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W4283790229 abstract "Abstract Due to the global labor market challenges, international companies react and adjust fast to these circumstances by implementing digital solutions into all business processes. Organizational ambidexterity is seen as the response of digital transformation and it can be divided into structural, contextual, and sequential dimensions. In this context, organizations representing the smart industry will need employees with specific competencies which let them meet technological challenges.This chapter aims to clarify the state of opinion on expectations towards, and preparedness for, the impact of Industry 4.0 on human resources management and the implementation of various types of ambidexterity in these companies. We have conducted interviews with key HR informants from manufacturing companies operating in Germany and Poland. We have found that Industry 4.0 has a significant impact on HR practices. In both international companies, various digital solutions in employee recruitment, development, and performance, have been implemented. There have also been mature examples in both companies of structural, contextual, and sequential ambidexterity. Keywords Ambidexterity Smart industry HR management Digitalization HR challenges Industry 4.0 Citation Przytuła, S., Rank, S. and Tracz-Krupa, K. (2022), Ambidexterity as the Response of Smart Industry 4.0 – Towards Better HR Practices, Bondarouk, T. and Olivas-Luján, M.R. (Ed.) Smart Industry – Better Management (Advanced Series in Management, Vol. 28), Emerald Publishing Limited, Bingley, pp. 51-67. https://doi.org/10.1108/S1877-636120220000028006 Publisher: Emerald Publishing Limited Copyright © 2022 Sylwia Przytuła, Susanne Rank and Katarzyna Tracz-Krupa. Published by Emerald Publishing Limited. This work is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this book (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode. License This work is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this book (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode. Introduction The fourth industrial revolution is known as Industry 4.0 in most German-speaking countries. Different terms for this concept can be found in other countries, such as Smart Industry in the Netherlands or the Industrial Internet in the United States of America. Industry 4.0 is the production of goods and services with the help of technical components such as Big Data, Cyber-physical systems, the Internet of Things, social components like attractive workplace conditions and production components such as smart factories to increase the competitiveness of a country (Bulte, 2018). 50% of German companies are planning industrial networks, while 20% have already transitioned to the smart factory of Industry 4.0 which means that machines, people and production resources are in interaction (Bayraktar & Ataç, 2019). In Poland, digitalization of business process and automation in various sectors is in its infancy. The Polish industry is between reality 3.0 and 4.0. Specific solutions are introduced ‘locally’. A comprehensive approach is rare when the introduction of culture 4.0 simultaneously covers various levels and areas of the company's operations (Polski Przemysł 4.0, 2018). Thus, in a time of rapid, dynamic and unexpected social, economic and political changes affecting the global labour market (Przytuła, 2018), the companies must react and adjust fast to such challenges as Industry 4.0 which brings increasing automation and digitalization into management. Automation is the second most important strategic priority: 36% of companies plan to increase automation over the next 12 months through leveraging cloud computing and 13% by investing in RPA – Robotic Process Automation (Deloitte, 2016). The HAYS (2018) forecasts prove that nearly half (47%) of existing jobs are bound to be performed by machines within the next 25 years. Additionally, it is estimated that approximately 57% of jobs are at risk of automation in highly developed countries, while in the EU market it is about 54%. Digitalization is changing the organizational and functional structure of each company. This term means an ever-increasing use of technology and corresponding substantial changes in numerous domains of business and society. This notion is also true for human resource management (HRM) (Strohmeier, 2020). In this context, ambidexterity can be seen as a solution for digital transformation. ‘Ambidexterity’ comes from Latin and means ‘both (hands) right’, in other words being equally adept in the use of both hands. It is a concept that often comes up when companies restructure themselves to embrace digital transformation. Studies have shown, however, that organizations have to continuously reconfigure their activities to meet changing demands in their internal and external environments (Raisch & Birkinshaw, 2008). Organizational ambidexterity refers to the ability of an organization to both explore and exploit-to compete in mature technologies and markets where efficiency, control and incremental improvement are prized and also its competing in new technologies and markets where flexibility, autonomy and experimentation are needed (O'Reilly III & Tushman, 2013). Exploitation is associated with activities such as ‘refinement, efficiency, selection and implementation’, whereas exploration refers to notions such as ‘search, variation, experimentation and discovery’. Exploitation and exploration therefore require fundamentally different organizational structures, strategies and contexts (Raisch & Birkinshaw, 2008). In this context of digital transformation in companies, ambidexterity is considered as a modern organizational concept managing current strategical requirements as such innovation for new digital solutions vs. efficiency in existing processes in fast developing smart factories as Garaus et al. (2016) pointed. According to Andriopoulos and Lewis (2010), Schnellbacher and Heidenreich (2020) and Uotila (2018) the organizational ambidexterity long-term success depends on the ability to explore new opportunities and to exploit existing capabilities. A lot of research has been done on Industry 4.0 from a technical point of view, but there has been little research done on what it is meant for the workforce or society as a whole (Habraken & Bondarouk, 2017). According to Habraken et al. (2018), HRM research mainly focuses on how the HR function can acquire digital competencies or make use of technology in HR domains, such as using new technologies for administration (e-HRM), recruitment (video interviews, CV scanning systems), training (virtual reality glasses, or serious gaming) or performance appraisal (continuous feedback apps). However, the impact of technology on the future of work and consequently the role of HR is much broader and may lead to downsizing, restructuring the content of jobs, teams, or departments, decreased quality of work, working conditions, or employment relations. Also, a growing body of literature suggests organizational ambidexterity is influenced by companies' HRM practices (Malik, Sinha, Pereira, & Rowley, 2019) especially concerning individual knowledge and organizational capabilities. Schnellbächer and Heidenreich (2020) showed that ambidextrous knowledge offering (exploration) leads to higher performance in settings where radical innovations are required; in contrast, ambidextrous knowledge seeking (exploitation) leads to increase in performance where settings required incremental innovation. Fourné, Rosenbusch, Heyden, and Jansen (2019) revealed in their meta-analysis that high technology companies benefit from a special type of ambidexterity, that is structural one, which is discussed in the next section. Therefore, there is necessity for smart factories focusing on ambidexterity to balance the need of innovation vs. efficiency. Two transformation paths are under consideration for companies: organizational vs. individual ones (Mom, Chang, Cholakova, & Jansen, 2018). The central issue is how to transform the ‘context’ for ambidexterity in companies by changing their capabilities, that is organizational structure, culture, IT, processes/routines, leadership or employee competencies and behaviour. For building an ambidextrous organization, Stelzl, Röglinger, and Wyrtki (2020) identified these capability areas. These areas could be applied for running a situational analysis and defining the maturity level as a starting point for the transformation journey on the organizational level. For the employee level, Rosing, Frese, and Bausch (2011) argued that the leadership behaviour for implementing ambidexterity requires ‘two complementary sets of leadership behavior that foster exploration and exploitation in individuals and teams: opening and closing leadership behavior’. Zacher, Robinson, and Rosing (2016) showed in a field study that opening leadership impacts exploration behaviour of employees, whereas closing leadership influences their exploitation behaviour. Therefore, the HR is in charge of assessing the maturity level of ambidexterity and guiding through this transformation on organizational vs. individual levels. This requires, for instance, redefining the new role of HR to be fully engaged in running ‘old processes’, but facing new, digital and technological challenges. Kang and Snell (2009) propose that each component of intellectual capital (human, social and organizational) resides in both approaches of ambidexterity, creating unique configurations that are set to align the objectives and purposes of the organization. In ambidextrous organizations, this allows to seek co-existence of explorative and exploitative approaches and the management of several layers of intellectual capital. These processes require proper handling and effective interventions. Several researchers have highlighted the importance of HRM in assessing, developing, monitoring and influencing an organization's intellectual capital, Kang and Snell (2009) provide several configurations of how HRM can enable this in ambidextrous companies by promoting the practice areas of development (e.g. training, job rotation), employee relations (e.g. advancement, career planning) and performance systems (e.g. job design, performance appraisals) to achieve both stability and continuity. From an organizational point of view as Garaus et al. (2016) stressed the necessity for an integrated, ambidextrous HRM system which focuses on the exploration path, on employment practices and on the exploitation path, on work practices ending up in collaboration, knowledge integration and learning. The authors provide evidence that these practices do not need to be distinct or even conflicting, to accommodate ambidexterity, and argue that practices should be evolved in an integrated fashion to allow both approaches to connect and ensure the ability of the company to integrate knowledge. Similarly, Malik et al. (2019) illustrate how efficiency can be achieved by simultaneously adapting HRM practices seeking both continuity and adaptation. In doing so, HRM ensures that the intellectual capital can be re-aligned or re-configured through various practices at different levels to accommodate the explorative and exploitative requirements of the company simultaneously, especially in the context of global competition. Thus, we focused on the direct impact of Industry 4.0 on the HR function (recruitment, performance, talent management, development) through the lenses of the ambidexterity concept (Schnellbächer & Heidenreich, 2020) because the mandate of HRM is to guide and support organizational and individual transformation (Garaus et al., 2016; Stelzl et al., 2020). Best Practices for an Ambidextrous Organization Smart companies (companies with Industry 4.0, German term, see Pfeiffer, 2017) apply digitalization by implementing artificial intelligence (AI) for their business products and solutions. For the management, this means to think twice about optimizing established business processes with automation, artificial intelligence as well as creating new, disruptive innovation for new digital products in the digital age. On the one hand, digitalization helps to increase the process efficiency of these established business processes and core business competencies developed in an existing pattern. On the other hand, innovation is created by applying digitalization or even AI to invent new products and services via disruption (O'Reilly III & Tushman, 2013). What solution could we think of to integrate both aspects in working processes? This dual pattern of management in the current digital age is an important key aspect to add business value by applying organizational ambidexterity (O'Reilly III & Tushman, 2013). Ambidexterity focuses on both aspects of exploration (process efficiency) and exploitation (innovation) either within the teams along the business process or by defining separate teams for exploration and exploitation (structural ambidexterity). This creates a management perspective for driving digital transformation within the company. O'Reilly III and Tushman (2013) differentiate between three patterns of ambidexterity: structural, contextual and sequential. First, applying the most common pattern, structural ambidexterity means separating exploration and exploitation into independent business units. Beyond the business units for existing processes, an innovation hub is created to explore new disruptive business ideas in flexible units. Then, there is evidence of a positive impact on company's performance (Jansen, 2005). His study revealed that the structural differentiation on ambidexterity is mediated through informal senior team and cross-functional interfaces (Jansen, Tempelaar, van den Bosch, & Volberda, 2009). Fourné et al. (2019) emphasize this type for high technology companies. Second, contextual ambidexterity balances exploration and exploitation by making team members capable of creating a potential for efficiencies and be innovative at the same time, for example through simultaneous activities in one organizational unit. The success factors for implementing contextual ambidexterity pointed out by Birkinshaw and Gibson (2004) are the social support of the management and the high-performance organizational context with high achievement motivation of the staff. Third, sequential ambidexterity covers a temporal sequence of exploration and exploitation (e.g. one follows the other) which is applied in the new digital business opportunities. Less evidence for the increasing impact on performance was given (He & Wong, 2004), but Chou, Yang, and Chiu (2017) showed that sequential ambidexterity, as a temporal switching capability, is positively related to new product performance. The type of business strategy and absorptive capacity moderated the impact of the sequential ambidexterity on new product performance. The added value of different ambidexterity patterns depends on the organizational context in the light of industry 4.0 (see Pfeiffer, 2017). Based on the best practices in the literature of the subject, we illustrated this with three company cases from Germany. The first business example from ‘Munich Re’ goes for the structural pattern, the second case from ‘Trumpf’ focuses on the contextual pattern of ambidexterity, whereas the final example of the ‘BMW’ company presents sequential ambidexterity. ‘Munich Re’ as an Example of Structural Ambidexterity This re-insurance company with 40,000 employees and 52 billion Euro revenue in 2019 was founded in 1880. Dietl (Dietl, 2020) described in his article the case study of why the re-insurance company Munich Re has chosen structural ambidexterity: Munich Re offers insurances for catastrophes which are very rare, risk calculation is the essential mandate of everyday work which might limit creative thinking and innovation. The innovation for new products was limited because of some structural and cultural barriers. Therefore, the top management decided to set up cross-functional teams with up to 300 employees who were upskilled in agile working methods to understand customer demands. They worked in a very dynamic environment within an innovation hub close to the board. This structural ambidexterity ensures service excellence in existing business processes in the large corporation and resulted in a new organizational entity Munich Re Ventures, a new digital unit in a startup setting, and special technological units for the Internet of Things. Finally, a new spin-off stands for focusing on a niche, evaluating market opportunities, fast iterative processes (‘build, measure and learn’) and customer-centric focus. Beyond these structural changes, Dietl (2020) summarized the following success factors for more innovation at Munich Re: top management focus, freedom for disruptive innovation, long-term resource allocation and budget for innovation even in times of revenue losses because of COVID-19. The final management lessons learned are to acquire skilled employees, establish a culture for innovation and passion to experiment although the outcome is not yet predictable. ‘Trumpf’ as an Example of Contextual Ambidexterity The Trumpf company for machine tools, laser technology and electronics for industrial applications was founded in 1923 (Trumpf, 2021). The company is a market and technology leader in machine tools and lasers for industrial manufacturing. Software solutions pave the way to the Smart Factory. Hönl (2021) pointed that contextual ambidexterity has the advantage over structural ambidexterity to integrate the old and the new business perspective (traditional mechanical engineering practices vs. artificial intelligence) in heterogeneous, cross-functional teams in parallel for maximizing customer benefits. He also explained this type of ambidexterity as a dynamic, iterative, so-called agile development; the new role of ‘product owner’ within an agile team focuses on managing the technical content side and feasibility, while agile managers (former line manager) create the appropriate organizational framework, essentially by making it adaptable and facilitating continuous learning and collaboration across boundaries in the light of contextual ambidexterity. In Hönl's interview (2021), Duwe argued that new capabilities need to be combined with existing knowledge; therefore training on these capabilities is essential. Finally, Duwe (2018) summarized that this contextual ambidexterity is a key success factor for digital transformation, thus leadership behaviour should encourage thinking in both patterns in parallel. In consequence, the current business leaders apply contextual ambidexterity by flexibly switching their and their employees' mindset and capabilities between exploration and exploitation in the business processes, enabling the necessary frame for new work behaviour, tools and collaboration for their teams and employees, as in agile project management. The lesson learned from this case is to increase capabilities by developing skilled employees in interdisciplinary fields combined with an agile approach. ‘BMW’ as an Example of Sequential Ambidexterity Bayerische Motoren Werke AG, commonly referred to as BMW, is a German multinational corporation that produces luxury vehicles and motorcycles. The company was founded in 1916 as a manufacturer of aircraft engines. Birkinshaw, Zimmermann, and Raisch (2016) identified BMW as an example of sequential ambidexterity: ‘BMW's successful sequential alternation is its culture that encourages employees to critically reflect on their strengths; in the phase between 2006 and 2010, when front-line managers were working hard to optimize BMW's continuous profitable growth in its established model range, top executives began to meet with customers, industry experts, and researchers to discuss the future of mobility’. This is a good example of how different internal stakeholders dealt with sequential ambidexterity. Birkinshaw et al. (2016) summarized: ‘During exploitative phases, front-line managers rely primarily on seizing capabilities, whereas top executives emphasize their sensing capabilities to identify the right moment and prepare the organization for the shift towards an exploratory focus. Conversely, during explorative phases, front-line managers primarily deploy their sensing capabilities, while top executives emphasize seizing capabilities, to prepare the organization for a shift back to exploitation’. In a nutshell, BMW realized the sequential pattern less within a team focus and more with many stakeholder groups on different organizational levels. Overall, Luger, Raisch, and Schimmer (2018) criticized that ambidexterity is not the only best fitting solution for any strategical movement because this focus could result in defensive activities by the management if dynamic, transforming external forces in the environment are not taken into account. Luger et al. (2018) favours a continuum of exploration-exploitation with balanced resource allocations; in the long-term run, companies should focus on ‘capability-building processes (to balance exploration and exploitation) and capability-shifting processes (to adapt this balance to the changing requirements)’. In a current cross-country comparison, Bustinza et al. (2020) revealed in the product service industry that sequential exploitation-exploration pathway maximizes company performance, but the optimal tested pattern consistent across all the world regions (except Japan) is the contextual ambidexterity impacting company performance. In contrast, Clauss et al. (2020) showed in a survey-based study in German mid-sized engineering companies how ambidexterity, exploration and exploitation affect the self-assessed competitive advantage. They favoured an exploration strategy of innovation processes with radically new knowledge, products and services, linking this with strategic agility as only exploitation has not increased competitive advantage, whereas an ambidextrous strategy on its own could negatively impact the competitive advantage. However, our best practices focused more on structural ambidexterity which is an excellent entry point for the first implementation of ambidexterity on organizational structural level. Next, on the individual level, the leader and employee behaviour requires a transformation step in the direction of sequential or contextual ambidexterity accompanied by agile working methods. These agile working methods push the radical innovation like it was revealed by Clauss et al. (2020) and Trumpf (2021). To conclude, we argue that a hybrid integrative pattern of contextual and structural ambidexterity with flexible staffing and job rotation between organizational units, temporary project teams, is worth considering for a smart industry. Relying only on structural ambidexterity with an independent innovation hub is not enough. If organizational ambidexterity is implemented, there is a crucial issue of capability in terms of either allocating the resources to flexible business demands or developing employee capabilities progressing on the ambidexterity maturity level (Stelzl et al., 2020). HRM practices need to be flexible for both patterns of working along a continuum (Luger et al., 2018). Furthermore, HRM practices should extend their traditional services with add-ons for supporting the flexible explorative working style. In a nutshell, several HR practices are highlighted to stress the necessity for HRM adaptations due to digital transformation (Buisson, Gastaldi, Geffroy, Lonceint, & Krohmer, 2021; Seeck & Diehl, 2017; Shipton, Sparrow, Budhwar, & Brown, 2017). This research field is developing right now, so our discussion is more an outlook rather than a complete summary. Beyond this focus, HRM practices have to foster further current challenges for digital transformation within their companies. Hansen, Güttel, and Swart (2017) linked the ambidexterity theory with the HRM strategy and system in order to evaluate, within a company, which HR system is needed based on current strategic requirements (i.e. degrees of flexibility vs. innovation) and argued that four different HR systems (1–4) are required within the same company: (1) compliance vs. (2) productivity-based systems for exploitation needs or (3) collaborative vs. (4) commitment-based HR systems for exploration enhancement. Balancing ambidexterity in business, HR systems should apply the above solutions. Challenges for HRM There is a price to be paid in building HRM systems to serve and help the enactment of ambidextrous organizations, and the number of challenges to companies that seek ambidexterity are well known. Because ambidextrous organizations require parallel actions that may often deem incompatible, much time and resources are required to build the kind of HRM practices that can be effectively integrated to achieve company continuity and development simultaneously. In addition, HRM professionals should be endowed with a specific attitude and mindset that will allow them to boldly depart from typical traditional approaches or even remain inculcated in one approach. Therefore, preparation and the right frame of mind is required (Buisson et al., 2021). Moreover, an HRM system in an ambidextrous environment implies additional complexity, and with complexity come more uncertainties to deal with. Therefore, HRM professionals need to design and implement HRM systems to support work that requires dual capabilities, to allow the company to achieve ambidexterity (Ferraris, Erhardt, & Bresciani, 2019). Finally management support is required to enable a sense of involvement and participation that is required for employees to explore new ways of behaving while maintaining efficiency at work (Prieto-Pastor & Martin-Perez, 2015). Human resource professionals are concerned with overseeing the HR of organizations, which, through Industry 4.0, will be affected by technological tools and innovative technology (Jesuthasan, 2017). Technological disruption, robotics and automation threaten to replace low-skilled, routine jobs (Naudé, 2019). The increase in technological capability will not only cause an increase in unemployment but will also change the nature of work and the workforce because of the underlying trends in technology that accelerate job automation (Dhanpat, Buthelezi, Joe, Maphela, & Shongwe, 2020). Many scholars have examined various challenges of human resources management regarding organizational ambidexterity, including leadership (Cunha, Fortes, Gomes, Rego, & Rodrigues, 2019; Jansen et al., 2009; Nemanich & Vera, 2009), top management characteristics (Lubatkin, Simsek, Ling, & Veiga, 2006; Simsek, 2009; Smith & Tushman, 2005; Venugopal, Krishnan, Kumar, & Upadhyayula, 2019), employee motivation (Ahammad, Glaister, & Junni, 2019) and organizational culture (Wang & Rafiq, 2014). In a situation of ambidexterity, companies need to successfully combine different activities over time and space, and this brings enormous challenges for HRM, particularly in the matters of competency management (Buisson et al., 2021). Following Pfeifer's (Pfeiffer, 2017) argumentation, there is a global work reorganization for new capabilities of the workforces, either upskilling or downsizing employees, depending on the specific job families. O'Reilly III & Tushman (2013) argued to focus on dynamic capabilities and relocating these organizational capabilities by covering all three types of ambidexterity: ‘Leaders must be able to orchestrate the allocation of resources between the routine and new business domains’. There has also been substantial, though insufficient, research on human resource development as a challenge for HRM in the context of ambidexterity and smart industry. Specifically, vast research exists in examining exploratory and exploitative learning (Dixon, Meyer, & Day, 2007; Kostopoulos & Bozionelos, 2011). Thus, our attention is focused on re-training and new competencies required in an ambidextrous organization. These result from digitalization of various processes in an organization. On the one hand, digital technologies are employed to support operational HR practices, such as recruitment or compensation. On the other hand, the operational application of digital technologies implies a ‘liberation’ of HR professionals from the operational burden, and makes them focus on value-added strategic activities of HRM (Strohmeier, 2020). Implementation of Industry 4.0 will pose new challenges for re-training. This, in particular, includes the need to equip employees with certain competencies that are crucial in the current labor market. In the strategic document European Digital Competence Framework for Citizens (Vuorikari, Punie, Carretero, & Van den Brande, 2016), the European Union underlines the importance of digital competencies with key components, such as information and data literacy to articulate information needs, to locate and retrieve digital data, information and content; communication and collaboration to interact through digital technologies while being aware of cultural and generational diversity; digital content creation to create and edit digital content; safety to protect devices, content, personal data and privacy in digital environments; physical and psychologic" @default.
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W4283790229 title "Ambidexterity as the Response of Smart Industry 4.0 – Towards Better HR Practices" @default.
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