Multidexterity: How Lego and Netflix achieved digital success

What do LEGO, Netflix, and Narayana Health have in common? 

They have all mastered multidexterity - the rare ability to innovate and optimise simultaneously - by embedding digital transformation deep within their strategy, culture, and operations.

While competing on the strength of its classic brick-based sets, Lego has been building its digital competence in terms of creating video games, movies, AI-driven design for both its creators and consumers, and online play platforms.

Similarly, while Netflix was growing its mail-order DVD business, it was already taking the first steps in developing and implementing streaming technology and transforming its business model toward digital.

And while charging a fraction of the price for operations compared with its local competitors, the healthcare chain Narayana Health has been growing its business as well as achieving higher profit margins than key competitors.

Narayana has also developed its own, tailored healthcare platforms and embeds digital technologies to optimise all its processes in terms of patient experience, diagnostics, and background operations.

All these companies are accomplishing ambidexterity, the balancing of competing objectives, through a third integral move of digital competence and transformation.

How businesses can become multidextrous

In the age of AI, the path to ambidexterity necessitates that a company builds its digital DNA and successfully achieves digital transformation - the reconfiguration of processes and business models - in a way that leverages the power of data and the insights it can offer.

However, digital transformation is hard. Estimates of success differ, but studies show that the chances that transformations can meet their stated objectives are one in eight.

When the three dimensions of project budget, benefits, and timeline are considered, only one out of 200 projects meet objectives in terms of all three.

We view this rare capability of successful digital transformation as a third necessary and integral leg of ambidexterity, an organisational skill set we can more properly call “multidexterity.”

Setting digital transformation aside for a moment, ambidexterity alone requires companies to accomplish competing objectives.

Can you innovate how you do business while optimising operations? Can you have high quality offerings while achieving low cost internally? Can you be large but also nimble?

Only a small minority of companies manage to successfully achieve this.

One challenge lies in the inherent conflicts within business models. The skills needed to optimise and profit from an existing business are different from those needed to innovate and explore new avenues.

Getting operations to run efficiently, like clockwork, is different from the experimentation and messy interactions involved in creating something new.

Further, an optimisation mindset is different from an out-of-the-box mindset needed to generate new ideas.

High quality or novel offerings often exact a cost penalty; larger size usually breeds bureaucracy and slowness; and process innovation can disrupt existing operations, leading to suboptimisation of resources.

Time and technology are key factors. Ambidexterity is not a quick fix; it’s a systemic capability that cannot be purchased or achieved by simply tweaking a few processes or hiring particular talent.

It requires a digital transformational change program developed over time. This involves a commitment to purpose, distributed leadership, skills development, infrastructure investment, and other initiatives that simultaneously address competing aspects, such as operational excellence and strategic flexibility.

The different forms of multidexterity

Becoming multidextrous requires following a path to ambidexterity while effectively leveraging technology within a digital transformation framework.

Structural ambidexterity, for example, refers to an organisation’s ability to separate innovative efforts from core operations while ensuring adequate integration, so that both contribute to the overall strategy and performance.

Amazon operates its core e-commerce business as it simultaneously drives innovation and growth through Amazon Web Services (AWS).

AWS was initially developed as an internal solution to Amazon’s growing IT needs but eventually became a dominant player in the cloud computing market.

This dual focus allows Amazon to maintain and sharpen its operational excellence in retail while leading in technological innovation and creating an engine of growth for the company.

Contextual ambidexterity involves creating an environment where employees can simultaneously focus on exploring new opportunities and exploiting existing capabilities within the same business.

DBS Bank provides a compelling example of this. Recognised as the World’s Best Digital Bank, DBS fosters a culture of experimentation and agility within its teams.

By empowering employees to make decisions and adapt quickly, the bank has been able to innovate in digital banking while continuing to optimise its traditional services.

DBS became multidextrous via a multiyear journey that included ruthless rationalisation of diverse banking platforms into an integrated technology model, consistent agility initiatives and training, and integrating business with technology in terms of joint KPIs for all leaders.

Temporal ambidexterity refers to the ability of an organization to shift focus sequentially between different business models over time, ensuring that it remains agile and competitive in the long term.

NASA has shifted between three business models over the decades since its founding in 1958: the traditional hierarchical model, the inter-governmental partnership model, and currently the commercial network model.

Each of these models involves a different technology strategy, values and capabilities. They enable strategic agility over the long term, and the ability to balance successful delivery of more and more ambitious missions with ever-dwindling resources.

The agency developed a digital transformation framework to guide its efforts that includes desired future states, transformation targets, digital levers, technologies to be used such as AI and intelligent automation, and mission outcomes.

The skills required to be multidextrous

Leadership mindset is a starting point. For leaders, the first essential move is to question the status quo or received wisdom.

The fact that something has been done a certain way for decades does not mean that it should continue to be done that way.

Challenging the status quo is the first step to giving permission to oneself to envision a different future.

Dr. Devi Shetty, the founder of Narayana Health, saw the state of the healthcare industry in India in 2000 and believed it could be both better and cheaper.

He envisioned democratising healthcare in a country with immense structural challenges in this sector. Narayana Health has gone on to find ways treat over 100 million patients since its founding.

Leaders should be able to hold competing ideas simultaneously in their mind - a process that can help to reframe persistent problems and lead to groundbreaking solutions.

Narayana Health is recognised as one of the leading cardiac healthcare organizations in the world, offering surgeries of high quality at around a quarter of the cost of leading competitors.

The imperative of achieving simultaneously high quality as well as low cost led to the development of technology.

In time, AI-powered processes both in diagnostics as well as in patient management, higher specialisation for surgeons, job enrichment for medical support staff, flat organisation design, and a tailored and precise internal metrics system that pinpoints levels of efficiency and quality in all grew.

Developing the digital DNA of the business is another key ingredient for multidexterity.

DBS Bank developed its digital DNA by developing joint KPIs for both business and technology leaders, involving all employees in hackathons and other technology learning opportunities while at the same time investing in technology platforms and technology systems harmonization across the bank.

New technologies such as AI are raising the stakes by offering unprecedented opportunities for simultaneous optimisation as well as innovation.

Invest in the necessary technology infrastructure and digital DNA toward the path to multidexterity.

This article was originally published by the BCG Henderson Institute.

Further reading:

Increase the odds of success in digital transformation

Four keys to using big data to unlock better strategy

How to overcome employees resistance to new technology

Three steps for firms to achieve strategic agility

Loizos Heracleous is Professor of Strategy and teaches Strategy and Practice on the Full-Time MBA, Executive MBA, and Global Online MBA.

Martin Reeves is Chair of the BCG Henderson Institute, coauthor of The Imagination Machine and Your Strategy Needs a Strategy, and a regular contributor to Harvard Business Review.

Master strategic agility, resilience, and frameworks that support innovation and decision-making on the four day programme The Strategic Mindset of Leadership at at WBS London at The Shard.

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