While R&D hasn’t been a central feature of insurance for most of its history, the last 10+ years have brought intense change and growth to this highly-regulated, conservative industry. For some incumbents, balancing traditional core business concerns with investments in innovation has been difficult, especially when their core business concerns (for example, cutting costs or creating efficiencies) seem at odds with expensive exploratory investments. However, today, organizational ambidexterity is emerging as an approach that can help incumbents navigate and align their strategies better, bringing innovation to the insurance value chain while also staying true to long-held business tenets.
What is organizational ambidexterity?
Organizational ambidexterity is a term usually applied to diverse business environments where two different strategies are deployed at the same time. For example, a company that’s running a mature business while simultaneously working to bring new products to market through a startup. Ambidextrous companies are sometimes said to be able to operate in two different modes at once – exploratory and exploitative. When in the exploratory mode, an organization is future-focused, looking to make a discovery, investment or acquisition that differentiates their business. In the exploitative mode, an organization is working to cement or scale their existing competencies.
Finding the right balance
There’s no one-size-fits all solution for becoming an ambidextrous organization. Different businesses have unique environments, challenges and goals that need to be considered. For example, in organizations that are trying to scale and innovate at the same time, creating separate business units and instituting distinct teams, objectives and resources may be the right ambidextrous approach. Another organization may try to create a more adaptive model, switching or pivoting strategies when the circumstances or market landscape demand it. Other companies might set specific rules for distinct business units so they can collaborate, negotiate and function more effectively in their different roles. While the approaches may differ, the overarching goal of ambidexterity is to support the flexibility, diversity, and growth of the entire business.
Either/or vs. both/and
In complex business environments, ambidexterity and polarity management can help an organization find its equilibrium. When it comes to innovation, the two polarities most often discussed are stability and change. In a business context, this might mean something as simple as choosing between growth or profits.To manage polarities within an organization, it’s important to gather stakeholders together, particularly those who may be from opposing poles. An ambidextrous approach would help manage these polarities, taking the team from an either/or to a both/and mindset. Using the earlier example, that would mean growth and profits, not one over the other.
Ambidexterity and future-proofing insurance
Innovation is no longer just a short-term goal or money-vesting mechanism, but a critical link in the insurance value chain. Organizations looking to future-proof their business and stay relevant in a rapidly shifting environment must be willing to integrate ambidextrous practices that allow them to explore new growth opportunities and support and maintain their core business functions.