A management concept called ambidexterity offers lessons for Singapore firms in both making the most of existing businesses while finding new ways to grow
The continuing relevance of Singapore in a world of intense transition has been attracting debate in recent months.
It is a world moving from one that we have got familiar with and accustomed to, to one that is still emerging and, hence, ill-defined.
For Singapore firms caught in the midst of intense transition, a look at a management concept known as "ambidexterity" offers some pointers on how to survive.
Professors Charles O'Reilly of Stanford University and Michael Tushman of Harvard University conducted decades of research on how incumbent firms can remain relevant amid intense market transition. Last year, they published their findings in the book Lead And Disrupt: How To Solve The Innovator's Dilemma.
The authors identified ambidexterity as the answer.
Ambidexterity in the conventional sense means someone who can use their left and right hands equally well.
But in a management context, ambidexterity can be understood as the capability of firms to conduct "exploitation" and "exploration" simultaneously.
Exploitation is a firm's ability to exploit its existing competencies to maximise returns from its existing business in established markets.
Exploration, meanwhile, is a firm's ability to explore new business opportunities in emerging markets.
For example, given the current tight market conditions, traditional retailers need to exploit their competencies in running bricks-and-mortar shops to maintain healthy revenue flow by streamlining operations and improving productivity.
At the same time, to fend off growing competition from online shopping and ensure their continued relevance, traditional retailers will also need to explore innovative technologies and business models, such as online-to-offline commerce models.
The challenge in achieving ambidexterity lies in the contrasting tenets underlying exploitation and exploration.
Exploitation emphasises stability, efficiency, control and convergent thinking. Exploration emphasises agility, innovation, autonomy and divergent thinking.
Many firms are emphasising exploitation in the face of tougher market conditions. However, a single-minded pursuit of exploitation is insufficient to turn around a business as the economy undergoes intense transition. Exploration is needed to develop new products, services and business models for emerging markets. What is termed "organisational ambidexterity" is required to achieve corporate longevity.
Continuing with the retail industry example, in their pursuit of exploitation, many traditional retailers are operating with very lean staffing to keep their businesses out of the red. This leaves little capacity to build up capability for exploration.
Conversely, firms that overly focus on exploration will risk losing their hold on established markets, even as they adapt to capture emerging markets. Furthermore, without exploitation, firms will be unable to maximise returns from newly captured emerging markets.
An example is Sun Microsystems, a company famed in the computing world for its exploration efforts, contributing to the development of many technology innovations such as the Unix operating system, Java programming language and virtualised computing.
In the run-up to its demise in 2010, Sun Microsystems moved its established computer-server business, ahead of market demand, onto the still-emerging cloud computing model.
And, despite the many technological innovations resulting from its exploration, it failed to exploit and monetise these innovations.
As Singapore undergoes intense disruption to its established ways of operating, this concept of ambidexterity offers insights to maintaining its relevance.
HOW THE CONCEPT RELATES TO SINGAPORE
Singapore has achieved admirable economic development over the past 52 years. A key strategy behind this success is attracting multinational corporations (MNCs). This is the exploitation arm of its national ambidexterity.
In preparing for the disruption ahead, the Committee on the Future Economy (CFE) recommends a stronger focus on developing local businesses, especially small and medium-sized enterprises (SMEs). This is the exploration arm.
It is important to maintain exploitation, even as Singapore builds up its exploration efforts.
As the country sets off to implement the CFE's recommendations, the emphasis on the Economic Development Board as the lead agency to attract MNCs should be maintained, while furthering the capabilities of the Agency for Science, Technology and Research (A*Star), International Enterprise Singapore and Spring Singapore to grow SMEs.
As the parent of these agencies, the Ministry of Trade and Industry can coordinate and synergise to achieve national ambidexterity.
For instance, as Singapore pursues MNCs with disruptive technologies and business models, corresponding efforts can also be made to ready SMEs that are likely to be affected by this for more intense competition. Targeted emphasis can also be on MNCs which can catalyse SMEs' growth.
SOLUTIONS FOR SMEs
Many firms are emphasising exploitation in the face of tougher market conditions. However, a single-minded pursuit of exploitation is insufficient to turn around a business as the economy undergoes intense transition.
Exploration is needed to develop new products, services and business models for emerging markets. What is termed "organisational ambidexterity" is required to achieve corporate longevity.
As many SMEs remain ill-equipped to carry out exploration in-house, they can adopt an open innovation strategy by sourcing solutions from the many start-up incubators and research institutions in Singapore - for example, A*Star - or even abroad.
Firms that aspire to be disruptive market leaders can be proactive to engender new trends and demands in emerging markets, instead of responding reactively.
SOLUTIONS FOR INDIVIDUALS
The labour market has grown more challenging. New jobs will not only require 21st-century skills such as creative thinking, critical thinking and technology literacy, but also technical skills such as digitisation, programming and analytics; knowledge of new business models such as platform strategy and the sharing economy; and cultural intelligence to conduct regional and international business.
In terms of exploitation, individuals have to continually improve themselves in on-the-job proficiency.
In terms of exploration, individuals have to upskill themselves. This prevents them from becoming obsolete for existing jobs, while also preparing them for jobs in the future economy. Individuals who are unsure how to develop such individual ambidexterity can start by using their SkillsFuture credits to attend relevant accredited courses.
The writer is the director of the Office of Graduate Studies at the Singapore University of Social Sciences, and teaches technology and innovation management.
A version of this article appeared in the print edition of The Straits Times on August 12, 2017, with the headline 'Seizing the future with both hands'. Print Edition | Subscribe
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