Organisational ambidexterity and agility explained

Organisations must constantly renew and modernise their portfolio of offerings. This is not new. However, digitalisation and the complexity of markets have greatly accelerated innovation cycles. Organisations are challenged to develop new and creative solutions in fast-paced competition in order to meet their customers’ needs.

Agile ways of working are promoted as one solution for dealing with this challenge. The organisational principle of ambidexterity enables companies to deal with it. Both approaches lead to a joint solution.

Agility begins with organisation and culture and ends with methods and techniques. Rigid companies that use agile methods are doomed to fail. The organisational and cultural basis for agility is the necessary condition for the successful introduction and use of agile methods.

On the foundation of corporate culture, three levels can be distinguished. The level of organisation comprises the organisational form with primary and secondary organisation, the leadership structure and the communication and decision-making routines. The level of competencies comprises knowing, wanting and being able, i.e. know-how, attitude or personality, and skills in the sense of abilities and capabilities.

The level of methods and techniques comprises agile methods such as Scrum or Design Thinking as well as overarching techniques, such as adopting the customer perspective. The individual levels must be in harmony, whether agile or not, so that the goals set are achieved in the respective style.

Agility, like many other topics, must be considered holistically. Anyone who wants to use agile methods should pause briefly and check whether the context supports the plan or whether other methods make more sense.

Agile working makes sense when there is great uncertainty about the goal and the process. Agility then helps to work out the path to the goal together. This applies when the concern and the picture of the solution are unspecific and the process cannot be planned because there are too many unknown variables. The less specific these parameters are, the more important agile working becomes.

If, on the other hand, goals and approach are known and concrete, classic forms of work and work processes prove more efficient.

For the organisation as a whole: it is a matter of “both/and”, not “either/or”. Whether agile or classic working is the right choice is decided for each situation in light of the information available.

The two forms of work differ in characteristic features. In classic working, requirements and the usual approach are known. In agile working, the requirements are not clearly defined and the approach is worked out step by step. In classic working, change requests create effort that was not originally planned. In agile working, iterative coordination processes and changes to requirements are planned in.

In classic working, the customer is involved in the process and in service delivery little or not at all, because the goal of the collaboration is clearly defined. In agile working, the customer is closely involved in the process and in optimising service delivery or product development. This is referred to as third-order cybernetics.

Classic processes are clearly defined but rigid, and allow clear work assignments to be handled efficiently. Agile processes are continuously adapted to changing conditions and optimised, which allows flexibility in handling unspecific work assignments.

Classic working has clear hierarchies, standardised communication routines and hierarchically regulated decision-making processes. Agile working relies on self-organised teamwork with a high degree of personal responsibility, independent of hierarchical structures. A high level of informal communication and stand-up meetings ensures that decisions are made quickly and simply.

The mindset of an agile culture is derived from software development. It shows itself first in how uncertainty is handled. Classic project management regards change as a risk to be managed successfully. Agile project work sees change as an opportunity and thereby creates room for innovation.

For classic project management, this gives rise to the demand to avoid change as far as possible and to keep its impact on the project as small as possible. For agile project teams, it means accepting change as an integral part of a project. These are two completely opposite positions towards change in the world.

The second difference lies in how results are assessed. Classic project management assesses the degree to which the specification defined at the start of the project has been implemented. Agile project management assesses the usefulness of the finished product to the end user or customer in their context.

Two elements shape agile project management. The first is the agile feedback loop, following Ries (2011): build, measure and learn, with the data gained feeding into the next cycle. The second is the iterative approach, following Kniberg: the result emerges step by step over several successive iterations.

Agile leadership comprises all measures that make decisions and behaviour in an area of responsibility fast, flexible and well adapted.

Five principles and features characterise it. Agile leadership optimises decisions. It creates employees and teams who are able to act. It creates a culture of trust and good relationships. It ensures effective communication. And it manages with little direct leadership and regulation.

In a systemic understanding, an organisation is agile and capable of innovation when it has a particular organisational competence: it recognises uncertainty with regard to a required solution and the corresponding path to the solution, and it uses agile ways of working for these challenges in a targeted and skilful way.

This also includes being able, depending on the situation, to build up or dismantle structures that permit and support agile ways of working. This gives rise to the leadership requirement in uncertain times, which are described as volatile, uncertain, complex and ambiguous.

Leadership operates in a field of tension defined by two variables: the degree of uncertainty in the relevant environments and the uncertainty within the organisation, that is, the difficulty of planning work processes.

If both are low, the focus is on exploitation: optimising existing processes and products, working efficiently and managing customer relationships. If both are high, the focus is on exploration: generating new ideas to meet unusual customer expectations, in other words innovation. This is where agile working and agile methods have their place. Leadership stands between the two poles and has to manage the tension.

This requires a leadership culture that, alongside the familiar decision routines based on predictability and knowledge, also permits decisions under uncertainty. Added to this is the ability to manage the resulting paradoxes skilfully.

The central element of agile ways of working is the iterative approach with the cybernetic mode of steering, also known as second-order cybernetics, the systemic loop or the agile feedback loop. Interdisciplinary collaboration is also of great importance. It also treats the customer and their volatile requirements as an integral part of development.

Once it is recognised that agile working is necessary because there is double uncertainty, leadership has two tasks. It decides on structures and processes, builds them up and supports them. And it brings about the content decisions in the process of developing the solution, including the decisions required for the result. The uncertainty is processed within the team.

Four statements describe the leadership requirement in uncertain times. The first two go back to Wimmer (2019).

The first statement is: organisations must question existing forms of collaboration. A number of challenges that companies face as a result of increasing volatility in their relevant environments cannot be met with yesterday’s solutions.

Companies whose business models are not fundamentally called into question by digitalisation also need new organisational forms. Only then can they fully exploit the potential opportunities associated with digitalisation and other developments in relevant environments, for example the transport transition or the energy transition.

Agility may, on balance, be a fashionable hype. The core behind the topic nevertheless names a serious development problem for organisations that ought to be taken up and addressed in a targeted way.

The second statement concerns the relationship between agile frameworks and methods and organisational leadership. In agile structures, those involved are meant to learn to manage the essential leadership tasks on their own responsibility in self-organisation processes. An essential prerequisite for developing such structures in established organisations is the recognition that these new forms of organisational design cannot be extended to the entire organisation.

Deliberate and structured engagement with developments in an organisation’s relevant environments is an essential leadership task.

It is a misconception that agile frameworks dissolve essential leadership tasks and that organisations “automate” their steering without hierarchy in team-based processes. This impression is sometimes created by the writings of some organisational scientists who promote modern forms of agile organisation.

The third statement is: agile frameworks do not take changes in relevant environments into account. Classic agile frameworks such as Scrum concentrate on a single product and the associated product team. Relevant environments are not addressed.

Scaling frameworks such as LeSS or SAFe partly address topics such as budget planning and do not entirely disregard aspects of the environment. Nevertheless, they too are primarily concerned with how the joint work of several teams on one product can be designed.

Agile ways of working and frameworks are therefore not a panacea. The demands on leadership go far beyond agile frameworks. Leadership is called upon to manage the balance between exploitation and exploration at the organisational level.

The fourth statement is: the prerequisites for organisational ambidexterity make organisations agile. The term ambidexterity comes from Latin, from ambo for both and dexter for right, and means two-handedness. It describes the organisational ability to manage today’s business efficiently and continuously optimise it, exploitation, while at the same time recognising potential and developing innovations, exploration.

Continuous changes in the economic, social, political and above all technological spheres challenge organisations’ adaptability and willingness to change again and again.

Leadership manages the balance between exploitation and exploration and the paradoxes associated with it. These concern resource allocation, workplaces and working conditions for the employees of the core business and of the internal innovation wing. Added to this is the structural coupling of the two areas.

The approach is based on an understanding of organisations grounded in modern systems theory. According to this, organisations are complex social systems that provide solutions to problems in their environment. By drawing a boundary, an internal space is created in order to ensure stable output despite external influences.

This results in highly selective perception, and relevant changes are often not recognised early enough. An organisation’s environments include customers, suppliers, competitors, banks, employees, the city or the internet. The organisation selects which of these count as relevant through its frameworks of observation and evaluation, in order to reduce complexity and remain able to act.

The established routines are geared to confirming internal ideas about the environments and filtering out divergent impulses. An organisation sees what it sees, and as a rule it does not see that it does not see what it does not see.

Appropriate leadership ensures the right amount of impulses flowing into organisational decision-making processes. In this understanding, consulting becomes a deliberate decision to counteract the self-referentiality of organisations.

The understanding of strategy fits with this. Strategy development is a leadership task that cannot be delegated, concerned with working on the difference between present and future. Plan-driven corporate management is replaced by shaping the future and coping with uncertainty. Strategy work reflects the existing hypotheses about the status and development of the relevant environments. It develops an attractive vision of the future that gives the organisation orientation and provides clear answers as to how the company will position itself in the market in future.