Ambidextrous R&D: Balancing innovation and growth with efficiency and reliability

Organizational ambidexterity is much like riding a bike – it requires constant scanning and then continual adjustments in control and balance to keep going (McCarthy & Gordon, 2011: 255)

R&D organizations by definition need to be innovative, generating new knowledge and competencies. However, they also face demands to adapt, combine and use existing knowledge in productive, timely and reliable ways. These  different demands require R&D organizations to juggle or balance two contradictory organizational behaviours and modes of learning known as ‘exploration’ and ‘exploitation’ (March, 1991).

Exploration and exploitation have fundamentally different qualities. Exploration involves activities such as search, risk taking, experimentation, play, discovery, creativity and innovation. Exploitation is characterized  shorter-term time horizons and focuses on refinement, efficiency, reliability and implementation. With such differences, the ability to develop and maintain an appropriate balance between exploration and exploitation in the same R&D organizational unit is challenging and requires a capability known as “contextual ambidexterity” (Gibson and Birkinshaw, 2004).

In a paper with Brian Gordon, we argue that an R&D organization’s ability to adjust and maintain an appropriate balance of exploration and exploitation is limited because of the management controls that dominate these organizations. Typically, approaches to R&D control focus on the design and impact of performance measurement systems, which direct employees towards exploitation at the expense of exploration. Thus, it is hard work to maintain R&D ambidexterity with management control systems that motivate and reward employees to largely focus on exploitation.

In response, and drawing upon the work of Robert Simons (1994), we present a framework for understanding how different types of management control system, guided by different R&D strategic goals, can be used to induce and balance both exploitation and exploration. See Table 1.

Table 1: Using strategy driven control to attain R&D contextual ambidexterity

The central column of Table 1 lists four types of management control system: beliefs, interactive, boundary, and diagnostic. These are the different types of control systems that managers can use to direct and adjust different R&D behaviours and outcomes. Robert Simons called them the ‘four levers of control’ and explained how they represent the different policies, procedures and technologies that influence the cultural norms, behaviours and outcomes of individuals and groups.

As management control systems are used by managers to help ensure that individuals and teams work in a way that is consistent with the organization’s goals, the nature of each type of control system and the extent to which an organization uses each type of control, depends on the goals of the R&D organization. In the left column of Table 1 we list four different R&D goals – growth, innovation, reliability and efficiency, each of which is individually oriented toward each of the four types of control system. This is indicated by their horizontal placement to each other in Table 1: growth-beliefs, innovation-interactive, reliability-boundary and efficiency-diagnostic.

The right-hand column of Table 1 indicates how the four management control systems combine to produce the behaviours and control orientations necessary for contextual ambidexterity. We suggest that beliefs systems and interactive systems jointly produce exploration and a feed-forward control orientation, while the exploitation aspect of R&D contextual ambidexterity is linked to the joint use and effects of diagnostic and boundary systems. The two control orientations – feedback and feed-forward – refer to the extent to which individuals and teams conceive and undertake control in an ex post (after-the-event) or ex ante (before-the-event) manner.

For a more detailed description of this framework along with illustrative examples of each type of R&D  goal, management control system, and resulting exploitation-exploration behaviours, read the full paper.

Being Ambidextrous

Our framework points to some important takeaways for managers who are seeking a more effective balance between exploitation and exploration.

• First, measuring R&D performance is important; but it is only one aspect of R&D management control. Thus, it is important to reflect on the different control systems at your disposal, and move beyond the obvious diagnostic-based measures and rewards.
• Second, the extent to which you use different types of management control system will depend on your R&D strategic goals. The control of people, and their activities and outcomes should be led by a strategy.
• Third, an organization’s effective exploitation-exploration balance is likely to change over time. This is because an optimum mix of exploitation-exploration at one point in time is likely to become unsuitable as industry and organizational conditions change. Thus, organizational ambidexterity is much like riding a bike – it requires constant scanning and then continual adjustments in control and balance to keep going (McCarthy & Gordon, 2011: 255).

References

Gibson, C.B. and Birkinshaw, J. (2004) The antecedents, consequences, and mediating role of organizational ambidexterity. Academy of Management Journal, 47, 2, 209–226.

March, J.G. (1991) Exploration and exploitation in organizational learning. Organization Science, 2, 1, 71–87.

McCarthy, I.P., & Gordon, B.R. 2011. Achieving Contextual Ambidexterity in R&D Organizations: A Management Control System Approach. R&D Management, 41(3), 240-258

Simons, R. (1994) How new top managers use control systems as levers of strategic renewal. Strategic Management Journal, 15, 169–189.

Ian McCarthy

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