Playing A Game of Risk
As evidence of this gap in innovation readiness, one only need to look at a recent study, entitled “Innovation Reignited,” which ranked innovation as the number one strategic priority, with 82% of C-suite leaders expecting new product/service development to become even more important over the next three years. Yet at the same time, 60% of survey respondents said their organizations are not effective at generating and executing innovation. The report was conducted by Market Logic, Ipsos, and Alchemy-RX.
To put it more succinctly, an article from BCG frames it this way: “The question CEOs must ask, therefore, is not whether they need to innovate—but how they can conquer the traditional tradeoffs they’ve come to accept as the price of innovation.”
The article, “How CEOs Can Conquer Traditional Innovation Tradeoffs,” points to how the marketplace is full of risk for innovation—with investments decreasing, growth rates trending down, and an atmosphere of volatility and uncertainty across the globe. At the same time, AI and digital tools are making it easier to innovate more efficiently—yet it is also making it easier for competitors to duplicate a new product or service.
Bridging Innovation Tradeoffs
BCG’s author of the article, Martin Reeves, argues that one solution to this innovation tradeoff dilemma is to focus on not only ambidexterity but co-ambidexterity. As innovators know, ambidexterity is a balanced formula that connects current and future performance. This often entails splitting the organization, one part exploiting the present business while the other part is exploring the future.
Reeves notes, “While such approaches valuably balance these competing imperatives, they don’t fundamentally break the assumed tradeoffs between current and future performance. But what if a company used AI and digital technologies to link their “exploit” and “explore” functions with their customers’ exploit and explore journeys?”
This co-ambidexterity between the company and the customer, as Reeves terms it, can potentially help conquer innovation tradeoffs. For one thing, it unlocks value by customizing offers or by creating new ones. It can also open the way to more open innovation and collaboration between the company’s processes and the customer’s feedback.
Additional Resources
Balancing Innovation with Ambidexterity
Innovators have long been tasked with being a flexible part of an ambidextrous team, as part of an organizational cog that can easily pivot and manage tasks on several levels. This ambidextrous approach entails focusing on the big picture for the company when needed, yet at the same time focused on the small, incremental steps that often define and are necessary for entrepreneurship and innovation.
The road to innovation can sometimes be straight and unencumbered. But more than likely, it can also be a long and winding route, with many obstacles along the way. There are also innovation traps to avoid if possible. One such trap is the competency trap, which can impact even the most ambidextrous organizations. The competency trap is said to be the false belief that the same practice that led to past success will necessarily lead to future success. An infamous example often cited is that of Kodak, which invented the digital camera back in the 1970’s but struggled and failed to capitalize on the digital opportunity.
Creating Co-Ambidexterity
BCG also adds four key points to create a more co-ambidextrous environment for innovation. With developments in AI, this is said to be faster, less costly and less risky:
- Treat every customer interaction as a source of innovation. Customers are not just serial transactors satisfying current needs. In nearly every sector, they are constantly searching—looking for new ways to solve problems, meet their evolving needs, or simply make life easier. For this reason, co-ambidexterity starts with treating all customer feedback, complaints, suggestions, and even subtle shifts in behavior as crucial signals that can drive innovation.
- Build systems that capture and analyze customer data in real time. AI enables companies to sift through vast quantities of customer data to spot patterns and hints of changing preferences and needs as they emerge. It can detect subtle shifts in how customers use a product, flag emerging needs that aren’t being met, and even predict new features and offerings that might appeal to customers.
- Increase the volume of experimentation and rate of learning. AI also enables businesses to run many small, rapid experiments to test new potential features or services. Innovation thereby becomes embedded in current business, not just the R&D function. CEOs must also create a culture where learning from small failures is seen as an opportunity to drive smarter, faster innovation.
- Breakdown innovation silos. It’s important to not just run experiments in secluded “innovation labs” remote from the marketplace. When learning flows freely across a company, promising ideas are spotted earlier, tested faster, and scaled based on emerging evidence.
Reeves advises, “There is no reason why CEOs should endure or accept traditional innovation tradeoffs when co-ambidexterity offers them a more fruitful path forward. It can replace slow-moving, haphazard, and costly innovation processes with information-enabled experiments and relationships that glean insights in real-time, at a lower cost, and with a higher chance of success. CEOs who embrace co-ambidexterity will carve a sustainable competitive advantage powered not by innovating at customers, but with them.”
Video: “Walls and Moats Won’t Save You. Innovation Will,” courtesy of Harvard Business Review.
