Raisch & Tushman (2016) – Growing new corporate business: from initiation
to graduation
Summary
Question: What relationships does a new business need to have a) with relevant peer business units
and b) with the corporate parent in order to be scaled up (i.e. to be transitioned from the exploration
to the exploitation phase?
Relationship to peer business units
During Exploration Phase During Exploitation Phase
new business projects differentiate themselves new business projects integrate themselves to
from peer business units (loose coupling) peer business units (tight coupling)
Relationship to corporate parent
During Exploration Phase During Exploitation Phase
New business projects integrate themselves to New business projects differentiate themselves
parent organization from parent organization
Theoretical background: Dynamic view on ambidexterity
Assumption: new corporate businesses transition from an exploration phase to an exploitation phase
as they scale up
3 streams:
Contingency perspective Assumes that changing environmental requirements
motivate organizations to transition between exploration
and exploitation phases to avoid repeated misalignment
with their environment
Vacillation perspective Assumes that companies benefit from alternating between
organizational alignments that promote either exploration
or exploitation as vacillation between periods of
exploration and periods of exploitation delivers brief
episodes of dual capability
Life-cycle perspective Assumes that as organizations evolve over time, they
transition between exploration and exploitation, with
exploration decreasing over time and exploitation
increasing over time
Methods
Longitudinal case study of 6 cases, qualitative & exploratory
, Finding and Proposed Framework:
Parent integration Parent differentiation
Horizontal relationships between new business and peer units
Peer Differentiation (Exploration phase)
Beginning state: LOOSE COUPLING!
The new business unit differentiates itself from peer business units using 2 mechanisms
1. Developing a distinct skill set
2. Creating a local identity
Underlying reasons:
Ambidexterity theory: structural separation of exploration and exploitation & hiring outsiders
with distinct skills reinforces the boundary between exploratory and exploitative units
Peer graduation (Transition phase)
Peer graduation process: The peer business units evaluate whether the value of the new business
exceeds it’s potential costs of cannibalization and internal competition
New business transitions from exploration to exploitation phase under 2 conditions:
1. It clarify’s its territory – making sure that it will not cannibalize the peer-BU’s operations
2. Identification of strategic complementarities – i.e. synergies between new business and BU
Influence of the corporate parent:
The corporate parent also influences the outcome of this peer graduation process, e.g.
corporate managers help to facilitate discussions
Peer Integration
Once the peer graduation process was successful, the new business is integrated into the peer BU
and they start:
1. Sharing resources
2. Develop a collective identity
to graduation
Summary
Question: What relationships does a new business need to have a) with relevant peer business units
and b) with the corporate parent in order to be scaled up (i.e. to be transitioned from the exploration
to the exploitation phase?
Relationship to peer business units
During Exploration Phase During Exploitation Phase
new business projects differentiate themselves new business projects integrate themselves to
from peer business units (loose coupling) peer business units (tight coupling)
Relationship to corporate parent
During Exploration Phase During Exploitation Phase
New business projects integrate themselves to New business projects differentiate themselves
parent organization from parent organization
Theoretical background: Dynamic view on ambidexterity
Assumption: new corporate businesses transition from an exploration phase to an exploitation phase
as they scale up
3 streams:
Contingency perspective Assumes that changing environmental requirements
motivate organizations to transition between exploration
and exploitation phases to avoid repeated misalignment
with their environment
Vacillation perspective Assumes that companies benefit from alternating between
organizational alignments that promote either exploration
or exploitation as vacillation between periods of
exploration and periods of exploitation delivers brief
episodes of dual capability
Life-cycle perspective Assumes that as organizations evolve over time, they
transition between exploration and exploitation, with
exploration decreasing over time and exploitation
increasing over time
Methods
Longitudinal case study of 6 cases, qualitative & exploratory
, Finding and Proposed Framework:
Parent integration Parent differentiation
Horizontal relationships between new business and peer units
Peer Differentiation (Exploration phase)
Beginning state: LOOSE COUPLING!
The new business unit differentiates itself from peer business units using 2 mechanisms
1. Developing a distinct skill set
2. Creating a local identity
Underlying reasons:
Ambidexterity theory: structural separation of exploration and exploitation & hiring outsiders
with distinct skills reinforces the boundary between exploratory and exploitative units
Peer graduation (Transition phase)
Peer graduation process: The peer business units evaluate whether the value of the new business
exceeds it’s potential costs of cannibalization and internal competition
New business transitions from exploration to exploitation phase under 2 conditions:
1. It clarify’s its territory – making sure that it will not cannibalize the peer-BU’s operations
2. Identification of strategic complementarities – i.e. synergies between new business and BU
Influence of the corporate parent:
The corporate parent also influences the outcome of this peer graduation process, e.g.
corporate managers help to facilitate discussions
Peer Integration
Once the peer graduation process was successful, the new business is integrated into the peer BU
and they start:
1. Sharing resources
2. Develop a collective identity
