Striking a balance between tradition and innovation: The rise of hybrid organizational models

In the realm of organizational development, companies often find themselves at a crossroads, seemingly compelled to shift entirely toward full agility. However, this all-or-nothing approach is not just unattainable for many, but also not always the most desirable path. For a substantial number of organizations, a more fitting solution is a hybrid model that seamlessly integrates traditional and innovative leadership and work practices.

In today's fast-paced business environment, especially in the aftermath of the COVID-19 pandemic, the ability to adapt to volatile conditions has emerged as a competitive advantage. Those who thrive are those capable of creatively amalgamating knowledge and technology to respond to disruptions or even revolutionize existing business models. Yet, achieving creative and innovative outcomes can be arduous within a conventional hierarchical system that emphasizes efficiency and rule-based work. Quick, inventive responses to market changes—let alone disruptive innovations—require autonomy, the ability to independently seek engaging tasks, and the freedom to organize work responsibly. This is where the Agile organization, with its networked cross-functional teams, comes into play. Here, the focus shifts to individual responsibility over top-down directives, and projects are approached holistically, end-to-end, with a pivotal emphasis on coordinating cross-functional value streams within the organization.

Recognizing the need for such a shift, some companies embark on a radical transformation journey. Their ultimate goal often involves the complete elimination of traditional hierarchical structures. Frameworks like Scrum, Design Sprints, or Kanban Boards are frequently seen as silver bullets to introduce agility and dismantle rigid organizational hierarchies. The practical adoption of agile tools and methods is often accompanied by comprehensive employee training in agile methodologies. Departments are disbanded, and all hierarchies below top management are dismantled. These are replaced by new structures, processes, methods, and rules, all aligned with agility and New Work principles. This includes a transformative leadership culture that emphasizes coaching and support rather than transactional control.

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Does every company need to become agile?

However, not every company needs to embrace full agility. Companies require both agile and innovative elements, as well as areas and structures that prioritize efficiency and stability. A hybrid organizational structure enables them to preserve these while complementing them with new approaches, broadening their strategic options, and reinforcing themselves against unforeseen risks with resilient innovative project teams. This ability to blend the best of both worlds is what's referred to as ambidexterity, differentiating truly "winning" companies. As Steve Blank once noted, "Exploitation pays the salaries, exploration pays the pensions."

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To achieve ambidexterity, companies must differentiate between complicated and complex tasks.

• Complicated tasks can be challenging but can be handled by specialists using their expertise, following known, learned, standardized solutions.
• Complex challenges have no known solutions or blueprints. They are filled with surprises, making it unclear how they will change through intervention, often requiring experimental approaches.

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Traditional systems that primarily operate based on standards and rules, designed to minimize errors, are ideal for solving complicated (and even simple) tasks. In contrast, agile systems are well-suited for addressing complex challenges. The goal of a hybrid model is to strike a balance between both worlds for the company's benefit.

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How to Become a Winning Company?

To leverage the best of both worlds effectively, a culture of mutual respect is paramount. This approach facilitates the simultaneous exploration and optimization necessary for long-term adaptability. It calls for equal prioritization of projects aimed at improving efficiency and fostering innovation within the company. Additionally, the organization must ensure that knowledge of agile work and its importance proliferate across the board. This endeavor necessitates open communication, support, training, coaching, courage, patience, and trust in people.

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The existing organization should be critically evaluated to determine whether the structures, processes, rules, tools, and directives in place conflict with agile work in networked teams. In organizations dominated by a strong control logic, agile exploratory work in self-managed networked teams may quickly encounter limitations. Management may be hesitant to embrace the fact that creative innovation work, despite its potential initial inefficiencies, is a valuable investment in the long term.

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A hybrid approach can succeed if the following conditions are met:

1. Form a leadership alliance that emphasizes the purpose of the endeavor. The more people – ideally from across hierarchies and departments – participate, the more the hybrid approach will permeate the organization.
2. Start with an experimental pilot project, addressing a problem that has long resisted resolution. Sometimes, complex problems have been tackled with simple or complicated tools for too long, when complex solutions were needed.
3. Communicate the initiative within the company, ensuring it is transparent and open to all rather than conducted behind closed doors or limited to a privileged few. Positive experiences and reports can lead to multiplier effects.
4. Provide intensive support from experts during initial experiments with New Work, helping teams discover the best approaches and methods and adapt to new roles and work styles through constant reflection.
5. Have leadership buy-in. The attitude of leadership is crucial, as it determines the success of a hybrid system. If leaders obstruct the process, lack trust in teams, or fail to recognize the importance of hybrid work, it is unlikely to succeed.

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It is imperative for the existing organization to convey that the agile "operating system" complements the traditional system, contributing to the creation of a long-term, viable organization. At EY etventure , we have been guiding our clients in this approach, centering innovation projects on people while keeping the core organization in focus, facilitating sustainable change.