxes, or how an organization can maintain optimization and at the same time do new things and innovate in radical ways.
How can CEOs embrace the paradox between the old and the new to build an organization’s innovation capabilities, and to support innovation leaders across the enterprise?
The answer lies in what Smith calls leading paradoxically, and idea presented in the HBR article titled, “The Ambidextrous CEO.”
The Ambidextrous CEO
Smith’s research has shown that CEOs who are able to embrace contradictory strategies (and tactics) simultaneously are the leaders who are best able to build and maintain a thriving culture of innovation.
In part, that’s because the old and new have to come together, and have to be recognized for any sound strategy to exist. “They both have to happen…and yet the experience of the paradox is that you're living in this kind of tug of war, this sort of oppositional experience, where these two things are constantly pulling apart [within an organization],” she explains.
Based on her research, Smith says that when managing this state of paradox, CEOs that are most successful, and that best support innovation, are those who are able to both differentiate and integrate.
Differentiating means knowing how to pull things apart, and how to acknowledge and value the unique pieces. Integrating refers to knowing how to be able to find synergies and linkages between the individual components. To differentiate and integrate strategic agendas, CEOs must ensure that a broad brand or company identify is built, and widely understood by their innovation leaders and teams.
This “overarching identity” serves as the crucial framework that allows for multiple, contradictory strategic agendas to co-exist.
CEOs must answer: “What is the big picture that brings together the need for both the innovation and the existing product?” Innovation leaders must also define how an organization's goals are focused on the old world, and how they are focused on the new world.
An example of a company that got caught in the old world is Polaroid. Seeing its identity in a way that was too narrow—being an instant film producer—held Polaroid back from identifying itself as a company that could both manage instant film and manage digital film or digital imaging.
“An overarching identity asks: how do we think about both of these together?” adds Smith. When CEOs help craft and communicate an identity that can bring together old equity and a new or future path, it means that individuals across the enterprise can also see the links and the synergies.
It’s often a two-step process to get to that place of understanding. “The first thing is to recognize or notice our identities by who we are, how we understand who we are, and the culture of our organization.” It also takes time to recognize the structures of an organization so that an organization’s processes or culture are not caught up in the old world. The new overarching identity does not change or diminish the resources, skills, knowledge or competencies that have been built. Rather, it looks to better harness the inertia of the company.
The tendency is for CEOs to have an “either-or” mindset where they ask themselves, “Am I going to focus on the old world, or am I going to focus on the new world?”
The shift is realizing it is not an “either-or” question at all.
Embrace Both the Old and the New
“How can I do both? How can I hold the old world and value all of the competencies, resources, skills that I have gained from that, and how can I radically shift to a new world?” says Smith, describing the question that ambidextrous CEOs are able to ask over and over.
A study titled “Organizational Change and Managerial Sensemaking: Working through Paradox” observed how LEGO was managing change and innovation throughout the company (1). The study examined how middle managers were feeling much anxiety about moving away from the old world, while trying to grasp and manage what was new. LEGO managers were adopting an “either-or” type of mindset. They would ask: “Do I treat employees this way, or that way?”
With a shift in overarching identity, they were able to see that they did not have to have a trade-off at all. The innovation leaders were given permission to have a different mindset, one that asked: “What does the ‘and’ look like in this scenario?”
The “and” (rather than “either-or”) mindset, and the resulting shift in perspective, meant the managers were better equipped to approach and look at solutions. “Just that prompt would shift their thinking, and their sensemaking about who they were and what they were doing—their way of understanding themselves,” adds Smith. This evolution in thinking and problem-solving is kickstarted when CEOs define and articulate an organization’s overarching identity.
While many companies have the opposite problem, LEGO at the time was overly committed to many different principles of innovation. They were so committed to being adaptive and novel that they had issues with execution. “It's a reinforcement of how we often talk about the need for radical, adaptive, flexible and new ideas, creativity, and innovation because we're so stuck—we get cognitively stuck. We get sort of stuck in our old ways, and so we want to push ourselves out of these cognitive commitments we have to the past,” says Smith.
Smith argues that you also can’t be so radical that you lack disciplined execution. “You need both, and that's where this notion of paradox comes in.”
When proficiency in leading ambidextrously trickles down to innovation leaders, teams can explore new ideas and exploit the old certainties, at the same time. To do this, individuals and teams need the resources to incubate and protect ideas and innovations. Senior leaders must provide the ability for teams to focus on their unique, radical and creative ideas, without being weighed down by others across the organization.
The key in managing paradoxes successfully is emphasizing the culture with individuals and teams.
“That’s where the senior leaders come in to have to them adjudicate tensions, or adjudicate decisions about resource allocation and organizational design and all the rest, at the top of the organization,” says Smith. Smith asserts that it’s important for teams to have a dedicated place for those ideas to grow once they have been given the green light, and often times, that resource allocation is up to innovation leaders to insist upon. In the process, CEOs leading ambidextrously ensure that innovation is not stifled by short-term decision-making. This takes a high degree of communication and a comfort with holding onto a certain degree of tension.
Companies such as W. L. Gore & Associates focus on training their leaders a short-term and long-term way of thinking, says Smith. They also have cultural reinforcements that encourage this disciplined and exploratory mindset. For example, individuals throughout the organization are equipped with a shared language consistent with managing the ever-present paradoxes. “The culture says, yes, you've got to do both to be able to [innovate],” adds Smith.
When CEOs turn to their CINOs as a part of their key leadership circle, the CINOs are not asked to choose between competing demands, nor are they being asked to resolve them.
“What you are trying to do is find ways in which they can both succeed,” adds Smith. This takes proactive communication, reinforcement, and even incentive structures to implement.
It might sound counterintuitive, but being able to be constantly shift between core business initiatives and a mindset of discovery and innovation, is what’s required of CEOs to support CINOs, and to find continued growth across business units. “You're not consistently focusing on the innovation, and you're not consistently focusing on the existing product, either. We call it being consistently inconsistent.”
About Wendy K. Smith
Wendy Smith earned her Ph.D. in Organizational Behavior at Harvard Business School, and is an Associate Professor of Organizational Behavior at the Alfred Lerner School of Business at the University of Delaware. Smith’s research focuses on strategic paradoxes – how leaders and senior teams effective respond to contradictory agendas. She has studied how organizations and their leaders simultaneously explore new possibilities while exploiting existing competencies, and how social enterprises simultaneously attend to social missions and financial goals. Her research has been published in journals such as Academy of Management Journal, Academy of Management Review, Harvard Business Review, Organization Science, and Management Science. Smith is currently writing a book on this topic that will be published by Rotman - University of Toronto Press.
1) Luscher, L., & Lewis, M. W. 2008. Organizational change and managerial sensemaking: Working through paradox. Academy of Management Journal, 51(2): 221-240.
2) Tushman, M., Smith, W., & Binns, A. (2011, June 1). The Ambidextrous CEO. Harvard Business Review.
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