Is Compromise a Vital Part of the CEO’s Innovation Toolkit?

Innovation has long been accepted by CEOs as coming with many compromises including cost overruns, delays and high failure rates.

However, a report by Boston Consulting Group (BCG) explores how leaders can navigate innovation - and the inherent challenges - by shifting from ambidexterity to co-ambidexterity.

Ambidexterity in business means a company can balance exploitation, improving existing products and processes for short-term gains, with exploration - innovating and adapting to new markets for long-term success.

BCG's concept of co-ambidexterity is an advanced strategy which “interweaves firms’ and customers’ search and execution processes”.

The company says that this strategy is a new approach that will break the “inherent tradeoff” between search and execution.

Addressing these challenges, Martin Reeves, Managing Director and Chairman of BCG Henderson Institute, says: “In a business environment fraught with risk, leaders need a new approach to innovation - one that addresses the traditional tradeoffs while unlocking a wealth of benefits for the company and their customers.”

In the current business environment, where leaders face volatility and uncertainty, new challenges can appear and escalate quickly, which BCG says can “change the base case for an innovation project”.

At the same time, the report recognises the role of AI and digital technologies in making it much easier for competitors to recreate a winning product, and adding greater urgency to innovate quickly and efficiently.

Turning ambidexterity into co-ambidexterity 

With forward-looking CEOs trying to connect current and future performance, BCG highlights the importance of balancing running a business efficiently while also seeking out tomorrow’s opportunities.

It says that companies should split their approach to innovation into two ‘teams’ - one exploiting the present business and one exploring the future.

Through digital and AI technologies, companies can mitigate the complexities of innovation between current and future performance - using the tech to link what BCG describes as their ‘exploit’ and ‘explore’ functions.

To explain this concept in a simple way, a customers’ purchase of an item of clothing, for example, is their exploit action - what they need now.

But their ‘explore’ action is their desire to have new office outfits - the bigger picture for long-term gain.

Martin says: “Linking the ambidexterity of the provider and the ambidexterity of the customer can unlock value in several ways”, paving the way to open innovation.

A company’s leadership can create co-ambidexterity through recognising what the customer wants in the long run, encouraging them to contribute to future innovation by using the company again as part of their long-term goals.

An example of co-ambidexterity can be seen in Google Search: it’s exploit function is that the search is monetised through advertising, which is integral to the customer’s explore journey as it provides them with what they want to find.

For Google, this generates information to shape the company’s own exploration by refining search algorithms and other offerings.

To help CEOs adapt to co-ambidexterity, BDG outlines four actions that can make innovation faster, less costly and less risky:

1. Treat every customer interaction as a source of innovation 

Customer exploration is constantly ongoing through support chats, search queries and leaving reviews. BCG encourages CEOs to view this as the start of co-ambidexterity - treating all customer feedback, complaints and suggestions as signs and patterns that can drive innovation.

2. Build systems that capture and analyse customer data in real time

AI is a crucial tool as it can spot patterns in large quantities of customer data even before they emerge - flagging emerging needs and trends that aren't being met and suggesting features that could appeal to the target market.

3. Increase the volume of experimentation and rate of learning 

BDG recognises leaders creating a culture where learning from small failures is seen as an opportunity to drive smarter innovation and create future value. AI is a key tool in making these innovations a reality through fast experimentations.

4. Breakdown innovation silos

CEOs should shrink the distance between the company and the customers by treating them as part of the innovation process. This can be achieved by opening up the innovation processes to all areas of the company, avoiding restriction within ‘innovation labs’.

Amazon's ambidexterity 

In July, Amazon announced DeepFleet, a Gen AI foundation model that improves robot fleet travel times by 10%.

This exploits scale and logistics efficiency, while exploring advanced AI to improve robotics and automation.

Scott Dresser, Vice President of Amazon Robotics, said in a statement in July: “Built using the company’s rich and extensive data sets of inventory movement within its sites and leveraging AWS tools, including Amazon SageMaker, this new AI model redefines fleet efficiency.

“It allows us to store more products closer to customers, leading to faster delivery and lower costs.

“And, because it is built on AI that learns and improves over time, it will continue to find new ways to optimise how our robots work together.”

This approach allows Amazon’s leadership to adapt to its customers’ ‘explore’ functions.