Another Dimension of Procurement 4.0: Ambidexterity
Agile operating model
Since I learned about bimodal IT from Gartner, I went super-excited. I saluted this concept in my book and Udemy course.
I was initially intrigued by the possibility of shifting gears in the agile procurement process and selectively applying different process logic in different situations, and it still does.
In 2022, the "unisex" governance for any occasion is a repelling anachronism, which does so much more damage to the company than any competitors.
In the era of cloud IT, Agile and multimodal operations come together naturally.
However, integrating cloud-based and traditional applications assumes that the eventual new function will be delivered by practicing multi-speed IT, i.e., different working modes for various applications.
The earlier definitions of agility included the "ability to move nimbly and easily."
However, later on, the bimodal nature became increasingly associated with agility.
Gartner positioned bimodal IT as the recipe for enterprise agility. McKinsey mentioned that "truly agile organizations, paradoxically, learn to be both stable (resilient, reliable, and efficient) and dynamic (fast, nimble, and adaptive)."
Apparently, agility is not just the speed or the ability to operate in different modes, nor is it the magic bullet. The recipe for success is way more complex, and agility is only an element.
Let's look into some modern and classical theories for more detail, which would explain the complex dimensions of Procurement 4.0.
Procurement 4.0 is Multimodal
The logical roots of the multimodal operations
The logic of multimodal operations is very intuitive.
It is easy to observe that different business functions of the modern enterprise operate at different speeds, with various flexibility and diverse priorities and objectives.
E.g., the HR back-office works in a highly standardized and routine manner, while marketing continuously fights fires.
Different sub-functions within the same parent function can operate differently. For example, accounts Payable comfortably execute as a factory line, while Treasury runs at lightspeed to effectively manage liquidity and respond to currency and commodity market fluctuations.
Technology can be similarly divided into Reliability and Agility realms, which led to bimodal IT.
Dual operating system
"Accelerate!" by Dr. John Kotter, a professor at Harvard Business School, became the best HBR article of 2012—two years before Gartner launched bimodal IT.
In April 2014, he published the bestseller "Accelerate: Building the strategic agility for the faster-moving world."
"The existing structures and processes that form an organization's operating system need an additional element to address mounting complexity and rapid change.
The solution is a second operating system devoted to designing and implementing a strategy that uses an agile, networklike structure and different processes.
The new operating system continually assesses the business, the industry, and the organization and reacts with greater agility, speed, and creativity than the existing one.
It complements rather than overburdens the traditional hierarchy, thus freeing the latter to do what it's optimized. It actually makes enterprises easier to run and accelerates strategic change. This is not an "either-or" idea. It's "both-and."
The summarized view of Dr. Kotter's concept follows below.
Procurement 4.0 is ambidextrous.
Getting back in time and passing by different concepts of multimodal operations, we reached the notion of "organizational ambidexterity."
It refers to an organization's ability to explore and exploit—to compete in mature technologies and markets where efficiency, control, and incremental improvement are prized and compete in new technologies and markets where flexibility, autonomy, and experimentation are needed.
As early as 1961, Burns and Stalker defined "mechanistic management systems" as suitable for stable industries. These systems are marked by the precise member function definition and are highly hierarchical. However, organic systems are more appropriate for changing industries and are characterized by fluid definitions of function and interactions.
In 1991, James March discussed the paradox of organizational trade-offs between exploration and exploitation.
Exploration is perceived to be less favorable in the long run due to less specific outcomes, longer time horizons, and more diffuse effects than further development of existing ones.
Yet, firms will likely fail in the face of change without some effort toward exploration.
Based on the idea that different structures are required for exploitation and exploration,
several authors suggested that organizations accommodate both for long-term survival. So, the term "ambidextrous" has appeared.
There were three ways to achieve ambidexterity identified:
- Sequential one, where the firm switches between periods of exploration and exploration;
- simultaneous or structural one, which entails not only separate structural units for exploration and exploitation but also different competencies, systems, incentives, processes, and cultures—each internally aligned;
- contextual one requiring a supportive organizational context that encourages individuals to make their own judgments about how to best divide their time between the conflicting demands for alignment and adaptability.
Agility AND ambidexterity contribute to the competitive advantage
Despite the recent efforts to represent agility as the bimodal operational capability or ambidexterity, they are different.
Ambidexterity is the ability to pursue both exploration and exploitation.
Agility is the dynamic capability to rapidly change and rearrange the strategic orientation by adjusting quickly to shifting requirements, opportunities, and trends.
A combination of exploitation for creating returns from the steady improvement of existing products and processes with strategic agility to stay responsive to a dynamically changing environment tends to mediate the tensions of ambidexterity and improve the firm's competitive advantage.
Trimodal structure: Pioneers, Settlers, and Town Planners (or Commandos, Infantry, and Police)
The flip side to the benefits of a bimodal structure is the variety of cultural, business, and technical challenges.
The critical deficiency is the disconnect between shape-shifting agile ΠΆ-3000 innovators and squeaky T-800 units running back-end systems. That's a technical issue and the perceived clash of two cultures - US and THEM.
The complexity of strategic alignment between two clusters of IT and with the business is another major challenge.
Furthermore, the delimitation of scope, distribution of resources, and prioritization of activities also appeared highly complicated.
We already discussed the possible resolution to bimodal challenges - the theory of three roles by Simon Wardley - Pioneers, Settlers, and Town Planners, which he mapped to different stages of product evolution.
He recalled Robert Cringely brilliantly presenting a similar idea in his "Accidental Empires" in 1991: Commandos, Infantry, and Police.
"Whether invading countries or markets, the first wave of troops to see battle are the commandos... They work hard, fast, and cheap, though often with a low level of professionalism, which is okay, too, because professionalism is expensive. Their job is to do lots of damage with surprise and teamwork, establishing a beachhead before the enemy knows they exist. Ideally, they do this by building the prototype of a product that is so creative, and so precisely correct for its purpose that it leads to destroying other products by their very existence. They make creativity a destructive act.
Grouping offshore as the commandos do their work is the second wave of soldiers, the infantry. These people hit the beach en masse and slog out the early victory, building on the start given them by the commandos. The second-wave troops take the prototype, test it, refine it, make it manufacturable, write the manuals, market it, and ideally produce a profit.
What happens then is that the commandos and the infantry head off in the direction of Berlin or Baghdad, advancing into new territories, performing their same jobs again and again, though each time in a slightly different way. But there is still a need for a military presence in the territory they leave behind, which they have liberated. These third-wave troops hate change. They aren't troops at all but the police. They want to fuel growth not by planning more invasions and landing on more beaches but by adding people and building economies and empires of scale."
The idea of trimodal structure is logical and appealing but somewhat tricky in implementing appropriate governance.
The agile organization could possibly be divested into a separate legal entity. Otherwise, the firm must implement mediation structures and mechanisms, co-locate teams, and gradually build mutual trust and cooperation.
Procurement 4.0 is Agile and ambidextrous.
This speedrun along adjacent yet differently branded and sometimes conflicting concepts should only turn your attention to two observations.
Firstly, there's no point in worshiping any modern business theory for its logical elegance. Classical roots would likely feed that "cutting-edge" creation that wasn't branded and promoted enough to upsell as a paradigm shift.
Secondly, a company must demonstrate agility and ambidexterity to prosper in Industry 4.0.
For those finding it hard to pronounce the "ambidextrous", "multiskilled" should be good enough to remember.
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