Linking strategic flexibility and operational efficiency: The mediating role of ambidextrous operational capabilities

• Author: Sebastian Kortmann,Carsten Zimmermann,Carsten Gelhard,Frank T. Piller
• Date: 01 November 2014
• DOI: http://doi.org/10.1016/j.jom.2014.09.007
• Published date: 01 November 2014

Journal

of

Operations

Management

32

(2014)

475–490

Contents

lists

available

at

ScienceDirect

Journal

of

Operations

Management

j

o

ur

na

l

ho

mepage:

www.elsevier.com/locate

/jom

Linking

strategic

flexibility

and

operational

efficiency:

The

mediating

role

of

ambidextrous

operational

capabilities

Sebastian

Kortmanna,∗,

Carsten

Gelhardb,1,

Carsten

Zimmermannc,2,

Frank

T.

Pillerd,3

aUniversity

of

Amsterdam,

the

Netherlands

–

Amsterdam

Business

School,

Plantage

Muidergracht

12,

1018

TV

Amsterdam,

The

Netherlands

bUniversity

of

Muenster,

Institute

of

Business

Administration

at

the

Department

of

Chemistry

and

Pharmacy,

Leonardo-Campus

1,

48149

Muenster,

Germany

cUniversity

of

San

Diego,

School

of

Business

Administration,

5998

Alcalá

Park,

San

Diego,

CA

92110,

United

States

dRWTH

Aachen

University,

School

of

Business

and

Economics,

Kackertstraße

15-17,

52072

Aachen,

Germany

a

r

t

i

c

l

e

i

n

f

o

Article

history:

Available

online

16

September

2014

Keywords:

Ambidextrous

operational

capabilities

Strategic

flexibility

Operational

efficiency

Mass

customization

capability

Innovative

ambidexterity

a

b

s

t

r

a

c

t

We

elucidate

the

important,

though

complex,

relationship

between

strategic

flexibility

and

operational

efficiency.

We

incorporate

insights

from

the

dynamic

resource-based

view,

ambidexterity

literature

and

managerial

practice

to

explain

how

two

ambidextrous

operational

capabilities,

i.e.,

mass

customization

capability

and

innovative

ambidexterity,

fully

mediate

the

relationship

between

strategic

flexibility

and

operational

efficiency.

Using

top-level

executive

data

in

India

and

the

United

States

of

America,

our

structural

equation

models

show

that

ambidextrous

operational

capabilities

link

strategic

flexibility

and

operational

efficiency.

While

informing

the

debate

on

developing

sustainable

competitive

advantage,

we

derive

important

theoretical

and

managerial

implications

for

both

operations

management

and

strategic

management.

©

2014

Elsevier

B.V.

All

rights

reserved.

1.

Introduction

The

trade-off

between

flexibility

and

efficiency

receives

increas-

ing

attention

in

managerial

practice

(e.g.,

Kaplan

and

Norton,

2008;

Prahalad

and

Krishnan,

2002)

as

well

as

various

academic

liter-

atures,

such

as

operations

management

(e.g.,

Anand

and

Ward,

2004;

Bordoloi

et

al.,

1999;

Boyer

and

Lewis,

2002;

Ferdows

and

De

Meyer,

1990)

and

strategic

management

(e.g.,

Ebben

and

Johnson,

2005;

Kotha,

1995).

While

firms

need

to

be

strategically

flexible

to

adapt

to

unanticipated

situations

and

rapidly

changing

envi-

ronments,

they

also

need

to

optimize

their

business

processes

to

achieve

operational

efficiency

(Eisenhardt

et

al.,

2010).

Hence,

prior

literature

suggests

that

balancing

strategic

flexibility

and

operational

efficiency

supports

sustainable

competitive

advantage

through

reconciling

long-

and

short-term

objectives

(Adler

et

al.,

1999;

Eisenhardt

et

al.,

2010).

∗Corresponding

author.

Tel.:

+31

020

525

4305.

E-mail

addresses:

S.Kortmann@uva.nl

(S.

Kortmann),

Carsten.Gelhard@uni-muenster.de

(C.

Gelhard),

zimmermann@sandiego.edu

(C.

Zimmermann),

piller@tim.rwth-aachen.de

(F.T.

Piller).

1Tel.:

+49

(0)251

83

318

20;

fax:

+49

(0)251

83

318

18.

2Tel.:

+1

619

260

4852.

3Tel.:

+49

0214

80

93577.

However,

the

relationship

between

strategic

flexibility

and

operational

efficiency

is

associated

with

various

tensions

arising

from

conflicting

metrics

(Melynk

et

al.,

2004),

contradictory

com-

petitive

priorities

(Boyer

and

McDermott,

1999),

and

inconsistent

orientations

within

middle

management

(Guth

and

MacMillan,

1986).

Strategic

flexibility

supports

the

adaptive

use

of

resources,

the

reconfiguration

of

processes

(Sanchez,

1995;

Zhou

and

Wu,

2010),

and

thus,

the

ability

to

quickly

respond

to

dynami-

cally

changing

environments

(Nadkarni

and

Narayanan,

2007;

Schreyögg

and

Sydow,

2010).

Hence,

Eisenhardt

et

al.

(2010)

clas-

sify

strategic

flexibility

as

an

important

dynamic

capability4that

allows

effective

organizations

to

constantly

create

and

recom-

bine

resources

in

novel

ways

(Eisenhardt

and

Martin,

2000;

Helfat

and

Peteraf,

2009;

Teece

et

al.,

1997).

Yet,

strategic

flexibility

is

also

associated

with

high

investment-

and

opportunity

costs

(e.g.,

Bowman

and

Hurry,

1993).

Organizations

that

overempha-

size

strategic

flexibility

may

forego

other

opportunities,

such

as

deriving

benefits

from

economies

of

scale

or

operational

excel-

lence

(Grewal

and

Tansuhaj,

2001).

Consequently,

prior

literature

suggests

that

strategic

flexibility

could

also

be

associated

with

4Dynamic

capabilities

are

defined

as

the

ability

to

build,

integrate,

and

reconfig-

ure

resources,

processes,

and

capabilities

(e.g.,

Eisenhardt

and

Martin,

2000;

Helfat

and

Peteraf,

2003;

Teece

et

al.,

1997).

http://dx.doi.org/10.1016/j.jom.2014.09.007

0272-6963/©

2014

Elsevier

B.V.

All

rights

reserved.

476

S.

Kortmann

et

al.

/

Journal

of

Operations

Management

32

(2014)

475–490

decreasing

firm

performance

(Grewal

and

Tansuhaj,

2001),

short-

term

profitability

(Johnson

et

al.,

2003),

and

operational

efficiency

(Baker

and

Nelson,

2005).

Operational

efficiency,

though,

is

associated

with

cost

and

time

savings

that

yield

short-term

benefits

(e.g.,

Kaplan

and

Norton,

2001).

Operational

efficiency

captures

the

ratio

of

outputs

to

inputs

in

the

value

creation

process

(Madhavan

and

Grover,

1998;

Priem

and

Butler,

2001)

and

comprises

two

dimensions,

i.e.,

cost-based

efficiency

and

time-based

efficiency.

While

cost-based

efficiency

is

related

to

“costs

of

quality,

costs

of

engineering

changes,

and

manu-

facturing

costs”,

time-based

efficiency

is

associated

with

“[d]elivery

speed

and

reliability,

manufacturing

lead

time,

and

inventory

turnover

rate”

(Yeung,

2008,

p.

496).

Managers

may

also

be

at

risk

of

overemphasizing

operational

efficiency

at

the

expense

of

strategic

flexibility.

This

imbalance,

for

example,

can

be

induced

by

stake-

holder

pressure

or

simplistic

measurement

structures,

and

can

result

in

favoring

short-term

profitability

over

long-term

adapt-

ability

(e.g.,

Doyle,

1992;

George

and

Van

de

Ven,

2001;

Kaplan

and

Norton,

2001).

Hence,

operational

efficiency

is

–

similar

to

strategic

flexibility

–

“a

necessary,

but

insufficient,

condition

for

sustained

competitive

advantage”

(Krause

et

al.,

2013,

p.

10).

To

disentangle

the

complex

relationship

between

strategic

flexibility

and

operational

efficiency,

we

build

on

the

dynamic

resource-based

view

of

the

firm

(e.g.,

Helfat

and

Peteraf,

2003;

Helfat

et

al.,

2007;

Teece,

2007;

Winter,

2003)

to

accentuate

the

role

of

operational

capabilities

relating

to

dynamic

capabilities

and

performance

(Helfat

and

Peteraf,

2003).

We

follow

Helfat

and

Peteraf

(2003,

p.

999)

and

stress

that

“[d]ynamic

capabilities

do

not

directly

affect

output

for

the

firm

in

which

they

reside,

but

indirectly

contribute

to

the

output

of

the

firm

through

an

impact

on

operational

capabilities.”

While

dynamic

capabilities

relate

to

the

ability

to

build,

integrate,

and

reconfigure

operational

capa-

bilities

(Helfat

and

Peteraf,

2003;

Mishra

et

al.,

2013;

Teece

et

al.,

1997),

operational

capabilities

embrace

the

development,

produc-

tion,

and

delivery

of

products5(Kaplan

and

Norton,

2008).

They

are

also

referred

to

as

“how

we

earn

a

living

now”

capabilities

(Winter,

2003,

p.

992)

and

can

directly

influence

performance

(e.g.,

Devaraj

et

al.,

2007;

Rosenzweig

et

al.,

2003).

The

role

of

operational

capabilities

in

the

dynamic

capabilities-

performance

context

requires

specific

attention

(Helfat

and

Winter,

2011).

Here,

we

refer

to

prior

operations

management

literature

and

the

role

of

operational

capabilities

for

balancing

trade-offs

(Boyer

and

Lewis,

2002;

Klassen

and

Menor,

2007),

such

as

flexibil-

ity

and

efficiency

(Sawhney,

2012),

quality,

delivery,

flexibility,

and

costs

(Kristal

et

al.,

2010),

or

improvement

and

innovation

(Peng

et

al.,

2008).

While

the

pursuit

of

various

activities

in

a

trade-off

situation

is

referred

to

as

ambidextrous

behavior

(Rothaermel

and

Alexandre,

2009),

we

propose

that

operational

capabilities

require

ambidextrous

traits

to

mediate

the

relationship

between

strate-

gic

flexibility

and

operational

efficiency.

More

specifically,

through

balancing

immediate

trade-offs

that

are

directly

associated

with

value

creating

activities,

ambidextrous

operational

capabilities

are

also

able

to

influence

adjacent

trade-offs

relating

to

strategic

flex-

ibility

and

operational

efficiency

(e.g.,

Adler

et

al.,

1999).

Hence,

we

define

an

ambidextrous

operational

capability

as

the

ability

of

a

firm

to

balance

different

value

creating

activities

in

a

trade-

off

situation

(Patel

et

al.,

2012;

Rothaermel

and

Alexandre,

2009).

We

draw

on

prior

research

that

particularly

stresses

the

role

of

ambidextrous

production

and

innovation

capabilities

in

balancing

trade-offs

(e.g.,

Adler

et

al.,

1999)

where

mass

customization

capa-

bility

captures

“the

ability

to

quickly

produce

customized

products

5Due

to

our

focus

on

manufacturing

firms,

we

concentrate

on

the

term

‘products’,

which

we

use

in

its

broadest

sense,

comprising

tangible

products

and

intangible

services.

in

large

volumes

and

with

a

cost,

quality,

and

delivery

compara-

ble

to

that

achieved

by

mass

production

(MacCarthy

et

al.,

2003)”

(Huang

et

al.,

2008,

p.

715),

and

innovative

ambidexterity

refers

to

the

simultaneous

pursuit

of

both

discontinuous

and

incremen-

tal

innovations

(Jansen

et

al.,

2006;

Kortmann,

2014;

Tushman

and

O’Reilly,

1996).

Managerial

practice

further

illustrates

the

importance

of

these

ambidextrous

operational

capabilities

for

combining

strategic

flexibility

and

operational

efficiency.

For

example,

the

German

automobile

manufacturer

BMW

is

strategically

highly

flexible

in

developing

entirely

new

market

segments,

while

remaining

com-

petitive

in

established

segments.

Being

considered

a

global

leader

in

mass

customization

capability

(Salvador

et

al.,

2009),

BMW

is

producing

most

of

its

cars

“to

order.”

Modular

architectures,

an

advanced

configuration

system

(Walcher

and

Piller,

2011),

and

an

elaborated

procedure

to

determine

future

options

via

co-creation

(Füller

and

Matzler,

2007),

enable

BMW

to

produce

and

deliver

fully

customized

cars

in

twelve

days

at

a

competitive

cost

position.

Further,

BMW

develops

novel

product

lines,

such

as

the

electric

car

initiative

‘Project

i’

(Ramsbrock

et

al.,

2013),

and

simulta-

neously

adapts

existing

platforms,

as

in

the

case

of

MINI,

where

one

base

model

was

further

expanded

into

seven

related

models.

Both

ambidextrous

operational

capabilities,

i.e.,

mass

customization

capability

and

innovative

ambidexterity,

have

thus

been

instru-

mental

in

BMW

retaining

high

operational

efficiency.

Building

on

this

discussion

and

example,

we

analyze

the

mediating

role

of

mass

customization

capability

and

innovative

ambidexterity

on

the

relationship

between

strategic

flexibility

and

operational

efficiency.

Using

top-level

executive

data

in

India

and

the

United

States

of

America,

we

specifically

contribute

to

the

operations

management

and

strategic

management

literatures

in

at

least

three

important

areas:

first,

we

incorporate

insights

from

the

dynamic

resource-based

view

of

the

firm

to

clarify

how

two

ambidextrous

operational

capabilities,

i.e.,

mass

customization

capability

and

innovative

ambidexterity,

link

strategic

flexibility

and

operational

efficiency,

and,

thus,

support

sustainable

competi-

tive

advantage.

Second,

we

contribute

to

ambidexterity

research

by

emphasizing

the

importance

of

ambidextrous

traits

of

operational

capabilities

for

balancing

adjacent

trade-offs

between

strategic

flexibility

and

operational

efficiency,

as

well

as

for

managing

imme-

diate

trade-offs

associated

with

customized

production

and

mass

production

as

well

as

discontinuous

and

incremental

innovation.

Third,

we

derive

important

theoretical

and

managerial

implica-

tions

that

relate

to

bridging

strategic

management

and

operations

management

in

general,

as

well

as

the

role

of

ambidextrous

oper-

ational

capabilities

for

linking

strategic

flexibility

and

operational

efficiency

in

particular.

These

implications

include

examples

from

managerial

practice

as

well

as

important

insights

for

capability-

based

strategies.6Based

on

a

cluster

analysis,

we

then

identify

three

types

of

capability-based

strategies.

2.

Theoretical

framework

2.1.

Strategic

flexibility

and

operational

efficiency

While

“it

is

easy

to

concentrate

on

flexibility’s

role

in

hand-

ling

uncertainties”

at

the

strategic

level,

firms

often

experience

difficulties

designing

specific

methods

and

efficiency-oriented

per-

formance

objectives

at

the

operational

level

(Gerwin,

1993,

p.

396).

This

is

challenging

for

practitioners

and

scholars

alike,

since

characteristics

of

flexibility,

i.e.,

low

levels

of

bureaucracy,

flat

6We

define

capability-based

strategies

as

strategies

that

originate

in

the

unique

development

and

combination

of

interrelated

capabilities,

which

are

consciously

formulated,

developed,

implemented,

and

reconfigured.