Innovation for Transformation – Challenges of Ambidexterity in the Automotive Industry
In combination with current mobility trends, such as electrification, interconnectedness and automation, the digital transformation is substantially changing the map of the global automotive industry. Against the background of this unprecedented uncertainty, the successful transformation from automobile manufacturer to mobility provider requires in particular the simultaneous mastery and coordination of the most diverse fields of innovation. While innovations in the core business “automotive engineering” ensure current survival, innovations in the future business “mobility”, especially autonomous driving and smart mobility, guarantee the future competitiveness of established manufacturers. An ongoing study in cooperation with the Volkswagen AG is investigating how the challenges and tensions of ambidexterity can be solved from a leadership and innovation perspective. By Laurenz Schneider
Ambidexterity as a leadership task
The transformation dynamics in the automotive market are having a decisive impact on the industry at the peak of its success. In 2018 alone, the German automotive industry generated sales of over 426 billion euros. However, the economic scope of action is reduced by declining profitability in the core business, in particular due to decreasing sales forecasts and expected fines for CO2 emissions. In addition, new competitors such as Lyft, Uber and Alibaba are already ahead of German manufacturers in the innovation business Smart Mobility. The increased pressure for change resulting from these developments must therefore be channelledquickly and economically. Thus the economic balancing act of ambidexterity represents the supreme entrepreneurial discipline for established companies of our time. On the one hand, management must link the core business with the innovation business through integrative measures in order to enable holistic innovations. On the other hand, management must inspire stakeholders and employees at all levels of the hierarchy to embrace change and create an overarching commitment that guarantees commitment and identification. But how exactly can leaders promote a new culture and identity that encompasses all areas of innovation and future scenarios?
Resolution of the innovation dilemma
For some time now, researchers have been investigating the phenomenon of ambidexterity from a variety of perspectives. Empirical research results show that in the context of technological uncertainty, organizational ambidexterity has a positive effect on corporate performance. So far, the phenomenon has been examined primarily from a structural, organizational and financial perspective, but the dilemma of ambidexterity is much more profound: it encompasses not only “separate structural units (…), but also different competencies, systems, incentives, processes and cultures” (O’Reilly & Tushman, 2008). The constructive resolution of this complex dilemma represents the core problem of organizational ambidexterity. Here it is important to understand how the respective innovation cultures differ, what tensions arise from this and how leadership can contribute to coordinating and jointly aligning the different areas of innovation.
Current research in the automotive industry
As part of the current research project, we are investigating how the challenges of ambidexterity described above can be successfully overcome. Thus, the project moves at the interface between leadership, change and innovation research. The context of the automotive industry offers the optimal environment to identify and understand the success factors for coping with ambidexterity due to the current framework conditions and the associated pressure to change. The long-term project is divided into two phases: In the first step, the challenges and areas of tension of ambidexterity are identified on the basis of concrete case studies in different innovation departments. In the second step, a holistic, multi-level leadership model is then developed, which provides concrete instructions for successful transformation. Thus, the aim of the study is to contribute to a better understanding of the success factors of ambidexterity and to provide users with practical guidelines for the successful transformation of established companies in innovation-driven markets.
Our recommendations for action
First analyses and research results show that the success of organizational ambidexterity strongly depends on the ability of leadership to inspire people in an organization for transformation through consistent transparency and continuous involvement. In particular, two principles can be identified here as orientation aids:
1. From silo thinking to transparency
In many established organizations, the innovation business is a black box. Consequently, this lack of knowledge comes along with fear of the future, cynicism and a lack of understanding for top management decisions. However, consistent transparency is a prerequisite for exploiting the company’s own potential. Here, the focus should be on continuously offering targeted, cross-departmental opportunities for involvement in order to take away fears of contact and promote holistic innovations. Ultimately, this transparency must also be reflected in an overarching vision that legitimizes the necessity of partly conflicting areas of innovation and emotionalizes employees and stakeholders for a common vision of the future.
2. From management to leadership
Organizational ambidexterity can only be successfully mastered if managers are able to deal with the tensions arising from the organizational multiple orientation. It is crucial that top management and key positions in innovation areas are staffed with leaders who prioritize the overall vision and recognize the relevance of the psychological level of transformation. In addition, it is crucial in this context that leadership is understood as a common, cross-hierarchical and cross-silo task.