What are antecedents and prerequisites for managing ambidextrous innovation (combining exploration and exploitation)?
KNOWLEDGE @ BI: Ambidextrous Innovation
We have used the case of Olympic Shipping to answer this ambitious research question.
Olympic Shipping is located in Fosnavåg (population 4000). The town is housing eight offshore shipping and four fishing companies that own more than 100 offshore vessels and 20 fishing vessels. Our case has 55 people engaged at their headquarters and 950 globally.
The company was founded in 1996 with 2 vessels. Today it has grown to 23 supply vessels with operations in the North Sea, the Gulf of Mexico and Brazil. In the period 2005-2014 the company grew from seven to twenty-three vessels. The intention is to increase to 40 vessels before 2020 operating in all five continents with the mission “smarter, greener and safer”.
Fosnavåg is part of the maritime cluster at Sunnmøre including 218 companies (23000 employees) of which 14 where ship yards, 172 equipment suppliers, 16 consultancies and 18 shipping companies.
In 2013 these firms together reported sales for approximately 52 billion NOK. Over 75% of the world’s large, hi-tech offshore vessels are designed by design-companies in this area and approximately 40% of the world’s most technologically advanced offshore fleet is controlled by ship-owners in this region.
Olympic specify and order new builds from local shipyards and they contract these vessels to customers in the offshore oil and gas business as drilling and oil companies. Usually it takes two years from they start detailing a new vessel until it is delivered from the shipyard, and the average contract period with customers are four years. Each build is a unique constellation of technical equipment as cranes, helideck, engine design, greener technology, new electronics devices mainly designed and produced locally.
Each customer contract represents a unique bundle of activities to be performed. Accordingly the projects embody stepwise developments, both in technological innovations and in customer requirements.
Researchers point of view
From a researchers point of view these properties make it easer to spot and pin point changes, progress and development and their related managerial decisions, actors and considerations; compared to cases where companies’ mass-produce products continuously applying long-linked technology.
The project-based context is the common value-creating logic. Our case typifies a setting that seems to be more and more common in business. The analysis brought up issues that have been lacking in the stream of research.
First, the competencies of the two founders and how their match their responsibilities in the firm. This is an interesting issue to investigate further. Many of today's successful firms have been started by two entrepreneurs, examples are Apple, Microsoft, Google, and Yahoo.
Exploration and exploitation
The interesting question here is: How do the founders divide organizational responsibilities according to concern for exploration and exploitation processes?
1. The dialectic relationship between the founders dividing a strategic/leadership mindset and a commercial/contractual mindset has been essential. This creates an uniqueness of risk taking betting own money into the balance between innovation and strategy/leadership. This gives an EBITA increase of 67% in 2013 and 57% in 2014.
2. Second, the CEOs interest for technology and a company mission directed right at the tensions between the present and the future specifying three distinct issues that shall be improved. Issues that can be addressed bout in processes that aims at improving existing operating practice (exploitation) and in improving future ships (exploration) so operating practice can be even better.
3. Third, the concentration of legitimate decision power at the top, combined with the CEOs deep interest in exploration and technology. We found no management teams that decided on the resource allocation between exploitation and exploration activities, they had a voice, but the decision power is in the hands of one person. Investigating this issue further would imply to examine technical and issue oriented discussions concerning trade offs, and the decision making practice when it comes to balancing tensions between exploitation and exploration process.
This article is published in BI Leadership Magazine 2014/2015 (Link to E-Magazine).
BI Leadership Magazine is a Science Communication Magazine published by the Department of Leadership and Organizational Behaviour at the BI Norwegian Business School. Photo: Olympic Shipping.