Innovation ambidexterity: Underlying mechanisms and supporting tools

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Master’s Thesis

Innovation ambidexterity: Underlying

mechanisms and supporting tools

Course: Master’s Thesis BA SIM

Thesis Supervisor: Prof. Pedro de Faria

Co-assessor: Dr. Marvin Hanisch

Author: Ramon Klein Velderman

Student number: 2967448

Date: 18-01-2021

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Abstract

Achieving innovation ambidexterity is challenging, but also an organizational priority due to its relationship to performance. This research examines the underlying mechanisms determining how organizations achieve an optimal balance between exploration and exploitation and between structure and creativity. In a case-study research setting, I conducted 19 in-depth interviews to investigate how organizations use mechanisms, tools and measures to achieve these balances. My findings indicate that organizations use resource allocation, portfolio governance systems, portfolio analysis tools, a loosely structured ideation process and incentive alignment to achieve organizational level ambidexterity. Moreover, the results indicate that increased autonomy for project managers, transparent decision-making, recognition of employees and portfolio analysis tools play an important role in the organizational efforts to achieve an optimal balance between structure and creativity. The identification and understanding of these mechanisms contribute to the literature on innovation portfolio management. For managers, the understanding of these mechanisms contributes to their efforts to achieve innovation ambidexterity and thereby increase firm performance.

Acknowledgements

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1. Introduction

Successful innovation is one of the key determinants of firm performance and consequently a thoroughly studied subject in the contemporary business literature (Gunday et al., 2011). A crucial antecedent to increasing firm performance is achieving organizational ambidexterity, reached by having an optimal balance in the innovation portfolio between exploration and exploitation and structuring the organization accordingly (Gibson & Birkinshaw, 2004). However, achieving organizational ambidexterity is challenging for portfolio managers (Lill et al., 2020). Implementing tools and measures can support these managers in achieving an optimal balance between exploration and exploitation in the innovation portfolio (Kang & Snell, 2009). Balancing exploration and exploitation also requires organizations to find the right balance between structure and creativity, since those balances are interrelated (Lavie et al., 2010). In general, structure and processes in the organization are aimed at efficiently conducting exploitative innovation activities without wasting valuable resources (Lavie et al., 2010). Conversely, creativity and flexibility in the organization are aimed at fostering exploratory innovation activities, implying that innovation projects do not need to adhere to organizational constraints like rigid structures and processes (Miron et al., 2004). In addition, implementing tools and measures can also contribute to finding an optimal balance between structure and creativity, since these tools facilitate an optimal allocation of resources like employees’ time towards activities requiring structure and creativity (Jansen et al., 2012). In summary, achieving organizational ambidexterity and a balance between structure and creativity, facilitated by implementing tools and measures, can increase firm performance.

Henceforth, the purpose of this study is to refine the current understanding of the mechanisms that determine how organizations achieve an optimal balance between exploration and exploitation. Furthermore, although previous studies have identified the existence of several tools and measures, an examination of how organizations implement these to achieve organizational ambidexterity is missing. Moreover, the second purpose of this study is to increase the understanding of the mechanisms affecting the balance between structure and creativity experienced by organization. Furthermore, an investigation into how organizations implement tools and measures to achieve a balance between structure and creativity is mostly absent.

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adopts a qualitative approach to examine how tools and measures support in achieving a balance between exploration and exploitation. Secondly, the use of measures and tools to mitigate the tension between structure and creativity is relatively underexplored in the literature (Lill et al., 2020). Therefore, this research investigates how organizations achieve this balance with the support of several tools and measures. The outcomes of this research are thus relevant for future researchers investigating the aforementioned balances.

To fulfil the aforementioned purpose and theoretically contribute to the existing academic literature, this thesis formulates two main research questions and two underlying sub questions. Firstly, this thesis investigates how organizations achieve organizational ambidexterity and how measures or tools are implemented to achieve that optimal balance between exploration and exploitation. This results in the following research questions:

RQ 1: How do organizations achieve an optimal balance between exploration and exploitation

(organizational ambidexterity)?

RQ 1.1: How do specific measures or tools help an organization in achieving organizational

ambidexterity?

Secondly, this research investigates how organizations achieve an optimal balance between structure and creativity and how measures or tools are implemented to achieve such an optimal balance. This results in the following research questions:

RQ 2: How do organizations achieve an optimal balance between structure and creativity? RQ 2.1: How do specific measures or tools aimed at achieving organizational ambidexterity influence

how an organization balances structure and creativity?

Intuitively, this research is especially relevant for managers aiming to achieve organizational ambidexterity and an optimal balance between structure and creativity. Since the optimal balance between exploration and exploitation (Junni et al., 2013) and structure and creativity (Miron et al., 2004) positively impacts innovation performance, managers in the field of innovation must pay significant attention to these topics. This thesis highlights several mechanisms that affect how organizations achieve these balances and can inform managers on how to effectively employ those mechanisms to their advantage. In addition, this thesis highlights multiple specific tools and measures that contribute to achieving these balances, which managers can use to their advantage when implemented correctly.

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2. Literature review

2.1. Exploration, exploitation and organizational ambidexterity

In his influential paper, March (1991) highlights the important distinction between exploration and exploitation, where the former entails search, experimentation and variation, the latter entails choice, execution and the reduction of variation. Instinctively, these equally important subsets of innovation can be contradicting in nature and therefore need to be effectively managed (Tushman & O’Reilly, 1996). As mentioned, finding an optimal balance between exploitation and exploration in the innovation portfolio and achieving successful innovation ambidexterity is challenging for organizations (Lavie et al., 2010). Additionally, Gibson & Birkinshaw (2004) make an important distinction between structural and contextual organizational ambidexterity. Structural ambidexterity entails that organizations adopt structures and processes to foster both exploration and exploitation. Andriopoulos & Lewis (2009) further develop the concept of structural or architectural ambidexterity and argue that alongside structural measures like spatial segregation of activities, organizations implement differentiated strategies with divergent goals and performance targets. Conversely, contextual ambidexterity entails that organizations adopt a combination of stretch, discipline, support and trust to simultaneously achieve alignment and adaptability, thereby fostering both exploration and exploitation (Gibson & Birkinshaw, 2004). Andriopoulos & Lewis (2009) further conceptualize the definition by Gibson & Birkinshaw (2004) and argue that contextual ambidexterity implies organizations utilize a combination of behavioural and social means to effectively pursue both exploratory and exploitative innovation activities.

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Moreover, D’Souza et al. (2017) argue that the optimal balance between exploration and exploitation is heavily dependent on firms’ competitive dynamics. Luger et al. (2018) expand upon the findings on competitive environments by D’Souza et al. (2017) and argue that not only an organization’s current balance between exploration and exploitation determines innovation performance, but its capability to adapt this balance to changing competitive and environmental dynamics. The authors find that organizations in a radical change context benefit from adapting the balance between exploration and exploitation to the environment, whereas organizations in an incremental change context benefit more from the learning effects caused by a stable balance between exploration and exploitation (Luger et al., 2018).

In summary, existing research gives indications that achieving both structural and contextual ambidexterity are important aspects of innovation portfolio management, since they are positively related to firm performance. Additionally, it also stresses that organizations take competitive and environmental dynamics into account while balancing exploration and exploitation.

2.2. Measures and tools to achieve organizational ambidexterity

Organizations adopt certain tools and measures in multiple layers of the organization to support in achieving ambidexterity in the innovation portfolio. Kang & Snell (2009) identify organizational, social and human capital as organizational resources to which tools and measures can be linked to achieve organizational ambidexterity. Linking these findings to the categorization by Gibson & Birkinshaw (2004), organizational capital can be used to achieve structural ambidexterity, whereas social and human capital can be used to achieve contextual ambidexterity (Kang & Snell, 2009). In turn, Turner et al. (2013) argue that organizations can develop processes and tools that aid managers in decision-making regarding the balance between exploration and exploitation. To illustrate, commonly used tools by organizations to support in achieving organizational ambidexterity are portfolio analysis tools (Untiedt et al., 2012) and individual incentives (Manso, 2017). This thesis makes a distinction between organizational- and individual-level tools that are adopted to achieve organizational ambidexterity.

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application of tools and measures to achieve organizational ambidexterity. Andriopoulos & Lewis (2009) acknowledge the claim by Jansen et al. (2006) that organizations need to both standardize and differentiate approaches to achieve organizational ambidexterity. In a multiple case study setting, they add that organizations differentiate their approaches between exploration and exploitation. To foster exploration, organizations adopt a loose coupling with customers, set technological breakthroughs as key strategic target and stimulate passion as a primary driver of employees. To foster exploitation, organizations adopt a tight coupling with customer, set profit as key strategic target and stimulate discipline as primary driver of employees (Andriopoulos & Lewis, 2009).

Secondly, this section examines how individual-level tools and measures contribute to achieving a balance between exploration and exploitation. Mom et al. (2007) conclude that top-down knowledge flows to managers lead to more exploitative innovation activities, whereas horizontal and bottom-up knowledge flows to managers lead them to engage in more exploratory innovation activities. Organizations therefore introduce measures or tools that balance knowledge flows to managers and thereby achieve organizational ambidexterity. Groysberg & Lee (2009) expand upon these findings and find empirical evidence that newly hired employees are less successful in exploratory activities compared to exploitative activities, thereby reinforcing an organizations’ tendency to engage more in exploitation compared to exploration. Thus, organizations introduce supporting structures that guide new employees to individually balance exploration and exploitation. In summary, existing research gives indications that tools and measures are an effective way to support organizations in their aim to achieve ambidexterity. Previous findings indicate that organization-level tools like formalization, connectedness, standardization and connectedness contribute to finding an optimal balance between exploration and exploitation. In addition, it also stresses that individual-level tools like directing knowledge flows and effectively guiding new employees similarly contribute to achieving organizational ambidexterity.

2.3. Balance between structure and creativity

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creativity helps to achieve organizational ambidexterity. Besides an indirect relationship between this balance and performance through achieving organizational ambidexterity, there is also a direct relationship between establishing an optimal balance between structure and creativity and performance (Gilson et al., 2005; (Lawson & Samson, 2001).

Sætre & Brun (2012) add that the balance between structure and creativity is dynamic and changes throughout the exploratory and exploitative innovation process. According to Sætre & Brun (2012), creativity in the early phases of an innovation project is a relatively more important antecedent of success compared to structure or constraint. Conversely, structure is a relatively more important determinant of success in later stages of innovation projects. Maier & Branzei (2014) agree with Sætre & Brun (2012) that large innovation projects require a flexible approach depending on the phase of project. Subsequently, Maier & Branzei (2014) argue that innovation project teams have to (re)allocate scarce resources to achieve such a dynamic balance between structure and creativity throughout the stages of the innovation project. Vogelgsang (2020) further extends these findings and states that management scholars should not regard the tension between structure and creativity as a balance, but rather as a transition. Vogelgsang (2020) argues that structures and constraints like strategic objectives, budgets and supervision, alternate along the innovation project development path, which allows for increased collective creativity in the project team.

Whereas Gibson & Birkinshaw (2004) investigate ambidexterity at an organizational or business-unit level, Miron et al. (2004) examine the tension between creativity and structure at an individual level. They argue that individuals can indeed maintain a balance between creativity and efficiency that does not inhibit innovation performance (Miron et al., 2004). Interestingly, Brown & Duguid (2001) argue that the tension between creativity and structure can potentially be beneficial and therefore senior management attempts to balance these factors. They conclude that creativity and structure conjointly result in new knowledge and profitable inventions if processes are in place that allow for contextual adaptations (Brown & Duguid, 2001). This implies providing employees with sufficient flexibility and autonomy to adapt to circumstances requiring either structure or creativity (Brown & Duguid, 2001).

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2.4. Measures and tools to achieve a balance between structure and creativity

In a recent systematic literature review, Lill et al. (2020) highlight the importance of measures and tools to address the tension between creativity and structure. More specifically, the research stream of innovation management controls examines how managers gather information concerning innovation projects and how to take decisions based on this information (Tkotz et al. 2018). To illustrate, innovation portfolio analysis tools can be regarded as innovation management control systems, since they support and facilitate management in strategic decision-making. This research makes a distinction between organizational-, project- and individual-level tools organizations adopt to achieve an optimal balance between structure and creativity.

On the organizational level, companies can guide the balance between structure and creativity by determining how to organize information. Kim & Zhong (2017) argue that a hierarchical information structure, where information is categorized according to predetermined higher-order categories inhibits creativity, since it reduces cognitive flexibility. On the contrary, organizations adopting a flat information structure experience increased creativity when information is not structured according to higher order categories.

On the project level, companies differentiate their innovation management control systems based on the need for creativity and structure (Dahlgren & Söderlund, 2010). Innovation projects that entail a relatively low degree of uncertainty require more formal processes and structures, whereas projects with a relatively high degree of uncertainty require more creativity and flexibility in their approach (Dahlgren & Söderlund, 2010). Similar to Brown & Duguid (2001), Rosso (2014) concludes that constraints and creativity mutually enhance each other when managed correctly. Rosso (2014) concludes that innovation project teams that are subject to the right constraints, like task structure and clearly defined project goals, experience better project results. This is because creativity is effectively focussed at solving challenges faced during the project. Moreover, Hoegl et al. (2008) argue that structure in the form of financial resource constraints for innovation projects must be correctly balanced with team creativity. Nonetheless, they argue that innovation project teams adopt a bounded creativity approach to provide a framework for creative thinking, since it ensures that the outcomes are aligned with an organization’s capabilities (Hoegl et al., 2008). Thus, senior management must take these discrepancies into account when finding a balance between structure and creativity in the innovation project portfolio.

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with a high need for structure, whereas it inhibited creative performance for individual with a low need for structure (Rietzschel et al., 2014). Where Rocco (2014) and Hoegl et al. (2008) take a project level perspective on how structures and constraints can actually promote creativity, Ortmann & Sydow (2018) similarly support this statement on an individual level. Ortmann & Sydow (2018) conclude that regularly imposing a new set of constraints and structures promotes creativity, since it provides a framework to guide creative thinking, which encourages employees to embody novel perspectives.

In summary, existing research indicates that tools and measures are effective in supporting organizations to balance structure and creativity. The literature indicates that organization-level tools like the organization of information contributes to finding an optimal balance. Furthermore, it also stresses that project-level tools like differentiation, creativity-enhancing constraints and a bounded creativity approach similarly contribute to balancing structure and creativity. Lastly, previous literature suggests that individual-level tools like individual flexibility and frequent new perspectives contribute to achieving this balance.

2.5. Research Gap

The academic literature has examined the definitions, performance implications and time-dynamics of organizational ambidexterity. Moreover, the literature has examined which tools and measures organizations can implement to achieve an optimal balance between exploration and exploitation. Additionally, previous research has addressed the tension organizations perceive between structure and creativity and the overall consensus between researchers is that well-designed constraints can stimulate and guide creativity contrary to impeding creativity. Moreover, existing research has examined which tools and measures organizations can adopt to balance structure and creativity.

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3. Methods

3.1. Research design

This research uses a qualitative approach aimed at gaining a in-depth understanding of the mechanisms behind the research questions highlighted in the introduction. This approach is suited, because this thesis investigates mechanisms that can solely be unravelled using qualitative research methods like semi-structured interviews (Eisenhardt, 1989). Henceforth, this research strategy allows future quantitative research to empirically test the propositions that are formulated based on the findings of this thesis.

3.2. Case selection

This case study research is performed in the context of a multinational agricultural company (Company X) in North-western Europe with one dedicated department for innovation, research and development (R&D). Company X has an extensive set of more than 30 radical and incremental innovation projects, which is sufficient in the context of this research. These radical and incremental innovation projects are reviewed in two separate review committees, which have a different composition of review committee members, although there is some overlap as can be observed in Table 1. Besides, Company X adopts a stage-gate innovation process, as first developed by Cooper (1990) to guide the innovation process for both radical and incremental projects.

Moreover, Company X has recently implemented portfolio analysis tools which enable decision makers to increasingly base their decisions on real-time data and visualizations. This setting provides a unique research context, since it allows for an investigation of the dynamically changing behaviour of decision makers before and after the implementation of portfolio analysis tools.

3.3. Data collection

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interviews (Griffin & Hauser, 1993). This data collection method is similar to Kester et al. (2009) who also held 19 interviews, but within a variety of North-western European multinational companies.

Interview

Number Role within Company X

Review committee involvement Tenure (Current role) Interview details

1 Project manager 1 Not applicable 28 (3) 00h33

2 Project manager 2 Not applicable 9 (1,5) 00h37

3 Project manager 3 Not applicable 1,5 (1,5) 00h28

4 Project process manager Not applicable 30 (6) 00h27

5 Portfolio manager & Project management officer

Radical &

Incremental 22 (3) 00h44

6 Business controller R&D Not applicable 1 (1) 00h31

7 Manager Product Technology Radical &

8 Manager Commerce Incremental 1,5 (1,5) 00h43

9 Managing Director Innovations Radical &

Incremental 4,5 (4,5) 00h32

10 Manager Business Incubator Radical 3,5 (2) 00h45

11 Manager Process Technology Radical &

Incremental 1,5 (1,5) 00h40

12 Financial Director R&D Incremental 6 (0,5) 00h24

13 Manager Customer Response Incremental 17 (2) 00h30

14 Manager Sustainability Radical &

15 Chief Technology Officer Radical 3 (1,5) 00h42

16 Manager Product Lines Incremental 20 (0,5) 00h21

17 Manager Investment

Development Neither 4 (1) 00h37

18 Financial Director Operations Neither 9 (5) 00h33

19 Manager QESH Neither 6 (6) 00h30

Table 1: Overview of interview sources

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Document

Number Document Title Content Description

1

Project plan design and implementation portfolio

analysis tools

A detailed description of the content and implementation of portfolio analysis tools in

Company X 2 Concept project portfolio

analysis tools

Prototype dashboards, visualizations and scenarios of the portfolio analysis tools, which

are yet to be fully implemented 3 Key performance indicators for

innovations proposal

Proposal to determine key performance indicators and set strategic targets accordingly.

However, these were only partly implemented

4 Project X & Y stage-gate pass documentation

PowerPoint presentation to visualize the projects’ characteristics and parameters in perspective of the innovation portfolio during the

stage-gate pass from feasibility to development, which was only done twice

5 Portfolio management definition & governance

PowerPoint presentation with a brief outline of the portfolio governance system

6

Minutes review committee incremental innovation (17-12-2020; 16-11-(17-12-2020; 15-10-(17-12-2020;

17-09-2020)

Minutes made during the review committee meetings on incremental innovation projects. This includes the meeting agenda, content of the

discussions and final decisions taken

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Minutes review committee radical innovation (24-11-2020;

27-10-2020; 20-08-2020)

Minutes made during the review committee meetings on radical innovation projects. This includes the meeting agenda, content of the

discussions and final decisions taken 8 Idea workflow overview

The online page available to all employees where the ideation process is briefly explained and ideas

can be submitted

9 Idea generation format The format employees are expected to use when submitting their ideas

Table 2: Overview of internal document of Company X

3.4. Data analysis

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After aggregating the primary data sources, this research compares the findings to the conclusions of previous literature in the discussion section. This comparison serves to examine why some researchers have concluded significant results or proposed conceptual frameworks and how those are related to the findings of this thesis. Finally, this comparison is used to develop propositions.

3.5. Research Quality

Throughout the data analysis and collection process, this research aims to ensure the validity and reliability of the findings from the interviews (Patton, 2014). Validity and reliability are highly important in the academic literature and especially in case studies (Yin, 1981).

First of all, triangulation of internal documents and interview data improves construct validity, even though this is relatively difficult to achieve in case study research given that exact measurements in the existing literature are absent and measures to evaluate results are scarce (Gibbert et al., 2008). In addition, internal validity implies to what extent the findings of this research can be attributed to the examined constructs. Similarly, this thesis applies a combination of interviews and internal documents as data sources to ensure internal validity by matching the patterns between these data sources (Gibbert et al., 2008). Additionally, a semi-structured interview format mitigated informant bias, since I asked similar questions to all interviewees. In addition, I made a slight differentiation in the interview guide between review committee members and project managers, since project managers are not involved in deciding on the balance between exploration and exploitation. The extent to which the findings of this study can be generalized, representing the external validity, is somewhat limited because of the unique research setting and case study design. However, since the theoretical aim of this study is not to deliver conclusive evidence, but rather to provide a starting point and inspiration for future researchers, the limited generalizability is acceptable (Riege, 2003).

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4. Results

The aim of this section is to present the case study findings and provide a clear overview of the results. The first section highlights the issues and challenges Company X faces attempting to achieve organizational ambidexterity and an optimal balance between structure and creativity. The second section highlights the mechanisms, tools and measures Company X adopts to address the issues and challenges introduced in the first paragraphs. The third section highlights the challenges and hurdles Company X faces when implementing the tools and measures introduced in the second paragraph. The final section provides a table summarizing all findings.

4.1. Issues and Challenges

First of all, Company X struggles to balance exploration and exploitation. This balance can be measured in terms of the amount of projects, employees’ time and money spent on the different type of innovative activities. One of the reasons Company X struggles to achieve organizational ambidexterity is that they do not set a clear target portfolio of innovation projects. This makes decision-making regarding the continuation or termination of innovation project especially challenging, since decision-makers cannot determine what kind of projects need to continue or start to finally reach the target portfolio.

Manager commerce: “We need to have a balanced portfolio to reflect the strategy. If you don't have

a target portfolio linked to the strategy, how can you ever judge if you have the right portfolio?” Furthermore, Company X struggles with stopping projects. Project managers and owners have the tendency to protect their own project from termination, even though that might not be in the interest of the organization as a whole. This happens because they feel highly responsible for their project and perceive it as a personal failure when the project they are working on is stopped. Additionally, the review committee has the tendency to discuss projects in atomistic fashion without regard for the complete project portfolio, which is evident from the minutes from review committee meetings (Document Nr. 6 & 7). Therefore, individual projects are continued because individual project parameters look relatively positive, but this would not be the case when projects would be discussed with the entire innovation portfolio in mind (Document Nr. 4).

Project manager 1: “The review committee has the tools that give insight into the composition of the

portfolio and based on the result, timing, risk and means necessary, they give priority to some projects and not to other projects. And within Company X we find that very hard for some reason. We

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Financial director R&D: “The review committee never stops projects. They have difficulty stopping

projects. So, it seems like sometimes people are they are protecting their own projects, their baby and their job.”

Secondly, Company X struggles to balance exploration and exploitation, because of lacking responsibility, accountability and leadership with regard to portfolio management. Company X struggles to define mutually exclusive decision-making mandates for the project manager, project owner, portfolio manager and the review committee (Document Nr. 5). This implies that it is not completely clear who can decide on the continuation or termination of projects in the innovation portfolio. Since the portfolio manager and review committee do not clearly have full decision-making authority, project owners can overrule decisions intended to improve the balance between exploration and exploitation in the portfolio. To illustrate, there is no clarity whether the review committee or the project owner has the final decision-making authority when it comes to stopping projects, which can be observed in the first two quotes below. Besides, Company X does not hold the decision-making authority accountable for taking wrong or no decisions. Senior management, the executive board in the case of Company X, does not hold the portfolio manager or review committee accountable for the (mis)balance in the innovation portfolio, which is troubling. These issues with unclear responsibilities and limited accountability are partially caused by missing leadership in Company X from the executive board. They do not set clear responsibilities nor do they hold managers accountable.

Portfolio manager & project management officer: “The project owner has the veto to decide what to

do with a project so he or she can take another decision than the review committee, he or she has that authority.”

Manager commerce: “The responsibility 100 percent sure is in a review committee. It cannot be a one

person judgment to kill a project. No way.”

Project manager 1: “I think there is still a lot to work on regarding the roles of project owner and the

review committee. These are not really well defined. And what you see now is that the review committee is more or less acting as the project owner”

Manager sustainability: “I think we can still improve our overall project portfolio management very,

very much, particularly in the clarity of the review moments and responsibilities. But looking from my position, I think we are struggling to redefine our project management and portfolio management.

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Thirdly, Company X struggles to design and implement a successful ideation process.

Company X fails to capture all valuable ideas with high potential and evaluate them based on a series of assessment criteria (Document Nr. 9). However, when a substantial amount of ideas from

employees are not communicated to the entity assigned with evaluating those ideas, Company X faces profound issues. Employees consciously keep their ideas from the formal ideation process, because they are frightened by the perceived administrative burden and excess amount of reporting to management. Thus ironically, an ideation process designed to foster creative thinking, forces employees to conduct creative activities outside of this designated process. This observation implies that the review committee does not have a complete overview of all innovative activities conducted within the Company X, which toughens decision-making regarding the balance between exploration and exploitation in the innovation portfolio.

Manager QESH: “So we've never tried to consciously steer the ideation process towards the strategic

choices that we've made or not. A lot of initiatives are not in the funnel and they're not being assessed for their business value, so they're effectively getting forgotten. So the I don't believe for a

second that our ideation phase is empty, I think we just don't have any overview of it.”

Manager business incubator: “The whole ideation process is there. That it is not continued to be

implemented or that people don't bother that might happen. That's another reason. But we do have an ideation process. We do have one-pager.”

Manager product technology: “People were very reluctant to work on projects because the amount

of templates they had to fill or the frequency they had to give project updates. If you do not start a project you can do more or less whatever you like. So it's better to do things under the radar, because you're not challenged or questioned that often, you don't have to fill in templates and nobody worries

about resources. So the work around the route is still too tempting compared to the official innovation funnel procedure.”

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Manager commerce: “If you simply look to the innovation funnel, I think we have hardly any

ideas, because ideas are in people's heads and they forget to simply put it on a one-pager and give it to the idea selection committee, because they don’t know what happens with it.”

Likewise, Company X commonly does not effectively show their appreciation to their employees for their contribution to the ideation process (Document Nr. 8). This causes employees to withhold their ideas, because they never receive any appreciation or gratitude, which works highly demotivating and disincentivizing. Thus, even though skilled employees might have a variety of creative and potentially valuable ideas, a disincentivizing organizational culture decreases their willingness to share these ideas. Again, the inability of Company X to capture these ideas in the organization inhibits the review committee from deciding which valuable ideas that improve the balance in the innovation portfolio continue in the innovation funnel.

Manager Commerce: “Today, a lot of people have ideas, they share the ideas, but then they

hear nothing anymore. Do I think within a year I'll go back and share an idea? No, because nothing is done with it.”

Furthermore, Company X struggles to align the individual incentives of their managers and employees with the overarching strategy. Decision-makers tend to be relatively conservative and risk-averse when deciding which innovation projects will continue or not. A plausible explanation is that managers are given monetary incentives that stimulate them to focus on incremental innovation projects that deliver short-term results, since this focus enables them to reach their individual performance targets. Although short-term innovation performance is appealing, the decreased focus on more radical innovation projects makes it more challenging for Company X to find an optimal balance in the innovation portfolio and thereby achieve its long-term strategic targets. In conclusion, these individual incentives can also be characterized as perverse incentives.

Project manager 4: “Project owners tend to select less risky projects because when they increase the

turnover by a certain amount, then his or her evaluation will be positive, of course”

Chief technology officer: “Personal incentives are misaligned with the strategy. And it can be the

bonus system. In the R&D organization, I observed that people wanted to fulfill their own agenda. They have their own budget and their own people. And this misalignment from the strategy can also

happen.”

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efficiency, but with relatively little room for flexibility and creativity. A strict project management structure can prevent project managers from investing time in creative activities, because they have to adhere to strict deadlines and score high on key performance indicators (Document Nr. 3).

Project manager 1: “When you have a strict stage-gate process with the planning till the end and an

internal KPI to deliver the project on time in full. When we score high on all of this, then our innovation projects are actually not that much innovative or creative.”

Besides, Company X struggles to provide project managers with the autonomy to balance structure and creativity within their individual projects given their decision-making mandate. Although a review committee consists of managers with considerably expertise, they perform a detailed examination of individual projects (Document Nr. 6 & 7), which comes across as very controlling and as if the review committee does not trust the project managers in the organization. This hinders project managers, since it increases their administrative burden and they have to spend a lot of time on reporting to senior managers, which is time-consuming and inefficient. More extremely, Company X adopts a highly structured innovation process, causing them to suffer from micromanagement and little flexibility, which causes ideas and projects to deliberately be kept outside of the formal innovation process. Project managers and members within Company X are scared off by the amount of administration and reporting related to innovation projects and thus choose to conduct innovative activities outside the formal innovation process. Disturbingly, the Manager QESH argues that conducting too many activities outside the formal innovation process can lead to Company X’s bankruptcy.

Manager business incubator: “Project managers are sometimes scared to death for the whole

process, because you have to fill out a humungous amount of templates, report to the executive board and the review committees. So that's a daunting prospect for many project managers.” ; “This organization is killing itself by micromanagement. The executive board should not get involved

with the nitty gritty details. Innovation is micromanaged and micro steered from the levels above. That's also what you see happening in the review committees. They are diving into details. Why do

you do that? Because you don't trust your project managers.”

Manager QESH: “I think there are more projects kept out of the funnel than there are projects in the

funnel at the moment. And I think that is done consciously. This could be very harmful to the organization. I think that if we don't get our way of doing innovation projects under control within

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4.2. Mechanisms, tools and measures

As mentioned, Company X struggles to achieve organizational ambidexterity, because it does not set a target portfolio nor stop innovation projects. Hence, Company X attempts to prioritize projects and allocate resources accordingly based on a set target innovation project portfolio to solve these challenges. A set target portfolio clearly guides decision-making in a review committee, because it forces them to discuss individual projects in perspective of the complete innovation portfolio. Moreover, when the review committee has taken decisions with regard to which innovation projects will continue, Company X can give priority to these projects and allocate the necessary resources accordingly to complete the innovation projects in timely fashion.

Portfolio manager & project management officer: “You would like to have a 75 percent incremental

versus 25 percent radical innovation budget, something in that direction, because in terms of focus, money, resources, you have to prioritize and especially the radical innovation projects take a lot of

resources.”

To facilitate resource allocation and the prioritization of innovation projects indicated in the previous paragraph, Company X uses portfolio analysis tools to support decision-making with valuable insights (Document Nr. 1). These tools support Company X in reaching the identified target portfolio. Portfolio analysis tools aggregate individual project-level data and transform it in understandable overviews and dashboards which are used by the review committee and portfolio manager to steer decision-making (Document Nr. 2). Moreover, portfolio analysis tools decrease the administrative burden due to the creation of a centralized database, which increases the time available to spend on creative and innovative activities. Aggregating the project-level data and creating a central database for the entire portfolio that can be analysed and transformed by a single person or entity decreases the amount of time project managers have to spend on administration and reporting. In addition, the outcomes from project-level data analysis allow project managers to benchmark their innovation projects to other projects in Company X. In turn, the insights derived from this benchmark highlight valuable opportunities and areas for improvement, which require more creative and innovative activities to fulfil.

Portfolio manager & project management officer: “To optimize the project portfolio, we should use

portfolio analysis tools to answer: what is the ideal combination of projects in terms of risks, profits, diversification, timing and planning?”

Manager product technology: “And I think that a project management tool should at least provide

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Manager process technology: “So the data is there which should be turned into information.

Managers already have the data, so they only have to share and forward this data to the one who is responsible for turning the data into information for the portfolio analyzes tool. So I don't think that

will lead to an additional administrative burden”

Moreover, Company X struggles to achieve organizational ambidexterity, because there is a lack of responsibility, accountability and leadership. Therefore, Company X attempts to adopt a clear portfolio and project governance system to guide both incremental and radical innovation projects towards success and thereby achieve organizational ambidexterity (Document Nr. 5). Clearly defined roles, responsibilities and decision-making mandates within Company X between the various stakeholders, such as the portfolio manager, project manager, project owner, review committee, steering committee and executive board are crucial towards the success of projects in the innovation portfolio. A well-defined portfolio and project governance system ensures innovation projects are categorized correctly and selects one responsible person to lead the project. Additionally, a well-defined portfolio and project governance system holds the review committee accountable for its decisions and stimulates leadership from the executive board in guiding decision-making.

Manager QESH: ”You have to make agreements about how you are going to organize the

governance, so how you organize the stage-gate reviews, who is responsible for project progress, who is responsible for approving this, who is responsible for making sure that all projects are in the

company are formally categorized in pre-determined categories.”

Furthermore, Company X struggles to design a successful ideation process. Therefore, Company X attempts to adopt a loosely structured ideation process to foster creativity and capture all existing ideas throughout the organization. Employees must be stimulated to share their creative ideas with a selection committee by having a clear and concise format where ideas can be collected (Document Nr. 9). A separate selection committee then selects the most promising ideas to be further researched in the feasibility phase. When a loosely structured ideation process is in place, this selection committee has a complete overview of all creative ideas and innovative activities in the organization. Therefore, this selection committee can make better decisions to select ideas that are in line with strategic targets and contribute to the balance in the innovation portfolio (Document Nr. 4).

Manager Commerce: “In good project management you have a tremendous amount of ideas in the

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Portfolio manager & project management officer: “On that feasibility to development gate, portfolio

management should help again, not really only to focus on that specific project in a feasibility gate, but whether it can contribute to the optimal project portfolio or not”

Moreover, Company X attempts to stimulate the contribution from their employees to the ideation process by clearly communicating how their ideas and proposals are being evaluated and how decision-making takes place and by whom (Document Nr. 8). Highly transparent decision-making in the ideation process induces increased understanding for decisions throughout the entire organization. This increased understanding causes employees to submit their creative ideas to the formal ideation process, because they know precisely how their idea is evaluated and how decision-making ensues.

Managing director innovations: “How can we make that ideation process less complex and with less

paperwork so that people can enter their ideas also in a digital way so that it is being revealed and that you get information on what happens next.”

Furthermore, Company X attempts to show recognition and acknowledgement towards employees to ensure their crucial and valuable contribution to the ideation process. When employees receive feedback from the selection committee regarding their submitted idea, even when they decide not to further explore that particular idea, the employee remains motivated to continue submitting ideas. This form of recognition does not necessarily have to be in a monetary form, but can be as simple as showing appreciation from managers to employees or putting the idea generator in the spotlight.

Manager Commerce: “If you evaluate ideas within a committee and give people feedback whether

it's an excellent idea or at this moment in time, you're not going to explore it due to some reason. Then at least you I think you stimulate creativity or innovation.”

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Manager business incubator: “We have not put targets at the commerce side stating, look, it's nice

that you have a target of 10 million and I know you will get there. But if the 10 million is not made up out of 80 percent commodities and 20 percent innovative product, you don't get your bonus. So

maybe that's a way of accelerating innovation, because we have sufficient innovative products available.“

Furthermore, Company X struggles to design and implement a successful project management structure. Company X attempts to use a loosely structured project management structure which stimulates creativity within a certain set of deliverables, budgets and time constraints. Although intuitively one might think that there exists an inherent tension between structure and creativity, this is not necessarily true. Strategically aligned constraints can stimulate creativity and guide it into the direction corresponding with an organization’s strategy. These constraints can even make employees more creative, because they are faced with certain stress and pressures that direct their creativity.

Manager sustainability: “I have an almost fundamental view on that. In Germany, you have a nice

expression that is: “In constraints, the master flourishes.” So I think there is no contradiction between structure and creativity, structure will help you to dedicate your creativity in the right direction.”

Chief technology officer: “Constraints and stress make you inventive. During the Second World War,

a plethora of new inventions and new innovations were introduced under stress when there's a risk that you don't survive. That is really the moment when there is true creativity and you will focus on

solutions.”

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Project manager 2: “People need to take ownership, but if you dictate them what they need to do,

you will lose a lot of the ownership and a lot of the drive the people have. Just let the project team have autonomy and build the project for themselves, so if you know what needs to be delivered and

at what quality level, the project team should have the mandate or the autonomy themselves to produce the result of the project.”

Managing director innovations: “So a project manager with a team should be given the freedom to

work within their mandate to deliver the project on time in full. And it's the task of the review committee to make sure that they are successful and check the requirements.”

Manager business incubator: “I think they should give project managers in Company X way more

responsibility then they currently have.”

4.3. Challenges during implementation

The aim of this section is to outline the challenges Company X faces when implementing some of the tools and measures highlighted in the previous section.

The correct implementation and use of portfolio analysis tools is crucial for its contribution to reaching organizational ambidexterity. Hence, there are several conditions that these portfolio analysis tools must adhere to. The outcomes from the portfolio analysis tools must be presented concisely and clearly, such that all decision-makers understand them and use the results in their decision-making (Document Nr. 2). Moreover, the quality of the input data is vital for the reliability and accuracy of the outcomes of the portfolio analysis tools. Furthermore, the transformation of portfolio analysis tools in the form of scenarios is crucial to correctly interpret the data and steer optimal decision-making (Document Nr. 1).

Manager process technology: “There should be a limited amount of tools or graphs to aid

decision-making, otherwise there will be an overflow of information.”

Chief technology officer: “The quality of a dashboard fully relies on the quality of your input data and

bullshit in is bullshit out. The data generation and the deep understanding of what we are doing, because when you know your data, you can determine the criteria and take a decision.”

Project manager 3: “It's the role of the portfolio manager to interpret the outcomes and transform

the data in the form of scenarios. And these scenarios are presented to the review committee.”

Financial director operations: “I think, generally speaking, from the financial administration point of

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Moreover, a crucial condition for the successful implementation of a loosely structured ideation process is that it is understandable and concise (Document Nr. 9). The aim for an organization must be to minimize barriers for employees to submit their ideas. A short and simple digital format allows employees to submit their ideas quickly and immediately after they come to mind. This can reduce the barriers employees face when sharing their ideas.

Managing director innovations: “How can we make that ideation process less complex and with less

paperwork so that people can enter their ideas also in a digital way.”

Finally, a crucial factor for the implementation of all measures and tools is that they become structurally embedded in the organization. There is a role for top management to ensure managers and employees adhere to the introduced tools and measures. However, forcing people to work in predetermined structures can scare employees off. Consequently, Company X must invest in building an organizational culture that supports the implemented measures and tools. This condition ensures that tools and measures are not only implemented successfully on the short-term, but also on the long-term.

Financial director operations: “You can put a lot of effort in introducing a reward or award for

sharing good ideas. But when that is not structurally embedded in the company, it will be gone after a year. And that's a kind of a cultural thing you have to work on.”

4.4. Summary of findings

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Table 3: Summary of findings

* The ‘I’ data sources refer to the interviewees, the ‘D’ data sources refer to the internal documents from Company X

RQ Issue or challenge Mechanism / Tool Level Proposition Data sources*

1

Organizations struggle to stop projects Resource allocation

& (de)prioritization Project

Proposition 1: Organizations that allocate resources

to (de)prioritize projects have a higher probability of achieving organizational ambidexterity

I: (1), (5), (8), (12) D: (4), (6), (7) Organizations struggle to address

responsibility, accountability and leadership in portfolio management

Portfolio and project

governance system Organization

Proposition 2: Organizations that adopt a well-designed portfolio & project

governance system have a higher probability of achieving organizational ambidexterity

I: (1), (5), (8), (14), (19) D: (5), (6), (7)

1.1

Organizations struggle to get an overview of the portfolio and set strategic targets

accordingly

Portfolio analysis

tools Organization

Proposition 3: Organizations that correctly implement portfolio analysis tools have

a higher probability of achieving organizational ambidexterity

I: (3), (5), (7), (11), (15), (18) D: (1), (2), (3), (4) Organizations struggle to capture all

valuable ideas from their employees

Loosely structured

ideation process Organization

Proposition 4: Organizations that adopt a loosely structured ideation process have

a higher probability of achieving organizational ambidexterity

I: (5), (7), (8), (10), (19) D: (4), (8), (9) Organizations struggle to align the

individual incentives of their managers and employees with the overarching strategy

(Non-)monetary

incentives Individual

Proposition 5: Organizations that align individual incentives with organizational

strategic targets have a higher probability of achieving organizational ambidexterity

I: (6), (10), (15)

2

Organizations struggle to provide project managers with high autonomy, causing

micromanagement to prevail

High autonomy for project managers

Project Proposition 6: Organizations that provide project managers with a higher degree

of autonomy experience a better balance between structure and creativity I: (1), (2), (9), (10), (14), (15), (19)

D: (3), (6), (7)

Individual Proposition 7: Organizations that provide their employees with strategically

aligned constraints experience higher levels of creativity

2.1

Organizations struggle to transparently communicate decisions in the ideation

process

Transparent

decision-making Organization

Proposition 8: Organizations that transparently communicate decisions in the

ideation process have a higher probability of optimally balancing structure and creativity

I: (8), (9), (10) D: (8), (9) Organizations struggle to show

appreciation to employees in the ideation process

Recognition and acknowledgment for

employees’ ideas

Individual

Proposition 9: Organizations that recognize and acknowledge the contributions of

employees to the ideation process have a higher probability of optimally balancing structure and creativity

I: (8), (18) D: (8), (9) Organizations struggle with an

administrative burden for project managers

Portfolio analysis

tools Project

Proposition 10: Organizations that correctly implement portfolio analysis tools

have a higher probability of optimally balancing structure and creativity

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5. Discussion

The aim of this section is to interpret the research findings in relation to previous academic literature, therewith formulating multiple propositions and answering the research questions. Similar to the literature review, this section is structured in accordance with the sequence of research questions presented in the introduction. Henceforth, the first two subsections provide an answer to the research questions on organizational ambidexterity and how measures and tools support in finding a balance between exploration and exploitation. Thereafter, the latter two subsections provide an answer to the research questions on the balance between structure and creativity and how measures and tools support in achieving an optimal balance between those two factors.

First of all, there are two project- and organizational-level mechanisms whereby organizations reach an optimal balance between exploration and exploitation and thereby achieve organizational ambidexterity. These mechanisms are described in more detail in the following paragraphs to fully answer the first research question.

RQ 1: How do organizations achieve an optimal balance between exploration and exploitation

(organizational ambidexterity)?

Allocating resources towards exploration and exploitation and (de)prioritizing innovation projects based on the identified optimal balance facilitates achieving organizational ambidexterity. When organizations learn to terminate underperforming innovation projects and reallocate resources to innovation projects with higher priority that are aligned with the organization’s strategic targets, this helps to achieve an improved balance between exploration and exploitation. In a multiple case-study setting, O’Reilly & Tushman (2011) similarly argue that resource allocation is used as a primary mechanism to reach organizational ambidexterity, because it illustrates a consensus in the organization regarding the prioritization of certain project. In addition, Pellegrinelli et al. (2015) argue that prioritization of projects within organizations is an effective mechanism to distribute scarce resources to achieve organizational ambidexterity. Interestingly, Pellegrinelli et al. (2015) add that executives frequently evaluate and possibly change their priorities, thereby slightly adjusting the organization’s strategic targets. O’Reilly & Tushman (2011) and Pellegrinelli et al. (2015) have discussed the relationship between resource allocation, prioritization and organizational ambidexterity. However, they do not specifically examine the positive effect of deprioritizing and terminating innovation projects on the balance between exploration and exploitation.

Proposition 1: Organizations that allocate resources to (de)prioritize projects have a higher probability

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Innovation portfolio and project governance systems facilitate the success of both exploratory and exploitative innovation projects. Clearly defined responsibility, accountability and leadership divided throughout several layers in the organization lead to mutually exclusive decision-making mandates. These mutually exclusive making mandates encourage faster and better decision-making regarding the balance between exploratory and exploitative innovation projects, because it is completely clear which entity can decide what. O’Reilly & Tushman (2011) also argue managers representing both explorative and exploitative activities must be represented in the decision-making body. When these representatives are both involved, the consensus they reach indisputably leads to better decisions regarding the balance between exploration and exploitation. Andriopoulos & Lewis (2009) argue that management becomes the responsibility of actors throughout all levels of the organization. Executives provide strategic leadership and set innovation targets. Middle management guides individual projects, ensures adherence to predefined processes and encourages flexibility. Finally, project managers and members apply their discipline, passion and creativity to enhance innovative activities (Andriopoulos & Lewis, 2009). Nevertheless, these researchers do not examine the importance of mutually exclusive decision-making mandates that encourage decisive action.

Proposition 2: Organizations that adopt a well-designed portfolio & project governance system have a

higher probability of achieving organizational ambidexterity

Secondly, organizations can use innovation portfolio analysis tools, a loosely structured ideation process and (non-)monetary incentives as tools and measures to achieve organizational ambidexterity. These measures and tools are explained in more detail in the following paragraphs to fully answer the second research question.

RQ 1.1: How do specific measures or tools help an organization in achieving organizational

ambidexterity?

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organizations to identify project interdependencies, which support decisions regarding the prioritization of interdependent projects over independent projects. Nonetheless, these researchers do not include the vital conditions associated with the correct implementation of portfolio analysis tools like the importance of high-quality input data and the inclusion of scenarios.

Proposition 3: Organizations that correctly implement portfolio analysis tools have a higher probability

of achieving organizational ambidexterity

A loosely structured ideation process fosters ideation and supports to achieve organizational ambidexterity. Innovative activities are regularly conducted outside the formal ideation process. This implies that the decision-making entity does not have a complete overview of all exploratory and exploitative innovative activities conducted within the organization. Therefore, it is frankly impossible to achieve an optimal balance between exploration and exploitation, because decisions are based on incomplete and missing information. Conversely, a loosely structured ideation process is an organizational-level tool that allows to capture all current innovative activities in an overview, implying more potential projects can be evaluated and exclusively projects that contribute to achieving an optimal balance between exploration and exploitation are selected. Sætre & Brun (2012) conclude that reduced structure is an important determinant to stimulate creative activities by employees in the early phases of the innovation process, but some guidance is required to guide and steer the ideation process. Ossenbrink et al. (2019) similarly conclude that a loosely structured ideation process enables organizations to capture more ideas from their employees and gives managers more decision-making choices when evaluating and selecting the most promising ideas. The increased number of ideas with high potential allows organizations to focus on balancing exploration and exploitation, besides evaluating obvious criteria like potential value and required resources. Nonetheless, these academics have not specifically investigated the harmful consequences of innovative activities being conducted outside the formal ideation process.

Proposition 4: Organizations that adopt a loosely structured ideation process have a higher probability

of achieving organizational ambidexterity

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exploratory and exploitative innovation activities helps organizations to balance those two. Manso (2017) argues that organizations must implement a combination of short- and long-term incentives based on innovation performance to overcome the fallacy to focus on exploitative innovation. Additionally, organizations must stimulate risk-taking and investment in exploratory innovation by providing managers with a golden parachute when they leave the organization (Manso, 2017). Conversely, Cabrales et al. (2008) find empirical evidence, based on a relatively small sample of 95 companies, that the combined use of short- and long-term incentives is associated with higher levels of incremental innovation, but not associated to higher levels of radical innovation. Still, based on the findings of this research, this thesis proposes that incentive alignment results in a higher likelihood of achieving organizational ambidexterity. Whereas Manso (2017) and Cabrales et al. (2008) argue that individual incentives must include both a short- and long-term component, this research specifically argues that incentives must be coupled to a combination of exploitative and exploratory innovation activities.

Proposition 5: Organizations that align individual incentives with organizational strategic targets have

a higher probability of achieving organizational ambidexterity

Thirdly, Multiple mechanisms determine how organizations achieve an optimal balance between structure and creativity. These mechanisms are described in more detail in the following paragraphs to fully answer the third research question.

RQ 2: How do organizations achieve an optimal balance between structure and creativity?

Innovation ambidexterity: Underlying mechanisms and supporting tools

Master’s Thesis