July 7, 2021

'Better way’ for companies to sharpen competitive edge through marketing

Haskayne researchers outline how to balance predictable exploitation and uncertain exploration

Just like a switch hitter for a baseball team can help it defeat its rivals, ambidexterity in marketing can pay off for a company — if it is good at learning new things, say researchers at the University of Calgary.

“If a firm is poor at learning, in most cases, it cannot really reap the benefit of marketing ambidexterity,” says Dr. Oleksiy Osiyevskyy, PhD'14, an associate professor and academic director of the Global Business Futures Initiative at the Haskayne School of Business.

Marketing is a multi-billion-dollar aspect of the business world that ranges from branding and product design to advertising and customer service. It affects everything from the packaging on your breakfast cereal to the data gathered about you when you look for a product on Amazon.

“Marketing ambidexterity refers to the ability of companies to simultaneously strike a delicate balance between two different things in marketing,” says Dr. James Agarwal, PhD, a professor at Haskayne. “They need to exploit what they already know will be successful, but, at the same time, they must be able to explore new opportunities that, in the long run, might turn out to be useful.”

Tension between exploitation and exploration

Agarwal and Osiyevskyy are among the co-authors of a study into the problem that was recently published in the Journal of Business Research. The study found that absorptive capacity — the ability to access, assimilate, use and disseminate new knowledge across a company — is the key to reaping the benefits of marketing ambidexterity.

Osiyevskyy likens the ability of a company to survive the ups and downs of the market to the process of evolution or adaptation to an environment, describing it as navigating the tension between predictable exploitation and uncertain exploration. “One type of adaptation is to keep on doing what’s always brought success in the past, which is what we call exploitation,” he says.

“The problem is that, as the market changes, the only way to learn new things and adjust to these changes is what we call exploration, which involves gathering new information about the market. But it means the company must divert resources from exploitation to exploration, with the aim of achieving a balanced focus in order to seize new market opportunities and revenue streams.”

Such factors are why exploration, whose outcome is initially unforeseeable and uncertain, will improve the company’s performance “only if this new information can be made sense of and then disseminated across the organization to achieve the right balance between exploitation and exploration,” says Osiyevskyy.

The study used a multivariate statistical model to confirm the research team’s hypothesis. It used sales and revenue data from 318 companies in the Singapore Enterprises Survey.

‘Look, there is a better way of doing it’

“A lot of managers really have a difficult time conceptualizing marketing ambidexterity,” says Agarwal. They are tempted to make a trade-off in favour of predictable exploitation — concentrating on making it more efficient as an easy way to maximize short-term profits to appease shareholders — while minimizing uncertain exploration because payoffs can be two or three years down the road, he says.

“We are suggesting: ‘Look, there is a better way of doing it,’” says Agarwal. “There can be a convergence between exploitation and exploration, which is what we call the balanced approach of marketing ambidexterity.”

Agarwal says the study adds weight to evidence that marketing managers need to have a seat on corporate boards, rather than being largely outside the decision-making process. It also reinforces the idea that marketing not only involves reaching out to customers and other stakeholders, but also listening closely to what they have to say, he says, adding it’s more important than ever due to digital technology, social media and big data.

“Marketing is the one discipline that interfaces with the market,” says Agarwal. “It needs to have a voice because what we are really looking at here is strategic marketing as a basis for a firm’s competitive advantage.”

The study was co-written by Dr. Hillbun Ho, PhD, of the UTS Business School of the University of Technology Sydney in Australia, and Dr. Sadat Reza, PhD, of the Division of Marketing and International Business at Nanyang Technological University in Singapore.