How To Design an Ambidextrous Organisation

By Jonathan Trevor and Peter Williamson

How can leaders today design and manage their organisation to make it deliver both efficiency and flexibility?  The authors explore the emergence of the ambidextrous organisational form, and propose a new concept called “the Enterprise Ecosystem” as a response to address the challenges facing companies in the 21^st century.

Many CEOs we talk to nowadays recognise that their companies need to be more flexible to accommodate fast-changing customer demands. They are also under pressure to maintain a relentless focus on efficiency. The result is an uneasy feeling that their organisations are not up to the challenge of doing both well. This frustration shouldn’t come as a surprise because the still dominant 20^th century models of organisation offer only an unpalatable choice: prioritise either efficiency or flexibility.

To maximise efficiency, the tried and tested approach has been to adopt a rigid hierarchical organisation based on top-down decision-making, high division of labour and formal rules, and lastly, policies and procedures optimised for an industrial, mass-production age. For enterprise-wide flexibility, the increasingly popular alternative is to embrace an “internal market” model based on loose networks of empowered experts, few boundaries, high informality, and horizontal interaction across a flat structure that aligns around values. Neither offers a silver bullet. So, companies risk “flip-flopping” between these extremes in endless rounds of re-organisation.

The challenges of the 21^st century demand a new approach. A promising avenue of management research is focussed on the emergence of the ambidextrous organisational form – these are organisations that are capable of exploiting existing opportunities efficiently, whilst simultaneously exploring new opportunities and developing capabilities for the future. Whilst the concept is well established in management literature, how these ambidextrous forms of organisation are designed and managed in practice is much less understood.  

Based upon our in-depth research and consultancy with companies operating in a variety of different sectors, we put forward a blueprint for designing an organisation as a network, with enough structure to make it capable of efficient implementation, but enough flexibility so that it is capable of rapidly learning and adjusting itself to its changing environment (please see About the Research).

We call this model of organisation the Enterprise Ecosystem. But what does such an organisation look like in practice? How does it reconcile the uneasy bedfellows of efficiency, consistency, flexibility, and creativity at a large scale? How can leaders design and manage their organisation practically to be capable of “doing both”, as Inder Sidhu of Cisco Systems puts it.

Demands on the 21^st Century Organisation

In looking for answers to these questions, we began by reminding ourselves what the 21^st century organisation needs to deliver for superior performance. Boiled down to fundamentals, today’s organisation must be capable of two things: integration (efficiently bringing together products, services, people, knowledge, materials, and operational activities) and flexible adaptation (responding to varied and fast-changing customer needs, ideas, technologies, and business conditions). 

Bureaucracy and the Search for Efficiency

Bureaucracy has developed a bad name. But still, many organisations continue to embrace the principles of bureaucratic work organisation based on strict hierarchy in the quest to efficiently convert inputs, including people, knowledge, and financial capital into outputs in the form of products and services. Rationally conceived, planned and executed hierarchies put managers in control of work activity to maximise productivity and minimise waste, thereby creating maximum surplus value. Notionally, the ‘machine’ bureaucracy is ideal for efficiently matching relatively predictable demand with predictability of supply in terms of volume, quality, and cost.

These qualities have helped many product-centric firms to thrive throughout the 20^th century. McDonald’s is an exemplary bureaucracy. It excels because of its deliberate product standardisation strategy and strict routinisation of operations on a global scale.¹ Like a well-oiled ‘lean’ machine, it can efficiently and consistently deliver its market-leading products to exacting levels of quality across thousands of different locations. To understand its scale, consider that McDonald’s sells more than 75 hamburgers every second and serves approximately 70 million customers every day in over 34,000 outlets located worldwide.² So, let’s not forget that while “bureaucracy” is now frequently used as a term of derision, it is proved to be highly successful over centuries in delivering standardised products and services at a large scale, even more efficient than individual artisans. 

But hierarchies also have downsides. Even at their best, bureaucracies constrain companies to product leadership. They lack the typical agility to respond quickly to changing customer needs, nor can they easily customise what they are able to offer. Hierarchies also rely upon the wisdom of the few at the top for direction. Those who chose to design their organisations around the ideal of a well-oiled machine have found that while they thrived in the industrial, mass product age, they are now faltering in the fluid environment of the 21^st century.

The Alternative: A Flexible Internal Market

The antithesis of the bureaucracy is the internal market model of organising work. Where bureaucracy is highly vertical and integrated to hierarchy, internal markets have no ‘centre’ to speak. Instead, an internal market typically comprises highly independent, separated, and autonomous teams and individuals. An organisation embodying an internal market emphasises flexibility above all else – the flexibility to configure and reconfigure rapidly around changing customer preferences.

Structurally, an internal market resembles a loose network with little or no hierarchy. Authority is delegated and knowledge is widely dispersed. Whereas traditional forms of organising emphasise the strategic value of economies of scale, the internal market emphasises the value of flexible differentiation – the capability to produce inimitable innovations (or variations) at the point of customer interaction. Decision-making is no longer the domain of the ‘wise’ few at the top. Decisions are usually made collectively, openly, and transparently⁴.

But the internal market model is not easily scalable nor it is efficient or easy to replicate – ‘lightning in a bottle’ cannot be reliably produced to order. Companies that plump for lightly structured networks in the face of an increasing turbulent and uncertain operating environment often find themselves directionless and floundering. Equally, it is all too easy to find oneself beset by energy-sapping turf wars in the unstructured and often highly individualised environment.

The very independence of the parts – in the form of enterprising individuals and teams – enables internal markets to flexibly adjust to the needs of individual customers, but also prevents the firm to be scalable as a whole. It is unlikely to be more than the sum of its parts because there is little in the way of joined up ways of working. In extreme cases, it is incapable of pursuing a common purpose that transcends individual goals and financial self-interest.

Pursuing the Best of Both

Clearly, there is no one-size-fits-all prescription on how to design a winning organisation. The hierarchy and the internal market have two very different ways of organising work, each with advantages and disadvantages. It is helpful to think of them occupying the opposite ends of a spectrum, with a range of options in between which are more or less appropriate according to the circumstances of individual firms. Product-centric firms that win by exploiting economies of scale will always conform more to the organising principles of the bureaucratic, hierarchical model. Service-oriented firms that need the flexibility to respond to fast-changing customer needs or maximise creativity may veer more towards the internal market end of the spectrum. But increasingly, forward-looking firms with whom we work with are looking to secure the best of both worlds by inhabiting the centre ground because developing a workable hybrid that combines the advantages of the bureaucratic hierarchy and internal market isn’t easy.

Consider the example of Facebook. Following its successful IPO in 2012, Facebook realised that its previously unstructured “Move Fast and Break Things” philosophy limited its growth potential. It introduced a raft of what were, at the time, profoundly counter-cultural organisational changes. First, it reorganised its staff according to product divisions (previously, there were none). Second, it encouraged deep technical specialisation at the divisional-level. Third, it introduced formal processes to speed up product innovation and reduce wasteful duplication. The new approach was encapsulated by Facebook’s revised motto, “Move fast with stable infrastructure”, which speaks to the challenge of balancing flexibility and efficiency.³

At the other end of the spectrum, Rolls Royce Aero Engines has a hierarchy capable of producing a jet engine that involves integrating a “bill of materials” with as many as 25,000 parts. It was also able to launch a series of new jet engine designs to match each major new airframe and then innovate through a succession of improvements and regular upgrades over decades. This enabled it to compete successfully in a world of standardised, mass-produced goods and services, even for a product requiring a huge diversity of the elements, so long as change and innovation was restricted to regular timetable determined by the company. But today, Rolls Royce needs to sell its customers “power by the hour”. Instead of purchasing an engine, they buy units of thrust from Rolls Royce to power their fleets of aircraft over a contracted span of time.

This shift demanded a step-change in Rolls Royce’s capabilities for both integration and flexible adaptation. It now needs to integrate diverse capabilities in maintenance, customer service, and inventory management with a deep knowledge of how the customer runs its own business as well as the 25,000 parts. It also needs to be able to flexibly adapt to the business models of different customers, their route structures, flying schedules, and internal processes. It is all designed to make life easier for the customers, but delivering power by the hour also equates dramatic rise on pressures for the Rolls Royce organisation. A sequence of damaging profit warnings throughout 2015 underlined how ill-equipped it was to address them.

Or consider Microsoft. It has to integrate millions of lines of code and the knowledge of an army of IT engineers-specialists. It has to always adapt its product, launching a series of new versions and a continuous flow of security updates and patches for its PC users. But today, Microsoft must integrate into its offerings the needs of a diverse set and range of devices for different kinds of customers, from mobile handsets and tablets through to game consoles and television screens. It also has to adapt its product much faster than before as the PC market declines and a myriad of new interfaces including voice, touch, eye movement, and facial recognition emerge, as well as responding to an era of cloud computing and rapid developments in artificial intelligence

Combining the best of hierarchy and internal market sounds great in theory. But creating a hybrid organisation is much more difficult in practice. So, what do these hybrid organisations look like and how can they be designed to simultaneously achieve efficiency and flexibility?

The Enterprise Ecosystem

We believe that a hybrid organisation is capable of both efficiency and flexibility and will be structured as an Enterprise Ecosystem. The design of an Enterprise Ecosystem starts from the perspective that 21^st century work organisations are – must be – complex adaptive systems. The complex adaptive system comprises multiple different, but complementary species, each pursuing their own specialist roles but which are interconnected in ways that allow them to generate mutual benefit and achieve a common purpose. Acting together, they can achieve more than the sum of the parts. And they are more resilient because they can respond systemically to overcome environmental disruption. Complex adaptive systems adapt to their changing environment by continuously reconfiguring their mix of species and the form and extent of the interdependencies between them, according to the requirements of the external environment.

Everyday examples of complex adaptive systems include economies, natural biospheres, and even organs, such as the brain. So why not companies? For species read teams, individuals or functions – different pools of talent (or technologies) that, when connected, provide the Enterprise Ecosystem with a variety of valuable knowledge, skill, and capability to address the multifarious demands of customers and markets. For interactions, read structures, relationships, reporting lines and information flows.

Unlike most naturally occurring complex adaptive systems that are entirely emergent, self-organising systems, Enterprise Ecosystems, by contrast, can be designed to fulfil a specific purpose. This means that the Enterprise Ecosystem as a whole can adjust to the changing environment guided by its common purpose. This contrasts with multi-agent systems of organisation, such as internal markets, where the individual agents act purely independently according to their own, narrow self-interest⁶.

The Chinese telecommunications equipment company Huawei is an example of an Enterprise Ecosystem. Despite the political controversy it has attracted in the US, Huawei is now the largest maker of telecoms equipment in the world with over 145 operations in different countries, and has surpassed Sweden’s Ericsson with $60 billion of sales, 66% of which came from outside China. When we interviewed one of the many Western expatriates who now work for Huawei, he recalled that on his first day with the company, he was asked to see an organisation chart. He was stunned by the answer: there wasn’t one. At first, he thought the privately owned company was just being secretive, but over the coming months, he came to realise that Huawei really didn’t have an organisation chart in the usual sense.

Certainly, there was hierarchy. In fact, much of the direction was very top down and the boss’s word was proverbial law for many employees. In addition,  there were units with different capabilities and specialisations, such as manufacturing, product development, sales, or finance, but these capabilities were continuously being reconfigured around projects or problem solving. When a new customer opportunity was identified, a team from across the company would be marshalled. When one of the top dozen leaders of the company agreed a new product initiative with their peers, a team would be put together to take it from idea – through product development and manufacturing, to final installation and service, often involving hundreds of people from within Huawei’s global operations. People would be added or reallocated through the life cycle of that initiative, flexing the capability-set and capacity as required. The same process was applied to making improvements in Huawei’s processes and support systems.

The pattern was also repeated at the coalface within each bid team, product development project, or improvement initiative. When a problem needs to be solved, the project team (often under intense pressure from above) gathers together anyone from the company that can help them in the mode of “huddle and act” until a solution is arrived at. The company is, therefore, strong on vertical hierarchy, but extremely flexible at all levels horizontally, reconfiguring itself continually to serve the next customer demand, back new initiatives, solve problems as they arise, and maximise knowledge exchange and joint learning.

An interesting reflection of this ecosystem is that when you receive a business card from a Huawei employee, it lists their expertise under their name (such as digital signal engineer or chip designer), but nowhere is there any reference to their department or business unit. Why? Because what counts is that they are a resource with specialist capabilities and experiences that can be flexibly deployed according to the emerging needs of the business.

This concept also applies right to the top of the company. Even the Chief Executive Officer (CEO) isn’t a fixed position in Huawei. In 2011, the company introduced what it called a “rotating CEO system under the leadership of the Board of Directors”. This system provided for rotating “acting CEOs” to take turns leading the company for six months. After the rotational period is over, the non-acting rotating CEOs remained part of the company’s decision-making nucleus⁷. Likewise, other senior employees must re-apply for new jobs every three years. These mechanisms aimed to avoid complacency and maintain ambition and dynamism in a fast-moving industry. Huawei’s founder, Ren Zhengfei points out that: “A rotating system for leaders is nothing new. In times when social changes were not so dramatic, emperors could reign for several decades and create periods of peace and prosperity. Such prosperous periods existed in the Tang, Song, Ming, and Qing dynasties. The rotational period for each emperor lasted several decades. Some companies in traditional industries rotated their CEOs every seven or eight years, and these CEOs experienced some prosperous times in their industries⁸.”

According to Ren’s thinking, the connections between different capabilities, and therefore people, shouldn’t be fixed in the way that a traditional boxes-and-wires organisation chart demands. Other companies, while not going quite as far as Huawei, have moved much closer to an ecosystem model.

For example, the storied aerospace engineering company, Rolls Royce, has transformed from organizing according to hierarchical principles to a structure more akin to an information-rich network. As part of its ‘modernizing work’ programme, it has established hundreds of new knowledge-sharing connections (think collaborations) between teams and talent in its customer-facing business units, functions and country-based operations worldwide.⁴ The benefit of this new ‘crowd wisdom’ approach is described as: “We get the whole organization engaged in meeting new objectives. Hitherto, they were seen as a management problem to solve. Now, we get the minds and intellect of the whole organization into solving our problems”.⁵

Meanwhile, ARM, recently acquired by Softbank for a considerable market premium, and whose RISC (reduced instruction set computing) architecture has become the de-facto global standard, organises itself as many project teams interacting as a single network across each of is five divisions The divisions themselves are embedded in a corporate structure that prevents them from becoming silos. Members of the senior executive team also sit on the boards of each division to ensure that both the corporate and divisional objectives are considered in any strategic initiative and a cross-division, cross-function Product and Project Approval Team decides on the projects ARM undertakes.

Of course, some of this thinking isn’t new. Many professional services firms, such as law firms, business consultancies, or investment banks work in a similar fashion. However, ecosystem thinking also takes the familiar project-based organisation to a new level of comprehensiveness and, critical scale. Unlike project-based organisations, Enterprise Ecosystems endure; they are not time limited nor are they a discrete component of a wider organisation or alliance.

Enterprise Ecosystems typically incorporate multiple temporary project-based organisations alongside permanent units as part of their overall network. The emphasis is on managing the connections between all varieties of “sub-organisation”, permanent and temporary, large and small, execution or innovation focussed, to ensure the whole of the ecosystem is worth more than the sum of its parts when aligned the enterprise’s enduring purpose. There are also similarities with matrix approaches to work organisation, especially in terms of the value placed upon horizontal connectivity. Unlike matrix organisations, which are designed principally to manage the interactions and potential trade-offs between different product lines and geographies, the Enterprise Ecosystem manages an even broader range of connections, including different domains of capability.

Rather viewing the organisation with a set of activities, ecosystem thinking starts with pools of different capabilities as the fundamental building blocks of effective organisation. Rather than hard-wiring the organisation, an ecosystem approach focuses on creating structures and incentives that encourage the formation of flexible connections between these capability pools that can be constantly reconfigured. Finally, rather than being driven by traditional reporting lines, the Enterprise Ecosystem is propelled forward by the energy that comes from grasping opportunities and solving problems within the context of a clear and compelling common purpose – the unifying raison d’etre of the network.

Designing The Enterprise Ecosystem

Designing an Enterprise Ecosystem begins with putting into practice three key principles. First, an ecosystem must bring together different species. In an external ecosystem, the species are different kinds of partners such as customers, end users, institutions, influencers, and so on. The species in an internal ecosystem are capability and knowledge pools made up of different kinds of people and technologies. Second, the connections between species in the ecosystem must be designed to flexibly integrate knowledge, and not as traditional reporting lines. The purpose of these connections is to bring together complementary capabilities and knowledge and to promote joint learning and creation¹⁰. Third, the energy that powers the ecosystem forward must come from shared purpose and values, not from pure command and control.

Attracting and Developing the Right Species

An effective Enterprise Ecosystem needs different types of people. They don’t all need to be well rounded or ambidextrous. But they do need to have distinctive capabilities that define their species and their functionality for peers.

The first species required are efficient executers – people who enable plans to be turned into action efficiently. They need the capability to deliver reliable quality with minimum errors at maximum efficiency. Efficient executers are sometimes in short supply. When Rolls Royce set up its new $565 million advanced manufacturing facility in Singapore to produce its most advanced products – Trent 900 and 1000 engines for the Airbus A380 and Boeing 787 Dreamliner, and 6,000 titanium fan blades per year – they needed to recruit and train over 450 technicians capable of performing stringent quality control requirements and maintaining absolute manufacturing consistency. The pool of seasoned aerospace technicians in Singapore was extremely limited. So Rolls Royce decided to slice its manufacturing process into chunks smaller than it used at its home base in England where it had efficient executers with 30 or 40 years of experience building engines. This enabled them to re-define the capability requirements of their efficient executers to emphasise ‘depth not breadth’; so they could develop technicians’ capabilities faster through more repetitions of a narrowly defined task in any given month. However, as we discuss below, to make this new, more specialised internal ecosystem work they needed to integrate them through better connections and knowledge sharing between technicians trained to execute a narrow range of jobs reliably. Similarly, Huawei and ARM need large pools of people with efficient execution capability who also need to be connected with others throughout the Enterprise Ecosystem.

The second species an Enterprise Ecosystem needs is the creative generalist. Their key role is to integrate capabilities and knowledge drawn from throughout the Enterprise Ecosystem to ensure customer delivery, or push a project forward or solve a problem. They need the ability to span multiple organisational boundaries, both internal and external, and provide a bridge for knowledge exchange. As ‘T-shaped’ talent, they typically have in-depth knowledge of one domain, but also broad knowledge of other areas. Much of ARM’s early success was built on its “partner managers” who acted as creative generalists. The partner managers were the “eyes and ears” of ARM in their external partners. But other important parts of their job were to represent a partner internally within ARM and provide feedback to ARM teams including engineering, marketing, and management regarding partners’ technical and business requirements so that ARM could develop and reconfigure its capabilities to serve the emerging needs of the market. One of ARM’s most successful partner managers in Korea exemplifies the skills required: he had worked for many years with a large computer hardware company in Korea, then founded his own systems-integration start-up, giving him a very broad knowledge of both technologies and the industry.

The third species required to underpin an Enterprise Ecosystem are flexible specialists. At their core, flexible specialists have deep knowledge of a domain, but they also need the adaptability necessary to apply this knowledge to different opportunities, projects, or problems, shifting between them in different timescales. Huawei, for example, has a team of over 40 photonics technologists and scientists in eastern England, many of them with advanced degrees. They need the capability to switch between developing prototypes for products that would be rolled out in the near term and next generation technology with a gestation of between three and ten years.

Establishing the Right Types of Connections

In any Enterprise Ecosystem, these species need strong capabilities to connect with others – even those with very different skills and ways of working. They not only need to be good at learning, but also able to share that learning across the internal ecosystem and sometimes also with external partners, customers and end users. All Enterprise Ecosystems need to incorporate proficiency of making and maintaining connections into their recruitment criteria. To enable this to happen smoothly, an Enterprise Ecosystem also needs the right types of connections between the species within it. Rather than traditional reporting lines, these connections reflect where knowledge needs to flow within the organisation to deliver results.

The key to promoting these connections is to establish a set of magnets that can pull together the relevant capabilities and knowledge that can produce results through exchange and interaction. As we have already noted, these can be customer opportunities, product or technological projects, or problems that need to be solved. These magnets, each of which has its own lifecycle, are the fundamental “work units” of the Enterprise Ecosystem. For administrative purposes, individuals may belong to a capability pool, but their day-to-day activities are part of the opportunity, project, or problem they are working on at any time.

An ARM executive explained the ways these magnets and connections work: “How do you integrate and communicate the multiple strands of information coming from the OEMs, partners, and different internal specialists? Part of the answer lies in keeping the ultimate objective constantly in view: in our case to develop a technology roadmap that was what might be termed ‘the highest common denominator’ between different partners’ requirements. The ultimate prize is to develop IP on new designs and architectures that can be licensed globally to a wide range of semiconductor partners.”

Powering the Enterprise Ecosystem

Generating alignment behind a common purpose is a necessary condition for maintaining an effective Enterprise Ecosystem. In the absence of traditional command and control, there are increased risks of entropy and conflicts between the different capability species in the internal ecosystem. Entropy dissipates energy and undermines performance as Facebook discovered. A key role of senior management in an Enterprise Ecosystem, therefore, is to define and communicate a common purpose that gives both focus and energy to the network.

Today, developing a strong sense of pride amongst employees is a key focus for HR leaders at Facebook to power their organisation forward. Pride fosters commitment to the enterprise and its purpose, which is essential for harnessing ecosystem working in the form of complementary teams (and the knowledge and creativity they bring) as well as the complex interactions that enable peerless innovation whilst operating at scale. The three factors from which pride originates are optimism for the company’s future, a belief in the goals and objectives that make up the company’s mission and confidence that the company is doing social good ¹¹. These three factors combined become a dominant organising logic within the Facebook Enterprise Ecosystem, and foster an open culture enabling people to “move around and solve the problems they care about most” to fulfil “our mission to make the world more open and connected¹²”.

People within the Enterprise Ecosystem need to know “what do we exist to achieve?” (purpose) and “where are we going?” (a vision of the future and what success looks like). Early in its history, for example, ARM’s then newly appointed CEO, Sir Robin Saxby posed a brutal question to his senior team: “Should we strike out for something, or just be in the hand-to-mouth chip design consulting business?” With Saxby’s enthusiasm and the founding engineers’ belief in their technology, they decided ARM’s purpose and vision would be to “become the global standard for RISC chips with a target of embedding ARM designs into 100 million chips by the year 2000.” To date, ARM partners have shipped over 60 billion ARM-powered chips used in more than 95% of the world’s mobile phones.

Enterprise Ecosystems also ask a lot of their people in terms of commitment in the overall goal of the company rather than just their immediate unit, and in terms of adaptability and willingness to live with ambiguity. In return, those working within these structures expect a lot from the companies and networks they work for. To devote this kind of energy in the face of the uncertainty of an ever-changing role in the internal ecosystem, people demand their leaders to establish a set of rules they can buy into and respect, and that won’t happen unless they perceive the rules and distribution of opportunity in whatever form it may take – from income, promotion, or simply from an interesting work.

Leading the Enterprise Ecosystem

Enterprise Ecosystems need to be led differently from traditional structures. To see how, consider the genesis of one the iconic products in ARM’s history, codenamed the ARM 9E. The project began with ARM looking for new application areas beyond cell phones. After a brainstorming session led by a group of its product managers, they alighted on disk drives. The product manager of the existing offering most closely adjacent to this new market, John Rayfield took up the challenge. He proposed a joint development project with a leading customer to co-develop the new product. When that customer chose a competing solution, he went to a second prospect; it also refused. Eventually, he identified a partner, Cirrus Logic, who was interested in adding an ARM design to complete its product offering. The ARM product manager convinced an ARM technical specialist to contribute and together with Cirrus they went to pitch the idea to Western Digital. This also ended in pushback from the potential customer, but this time they received the go-ahead to come back with an improved specification. At the next meeting, Western Digital’s senior management in California asked for Robin Saxby, then ARM’s CEO, to attend in person. During the meeting Saxby declared “I want your business, what do I need to do?” On hearing the list of deficiencies in ARM’s existing proposal he said, “Alright we’ll fix it.”

Even with the CEO’s commitment, completing the project in ARM’s Enterprise Ecosystem wasn’t a fait accompli. Rayfield “spent a lot of corridor time” bouncing around the ideas of his colleagues and getting input from people with both technical and international experience. He then put this together in a proposal that he circulated to 15 people scattered across the company, chosen for their specialised skills and experience. Rayfield received a huge response, some of which stunned him. Although, as he commented, “I felt I had thought things through very well … but these guys tore the ideas to pieces, pointing out things I had never thought of.” But through this process, Rayfield was able to assemble a team with diverse capabilities who were able to develop the specifications into a workable blueprint. He took it back to the customer who subsequently contacted his boss, Saxby, to congratulate ARM on the new initiative. CEO Saxby’s response to Rayfield was telling: “I’m glad they like it, but John, what exactly is it?” Shortly afterwards the 9E graduated to become a fully-fledged product development project and Rayfield was able to extend his team to draw on the full capabilities available within the ARM organisation. The final product turned out to be an important driver of the company’s growth, with applications in audio devices and storage and Rayfield later became the Director of Research.

This experience demonstrates a number of the ways successful leaders at different levels within an Enterprise Ecosystem need to think and act. First, they need to think in terms of the capabilities they require in order to win in the unfolding competitive environment, and how those capabilities are best built and sustained, rather than in terms of boxes and wires. Second, they have to accept less control and predictability about the way their organisations respond to opportunities and tackles problems. They promote behaviour in their people that generally asks for forgiveness rather than permission. Third, they need to embrace the idea that integrating different capabilities and winning commitment from within an Enterprise Ecosystem will be an entrepreneurial, iterative process.

Organising for the 21^st Century

Today’s organisational solutions, whether they are traditional bureaucracies, matrix structures, “organic” organisations, or the customer-focussed company, don’t seem to be delivering on the demands of the 21^st century business environment: efficient integration and flexible adaptation. Maybe it is time for a fundamental re-think inspired by ecosystem thinking. This means viewing your organisation not as a machine or a market, but as an Enterprise Ecosystem consisting of species with different capabilities and knowledge and the structures and incentives that encourage connections between them; connections that can be constantly and rapidly reconfigured to keep pace efficiently with the external environment.

Companies such as Facebook, Rolls Royce, and Huawei have already moved decisively in this direction from either end of a spectrum that incorporates the dominant organising logics of the 20^th hierarchy and internal market. But to make it happen, leaders need to reassess their roles and styles to succeed in a post-bureaucratic world. And these new Enterprise Ecosystems will not get off the starting blocks without the energy that comes from common purpose and compelling vision of the future to propel them forward.

Jonathan Trevor is Associate Professor of Management Practice at the University of Oxford, Saïd Business School. He holds a PhD in Management Studies and Economics from Cambridge University. He works extensively with executive leadership teams in all sectors and internationally to apply his research, and teaches on the Oxford MBA, Executive MBA and executive education courses.

Peter Williamson is Professor of International Management at the University of Cambridge, Judge Business School and Fellow of Jesus College, Cambridge. He holds a PhD in Business Economics from Harvard University. He also serves as the non-executive director of several companies spanning digital transformation software through green energy.

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