The Ambidextrous Organization Antecedents of Exploration and Exploitation : Examining Nokia’s Growth to Market Leadership and Failure at Renewal
Nyman, Henrik J. (2024-03-22)
Åbo Akademi - Åbo Akademi University
22.03.2024
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https://urn.fi/URN:ISBN:978-952-12-4370-7
https://urn.fi/URN:ISBN:978-952-12-4370-7
Abstract
A persistent question in strategic management is how organizations learn new things while also making use of current competences. In this thesis, I will examine how Nokia grew to become a leader in telecommunications, and how this leadership position was eroded when new competitors entered the market. I will examine the turn of events at Nokia through a lens of exploration and exploitation, defined as the capacity to develop new competences and seek new venues of business, and the ability to benefit from existing competences. The ability to do both at the same time has also been denoted as ambidexterity. Studies indicate that ambidexterity can support the long-term competitiveness of companies, especially those operating in more dynamic environments such as high-tech.
However, the exact mechanisms for supporting ambidexterity remain unclear. We still do not fully understand how external factors influence the propensity for exploitation and exploration, nor is it clear how internal strategic choices, structures, and cultures influence ambidexterity. In many cases, companies pursue simultaneous exploration and exploitation by separating focus between different units. In practice, this can involve units that focus on research and development, that is, exploring, while core business activities are taken care of by operative units that exploit existing business opportunities. At the same time, there are other ways of balancing between exploration and exploitation, and many organizations struggle with reconciling a disparate focus in different units.
In this thesis, I will examine Nokia’s ability to explore and exploit from the start of the nineties until the mobile phone division was divested in 2013. The findings are based on a combination of interviews for the included articles and secondary sources in this thesis summary. My findings indicate that the starting point for successful exploration is a clear definition of strategic intent. This becomes particularly important if the organization is faced with exogenous shocks such as disruptive innovations, like Nokia did when new competitors entered the market from 2007 onwards. Conditions like these might also require a re-definition of strategic intent. Further, ambidexterity relies on structures and cultures that are maintained through a balance of formal and informal control. In practice, this means that focus and ways of working is governed not only by clearly specified processes, rules, and incentives, but also with the help of unwritten mechanisms such as group norms, organizational culture, and values. This balance between different modes of control was skewed at Nokia, both in the nineties and from roughly 2007 onwards. Lastly, ambidexterity relies on multiple forms of balancing between exploration and exploitation. Separate units that focus on exploration might be a necessary but not sufficient precondition for ambidexterity. From 2007 onwards, Nokia relied extensively on separate organizations for exploration, both internal units and external partners.
However, the exact mechanisms for supporting ambidexterity remain unclear. We still do not fully understand how external factors influence the propensity for exploitation and exploration, nor is it clear how internal strategic choices, structures, and cultures influence ambidexterity. In many cases, companies pursue simultaneous exploration and exploitation by separating focus between different units. In practice, this can involve units that focus on research and development, that is, exploring, while core business activities are taken care of by operative units that exploit existing business opportunities. At the same time, there are other ways of balancing between exploration and exploitation, and many organizations struggle with reconciling a disparate focus in different units.
In this thesis, I will examine Nokia’s ability to explore and exploit from the start of the nineties until the mobile phone division was divested in 2013. The findings are based on a combination of interviews for the included articles and secondary sources in this thesis summary. My findings indicate that the starting point for successful exploration is a clear definition of strategic intent. This becomes particularly important if the organization is faced with exogenous shocks such as disruptive innovations, like Nokia did when new competitors entered the market from 2007 onwards. Conditions like these might also require a re-definition of strategic intent. Further, ambidexterity relies on structures and cultures that are maintained through a balance of formal and informal control. In practice, this means that focus and ways of working is governed not only by clearly specified processes, rules, and incentives, but also with the help of unwritten mechanisms such as group norms, organizational culture, and values. This balance between different modes of control was skewed at Nokia, both in the nineties and from roughly 2007 onwards. Lastly, ambidexterity relies on multiple forms of balancing between exploration and exploitation. Separate units that focus on exploration might be a necessary but not sufficient precondition for ambidexterity. From 2007 onwards, Nokia relied extensively on separate organizations for exploration, both internal units and external partners.