Managing Complementary Assets to Build Cross-Functional Ambidexterity: The Transformation of Huawei Mobile

Abstract

During technology transitions, incumbents are frequently faced with the ambidextrous challenge of exploiting existing capabilities and exploring new ones. While extant studies focus on radical changes in the product domain, we notice radical changes can happen in both product and market domains. Pioneering studies indicate that cross-functional ambidexterity addresses this challenge at the business-unit level by juxtaposing exploration and exploitation across different functional domains (particularly in product and market domains) and that complementary assets address this challenge at the organizational level. However, how efforts at two levels can be combined to build cross-functional ambidexterity and what roles complementary assets play remain unclear. Therefore, this study conducts an in-depth case study of Huawei Mobile, which managed to achieve superior performance during a technology transition that triggers radical changes in both product and market domains. We find that multi-level synergies contribute to the transition process. Specifically, cross-functional ambidexterity is constructed by prioritizing exploration in the product domain ahead of that in the market domain, and that it generates learning, brand and channel extension, matching, and brand alliance benefits at the business-unit level. Complementary assets help to reduce the uncertainty of exploration and resolve functional conflicts at the organizational level.

A Dynamic Perspective on Huawei

“…In many fields, authors are only asked to develop a new theory when the existing theories alone or in combination do not do a good job in explaining a phenomenon. It is evident when reading their article that Yan et al (2021) worked very hard to find and offer conceptual novelty, which they claim lies in the concept of 'cross-functional ambidexterity'. Unfortunately, nowhere in the article do the authors define how exactly this type of ambidexterity is different from traditional types, such as structural ambidexterity (separating exploration and exploitation efforts into separate units of the organization) or contextual ambidexterity (where the same unit depending on context and task sometimes enacts exploration and sometimes exploitation).…”

“…We believe Yan et al (2021) would have benefited from drawing on Gans' (2016) clarity in discussing the challenge that smartphones posed for incumbents including Blackberry. Incidentally, similar to Yan et al (2021), Gans (2016) questions the wisdom of structural ambidexterity advocated by Christensen. He also provides a wonderful case study of a shipping company that dealt with the technological disruption of container shipping by not creating a separate division.…”

“…As stated earlier, Yan et al (2021) have gone to great lengths to study the history of Huawei Mobile and have amassed superb empirical data for their case study. They have also been careful in their methodology.…”

“…Some of the leading writers on ambidexterity mention that cross-functional teams are necessary to manage both exploration and exploitation (O'Reilly & Tushman, 2004), but they never mention cross-functional ambidexterity as a new type. We could not work out how Yan et al (2021) see cross-functional ambidexterity as different from structural ambidexterity. We suspect that the authors wanted to highlight that the success of the mobile telephone division required, as O' Reilly and Tushman (2004) suggested, cross-functional collaboration.…”

“…By contrast, Huawei, which entered the functional phone business only in 2003, providing cheap 2G and 3G equipment to telephone operators, managed to become the largest smartphone producer in Q2 of 2020 [1] before US government intervention stripped it of crucial technology components, prompting Huawei to sell smartphone brands (Honor) so it would regain access to US technologies. Yan et al (2021) have traced in exciting detail the development of the Huawei mobile phone (consumer) business from an undervalued part of Huawei to a standalone business unit that has powered Huawei's growth in recent years. Huawei had virtually no experience in selling directly to consumers because its origins lay in selling telecommunications equipment to other businesses.…”