r Academy of Management Journal

2015, Vol. 1015, No. 1, 5889.

http://dx.doi.org/10.5465/AMJ.2011.0932

DYNAMIC DECISION MAKING: A MODEL OF SENIOR

LEADERS MANAGING STRATEGIC PARADOXES
WENDY K. SMITH
University of Delaware
Senior leaders increasingly embed paradoxes into their organizations strategy, but
struggle to manage them effectively. To better understand how they do so, I compared indepth qualitative data from six top management teams exploring and exploiting simultaneously. The results informed a model of dynamic decision making in which
strategic paradoxes can be effectively engaged. The details of this dynamic decisionmaking model extend and complicate our understanding of managing paradoxes
by depicting dilemmas and paradoxes as interwoven, explicating a consistently
inconsistent pattern of addressing tensions, and framing both differentiating and
integrating practices as necessary for engaging paradox.
The senior leaders say it is a bitch to manage these
two types of businesses. It takes a great deal of time,
and they know there will be great outcomes, but they
will not see them for 1224 months. They say its like
brushing your teethyouve got to do it every night,
but you only know when you go to the dentist
whether it was worth the effort.
(General manager, IT Services strategic business unit)

maintaining a consistent commitment to these decisions (Barnard, 1938; Thompson, 1967). Now, in the
context of more complex and global environments,
organizations and their leaders face pressures to address multiple, competing strategic demands simultaneously (Jarzabkowski & Sillince, 2007; Kraatz &
Block, 2008; Smith, Binns, & Tushman, 2010). Rather
than choosing between alternatives, long-term performance depends on engaging them both. Yet, as the
epigraph suggests, doing so challenges and frustrates
senior leaders.
Paradox theory offers insight into these challenges
(Quinn & Cameron, 1988; Smith & Lewis, 2011).
Paradoxes denote tensions that coexist and persist
over time, posing competing demands that require
ongoing responses rather than one-time resolutions
(Lewis, 2000). Studies describe approaches to managing paradoxes in general that include accepting
paradoxes as vital and learning to work through them
(Luscher & Lewis, 2008), accommodating contradictions into novel synergies (Eisenhardt & Westcott,
1988; Rothenberg, 1979), or differentiating and integrating to understand alternatives (Andriopoulos
& Lewis, 2009; Smith & Tushman, 2005). More recently, Smith and Lewis (2011) have theorized a
model incorporating these various approaches that
involves managing paradox by accepting tensions
as inherent, and shifting between choosing and accommodating alternatives over time. However, we
still know little about the specific nature and management of strategic paradoxes, whichdrawing
from Lewis (2000)I define as contradictory, yet interrelated, demands embedded in an organizations
goals. Managing strategic paradoxes is particularly
challenging for top management teams, because even

Organizations are rife with competing demands.

At an organizations highest level, senior leaders face
such pressures as exploring and exploiting (March
1991), integrating globally and adapting locally
(Marquis & Battilana, 2009), or maximizing profits
and improving social welfare (Margolis & Walsh,
2003). Early organizational scholars acknowledged
these competing strategic demands, but argued that
success depended on leaders making choices and
Thank you to Kevin Corley, associate editor, and three
anonymous reviewers for their constructive feedback and
guidance through the review process. I am deeply grateful
to Michael Tushman for his generous, ongoing support of
this study. I also appreciate advice and feedback on earlier
drafts of this manuscript from Costas Andriopoulos,
Marya Besharov, Andy Binns, Amanda Cowan, Shoshana
Dobrow, Amy Edmondson, Richard Hackman, Paula Jarzabkowski, Adam Kleinbaum, Marianne Lewis, Sally
Maitlis, Michael Posner, and Heather Smith, as well as the
generative conversations had with Joshua Margolis, Andy
Molinksy, Mike Pratt, Ann Langley, members of the European Group for Organizational Studies (EGOS) Strategy as Practice subtrack, and members of the May
Meaning Meeting. Thank you to Anthony Alagbile and
Joseph Szczepanski for research assistance. Finally, I appreciate the Fortune 500 senior leaders who generously
shared with me their time and experiences.
58

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2015

Smith

as they might seek to maximize both strategies simultaneously, these leaders face ongoing pressure
to make clear and consistent decisions between
alternative strategies to allocate resources and to
provide guidance for the rest of the organization.
How senior leaders address strategic paradoxes
critically impacts an organizations success, yet
remains relatively unexamined.
This gap in the literature motivated the studys
key research question: How do senior leaders sustain strategic paradoxes? To investigate this question,
I compared in-depth data from the top management teams of six strategic business units as they
made decisions in response to strategic paradoxes
specifically, exploring and exploiting simultaneously
(Raisch, Birkinshaw, Probst, & Tushman, 2009;
Smith & Tushman, 2005). Integrating insights from
these data with existing literature informed a model
of dynamic decision making that depicts how top
management teams engage strategic paradoxes
through a pattern of iteratively choosing between
domains over time. The details of this model advance and complicate our understanding of the
nature and management of paradox by depicting
dilemmas and paradoxes as interwoven, understanding paradoxical management as a pattern of
decisions over time rather than reactions to individual issues, and describing the critical role of
both differentiating and integrating practices together to manage paradox.
NATURE AND MANAGEMENT OF
ORGANIZATIONAL PARADOXES
Paradoxes are contradictory yet interrelated elements that exist simultaneously and persist over
time (Smith & Lewis, 2011: 382).1 Scholars typically distinguish paradoxes from dilemmas. While
paradoxes persist and are impervious to resolution,
1

Researchers use various terms to describe oppositional elements, including paradox, dualities, and
dialectics (i.e., Farjoun, 2010; Seo & Creed, 2002; Smith
& Graetz, 2006). A key distinction lies in the persistent
nature of tensions. Dialectics and dualities imply resolving tensions by identifying a novel synergy. In contrast, paradoxical tensions persist and cannot be resolved
(see Smith & Lewis, 2011). Conceptual confusion between
these constructs remains, and scholars often use these
terms interchangeably. Following other ambidexterity
studies (i.e., Andriopoulos & Lewis, 2009; Raisch & Birkinshaw, 2008; Smith & Tushman, 2005), I adopt the term
paradox to highlight the simultaneity and persistence of
tensions between exploring and exploiting.

59

dilemmas involve tradeoffs that are resolved with

either/or decisions (Cameron & Quinn, 1988; Clegg,
2002). Strategic paradoxes describe organizationlevel performing tensions that stem from the plurality of stakeholders and result in competing strategies
and goals (Smith & Lewis, 2011: 384). Even as
there are multiple types of paradox that exist at
multiple levels of analysis, strategic paradoxes are
particularly prevalent, challenging, and consequential to an organizations fate.
Strategic paradoxes pervade organizations, increasingly garnering attention from both practitioners and scholars. Research is replete with
examples of strategic paradoxes, including tensions
between global integration and local adaptation, financial profitability and social missions, or high
commitment and high performance (i.e., Beer, 2009;
Clegg, 2002; Gittell, 2004; Nonaka & Toyama, 2002).
Moreover, as the complexity, plurality, and competitiveness of environments grows, senior leaders
experience increased pressures to simultaneously
embed multiple competing demands within organizations (Besharov & Smith, 2014; Greenwood,
Raynard, Kodeih, Micelotta, & Lounsbury, 2011;
Kraatz & Block, 2008).
In this study, I focus on exploring and exploiting
as a key example of strategic paradoxes. As March
(1991: 101) noted in his early conceptualization,
demands to explore and exploit exist across organizations and remain a central concern of studies
of adaptive processes. Exploring introduces novel
innovations to achieve long-term sustainability,
while exploiting finds operational efficiencies in
existing products for short-term performance. Ambidexterity studies investigate how organizations
explore and exploit simultaneously (Raisch &
Birkinshaw, 2008; Tushman & OReilly, 1996). Yet
these strategic demands are paradoxical, involving
contradictory, self-referential, and persistent tensions (Hughes & Brecht, 1975). They are contradictory because they are associated with inconsistent
senior leadership demographics (Beckman, 2006), cultures (Ghoshal & Bartlett, 1994), processes (Benner &
Tushman, 2003), and knowledge management practices (Sheremata, 2000). Efforts to explore and exploit are also self-referential. Exploiting involves
stability and efficiency that effectively enable exploration. Exploring engenders change and renewal,
reducing risk and improving execution for exploitation (Farjoun, 2010). Finally, these tensions persist,
because engaging one domain triggers demands on
the other and fuels cycles over time (Andriopoulos &
Lewis, 2009).

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Effectively managing strategic paradoxes consequentially impacts an organizations fate (Cameron,

1986; Jay, 2013; Smith, Lewis, & Tushman, 2011).
In particular, ambidexterity studies emphasize that
long-term organizational performance depends on
successfully exploring and exploiting simultaneously (He & Wong, 2004; Tushman, Smith, Wood,
Westerman, & OReilly, 2010). Senior leaders play
a critical role: Their actions, rhetoric, and decisions
in response to tensions create organizational contexts
(Jarzabkowski, 2008), influence middle-manager
responses (Floyd & Lane, 2000), and ultimately impact performance (He & Wong, 2004). Yet simultaneously engaging paradoxical strategies challenges
and frustrates senior leaders. Even as paradoxes elude
resolution, senior leaders frequently face pressures
to make decisions in order for the organization to
move forward. Moreover, leaders experience both
internal and external pressure for consistency, rather
than encouragement to embrace inconsistent strategies simultaneously. Internally, commitments to
multiple strategic goals can foster ambivalence
among employees (Merton & Barber, 1976; Pradies &
Pratt, 2010) or contestation between subgroups with
distinct alignments (Glynn, 2000). These conflicts
become particularly intractable when the goals reinforce competing identity claims (Besharov, 2013;
Fiol, Pratt, & OConnor, 2009). Efforts to manage
ambiguity and conflict can result in choosing one
strategic alternative (Thornton, 2002). Leaders further
face inertial pressures, in which structures (Henderson & Clark, 1990), cognitive frames (Tripsas &
Gavetti, 2000), routines (Gilbert, 2005), and competencies (Leonard-Barton, 1992; Tripsas, 2009) support existing products over innovations. In addition,
embedding conflicting demands creates legitimacy
challenges with divergent external stakeholders
(Kraatz & Block, 2008). These pressures to minimize
internal conflict and to address external legitimacy
drive leaders to choose a single strategy.
Paradox research depicts various approaches for
managing these tensions. First, research stresses
refraining tensions to bring to the surface their
paradoxical nature. Paradoxes defy rational, linear
logic, and in so doing create uncertainty and ambiguity that are both emotionally and cognitively
threatening (Lewis, 2000). Individuals often respond defensively, repressing paradoxes by framing tensions as dilemmas and either/or options,
and ultimately choosing one alternative (Vince &
Broussine, 1996). These choices can fuel vicious
cycles as emphasizing one option resurfaces demand for the other and thwarts the creative energy

January

embedded within (Lewis, 2000; Sundaramurthy &

Lewis, 2003). Individuals and groups can ultimately be paralyzed by a choice between alternatives (Frankl, 1960; Smith & Berg, 1987). To avoid
these paralyzing cycles, scholars emphasize paradoxical thinking (Smith & Tushman, 2005), refraining the tensions of either/or as the possibilities of
both/and (Bartunek, 1988).
Studies also point to specific management approaches to responding to paradoxes. Recognizing
that paradoxes defy resolution, scholars depict
strategies for managing competing demands simultaneously that include (1) accepting, (2) accommodating, and (3) differentiating/integrating. Accepting
involves learning to live with the paradox (Lewis,
2000: 764). Doing so includes working through the
paradox to recognize and embrace the conflicting
tensions (Murnighan & Conlon, 1991; Smith & Berg,
1987). Luscher and Lewis (2008) describe developing
a workable certaintya negotiated understanding
to move forward without resolutions. To do so, they
stress the value of paradoxical inquiry as a practice to
surface tensions and to enable sensemaking. Others
emphasize using communication or humor to embrace paradox (Hatch, 1997; Hatch & Erhlich, 1993;
Jarzabkowski & Sillince, 2007).
Accommodating involves defining a novel, creative synergy that addresses both oppositional elements together. Rothenberg (1979) suggested that
geniuses such as Mozart, Einstein, and Picasso developed breakthrough ideas by cognitively juxtaposing contradictions and seeking a solution to
accommodate both alternativesa capability that
he labeled Janusian thinking. Eisenhardt and
Westcott (1988) describe how adopting a paradoxical frame enabled Toyotas senior leaders to generate new strategic solutionse.g., juxtaposing goals
to carry no inventory while having access to any
necessary component at the right time, which resulted in their just in time processes.
Other research identifies differentiating and integrating as complementary approaches for addressing paradox. Building on the early conceptualizations
of Lawrence and Lorsch (1967), these studies describe differentiation and integration in organizational designs (Tushman & OReilly, 1996), leadership
cognition (Smith & Tushman, 2005), or organizational practices (Andriopoulos & Lewis, 2009). Differentiating involves separating distinct elements
and honoring the unique aspects of each, while integrating stresses synergies and linkages (Smith &
Tushman, 2005). For example, Andriopoulos and
Lewis (2009) suggest differentiating practices that

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Smith

61

these cases for a year. Analyzing in-depth data over

the course of a year allowed me to generate novel
insights into the patterns of decision making in each
case. In addition, comparing across six distinct cases
surfaced differential patterns of decision making.

include building diversified portfolios, debating

project demands, and temporally and spatially
splitting practices, and integrating practices that
include cultivating a paradoxical vision, purposefully improvising, and identifying integrative roles.
More recent studies proposed attending to various
approaches over time. Jarzabkowski, Le, and Van de
Ven (2013) depict cycles of tensions and responses.
As individuals responded to paradoxical tensions,
new tensions emerged, fueling different responses.
Smith and Lewis (2011) theorized a dynamic equilibrium model that proposes managing tensions by
accepting inherent paradoxes, then vacillating between choosing and accommodating strategies.
Taken together, these studies posit strategic paradoxes as increasingly prevalent, challenging, and
consequential. Yet while research offers approaches
to managing paradox in general, we still know little
about how senior leaders address the intense
demands of strategic paradoxes under which they
seek to engage competing demands simultaneously,
but face pressures to make decisions in response to
critical issues. This study therefore seeks to expand
and build upon our understanding of the nature and
management of paradoxes, by exploring the central
research question: How do senior leaders make
decisions that can sustain commitments to strategic
paradoxes?

Research Context and Case Selection

I observed top management teams of six strategic
business units from one Fortune 500 corporation.
Following ambidexterity research (i.e., Jansen,
Simsek, & Cao, 2012), I focused on such units because industry competition often occurs at this level
(Porter, 1985), and the leaders of the strategic business units have responsibility for exploratory and
exploitative strategic domains (Gatignon, Tushman,
Smith, & Anderson, 2002). In addition, studying
multiple strategic business units in one organization
allowed me to compare cases within the same corporate context (Gibson & Birkinshaw, 2004) and to
minimize extraneous variability (Eisenhardt, 1989).
This Fortune 500 firm adopted a strategy requiring its strategic business units to develop products
across multiple horizons (see Baghai, Coley, &
White, 2000), resulting in a broad population of
strategic business units. Following existing research
(Finkelstein & Hambrick, 1996), I defined the top
management team as the general manager and his
or her direct reports. Table 1 summarizes these
six cases.
I worked with an executive in corporate strategy to sample cases theoretically based on three
criteria. First, each strategic business unit made a
commitment in its annual budget plan to exploit
and explore. Following extant research, I defined

METHODS
I compared six case studies to investigate how
senior leaders made decisions that enabled them to
explore and exploit simultaneously (Eisenhardt &
Graebner, 2007; Yin, 1984). I observed each of

TABLE 1
Case Selection
Case
Software 1
Software 2

IT Services

Life Sciences

Existing Products
Database
software
Enterprise
software
Strategic
outsourcing;
business
integration
Back-office
technology
solutions

Semiconductor

ASIC chips

Software 3

Collaboration
software

Innovations

Age
(yrs)

Industry

Existing Product
Performance

Existing Product Strategic

Commitment

Innovation Strategic
Commitment

Growth #2 in
market
Stable #1 in
market

#1 in market Increase
revenue 35%
#1 in market Stable
revenue

#1 in market Three-digit
growth in 3 years
#1 in market Three-digit
growth in 5 years

Web-based database
software
Web-based
enterprise
software
Application
management
services

18

Software

14

Software

10

IT; Consulting
services

Decline #1 in
market

#1 in market Increase
revenue 20%

#1 in market $1bn in
2 years

Life science
research and
delivery
technology
solutions
Transport and
network chips
Web-based
collaboration tools

10

Hardware

Stable #2 in
market

#1 in marke Stable
revenue

#1 in market $1bn in
3 years

Hardware

20

Software

Decline #2 in
market
Decline #2 in
market

#1 in market Increase
revenue 35%
#1 in market Increase
revenue 11%

#1 in market $2bn in
3 years
#1/#2 in market $0.5bn
in 2 years

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Academy of Management Journal

exploiting as incrementally improving an existing

products technology and/or marketing strategies
to increase efficiencies to the same target market,
and exploring as developing and commercializing
nonincremental innovations (Gatignon et al., 2002;
Tushman & Smith, 2002).
Second, I sought to minimize variance in the
contexts of the strategic business units. All six strategic business units were in high-tech industries.
Their existing products had been in the marketplace
between eight and 20 years, and had earned between
US$1 billion and $3.7 billion in revenues. Innovations were introduced to the market less than a year
prior to the study.
Third, to expedite data collection, I included
three real-time cases and three retrospective cases
(Leonard-Barton, 1990). To minimize bias from
these different types of data, I focused interviews
on specific events, corroborated across multiple
data sources, and asked key informants to assess
comprehensiveness (Eisenhardt & Graebner, 2007).
The time frame did not seem to impact the findings, with both real-time and retrospective cases
demonstrating the differences that emerge from my
data analysis.

January

business unit senior leaders, (3) division managers,

(4) internal organizational consultants working with
the unit, and (5) corporate executives (Eisenhardt,
1989). I first interviewed the general managers, and
they identified additional interviewees. Interviews
lasted between 45 minutes and two hours. Guided
by extant research, I started with structured interviewing to understand the strategic business units
strategic context, exploratory products or services,
and exploitative products or services. I asked informants to describe the challenges of managing
multiple strategic domains and how they responded
to these challenges (Miles & Huberman, 1994). As
each interview progressed, I began focusing on the
nature of specific strategic challenges and issues,
and how the informant responded. I adopted a
courtroom style of interviewing, pushing for concrete illustrations to increase the datas trustworthiness (Eisenhardt & Graebner, 2007). Because
of the strategic and interpersonal sensitivity of the
issues, I did not record the interviews, but took extensive notes, which conveyed trust and motivated
accuracy (Miller, Cardinal, & Glick, 1997). I recorded verbatim quotes and typed the notes up as soon
as possible (Miles & Huberman, 1994). To increase
data reliability, an internal corporate organizational
consultant accompanied me for 10% of the interviews. The similarities in our independent notes
reinforce confidence in the data quality.
Observation. I observed 16 senior leadership
meetings, including monthly board meetings and
special offsite strategy sessions. I sat in the back of
the room for these meetings, taking notes about their
content and processes, including verbatim quotes,
and typed up these notes as soon as possible. I spoke
with executives during breaks to ask questions and
to check my inferences. In the three real-time cases,

Data Collection
Data collection lasted for more than two years,
including interviews, observations, and archival
materials (Eisenhardt, 1989; Jick, 1979). Table 2
summarizes the data.
Interviews. I conducted 96 interviews with 65
distinct informants. To triangulate insights from different sources, I interviewed informants at various
levels in the company, including (1) the strategic
business units general manager, (2) the strategic

TABLE 2
Data Collected
Interviews

Case

Time Frame

Strategic
Business
Unit
General
Manager

Strategic
Business
Unit
Senior
Leaders

Division
Manager

Internal
Organization
Consultant

Meetings

Corporate
Executives

Total
Interviews

Total
Interviewees

Total
Meetings
Observed

Software 1

Real time

Software 2
IT Services
Life Sciences

Retrospective
Retrospective
Real time

5
2
2

16
7
7

2
1
0

1
1
3

24
11
12

13
9
7

1
1
4

Semiconductor
Software 3

Retrospective
Real time

3
2

10
16

1
1

0
1

14
20
6
96

11
14
4
65

1
7

6
Total

16

Meeting Type
Board meeting
Offsite
Offsite
Offsite
Board meeting
Offsite
Board meeting
Board meeting
Offsite

2015

I observed multiple meetings. In retrospective cases,

I observed at least one meeting and used these data
to support interview narratives.
Archival information. Forty archival documents
including internal strategic business unit documents
such as business plans, strategic progress reports,
and meeting agendas, as well as information from the
company websites and industry analysesallowed
me to triangulate my understanding of each strategic business units context, strategy, practices,
and outcomes.
Data Analysis
I adopted analytical techniques to generate insights within each case and then compared across
cases (Eisenhardt, 1989; Yin, 1984). I describe four
stages that systematically move from raw data to
theoretical interpretations (Gioia, Corley, & Hamilton,
2013). Even as I delineate stages, the process was
iterative to improve insights and generalizability
(Langley, 1999; Locke, Golden-Biddle, & Feldman,
2008). Table 3 summarizes the stages of the analytical process.
Stage I: Develop thick descriptions. I developed
a rich case study for each strategic business unit,
which incorporated various types of data (Langley,
1999) to describe the organizational context, exploratory and exploitative strategies, and a chronology of senior leadership challenges and responses.
I interspersed case writing with data collection,
allowing insights and questions from the cases to
inform future data collection (Yin, 1984). I shared
cases with key informants to assess reliability and
comprehensiveness.
Three critical insights emerged from the case
studies and guided my subsequent analyses. First,
leaders identified a number of specific issues that
involved tensions between exploration and exploitation. They described the issues as complex, challenging, and frustrating. This insight led me to focus
on specific issues as a primary unit of analysis
(Maitlis, 2005).
Second, these issues persisted over time. As
leaders made decisions on one issue, new issues
emerged. Informants experienced issues as ongoing tensions and said that they are constantly
grappling. This insight guided my focus on patterns of responses over time, rather than responses
to individual issues.
Finally, early insights suggested three different approaches to managing tensions between exploration and exploitationonly exploring, only

Smith

63

exploiting, and both exploring and exploiting.

These distinctions helped to guide future analyses,
in which I systematically coded raw data to develop theoretical constructs (Gioia et al., 2013)
and ultimately to verify the distinct approaches
(Eisenhardt, 1989).
Stage II: Identify key issues. I identified specific
issues between exploring and exploiting. To do
so, I generated a list of emerging issues, which I
defined as conflicts facing senior leaders involving both the existing product and the innovation.
I included issues that fit four criteria. First, the
issue was salient and challenging. Leaders described these issues using words such as difficult,
very hard, uncertain, unclear, challenging,
tensions, or problem. Second, the issue involved tensions between existing product and innovation, and were not problems facing only one
product domain. Third, the senior leaders had responsibility to address the issue. For example, I did
not include issues of leaders compensation that
required corporate policy changes. Finally, multiple informants raised an issue, ensuring its importance and salience.
I coded issues using short descriptions or in vivo
codes. Grouping thematically and incorporating
existing literature resulted in eight types of issue,
which I clustered into three categories that emerged
from the literature:
(1) resource allocation (i.e., Bower & Gilbert, 2005)
including issues of allocating (a) financial resources, (b) human resources, such as engineers
and sales people, and (c) time such as the senior
leaders time in meetings;
(2) organizational design (i.e., Nadler & Tushman,
1992) including issues around (d) organizational
structure, (e) processes, and (f) metrics; and
(3) product design (i.e., Gatignon et al., 2002) including issues around (g) product technology,
and (h) target markets.
I returned to each case to ensure that I had captured all of the issues, from which 47 issues resulted. To identify how leaders understood issues,
I explored their descriptive words (Huff, 1990),
which suggested two different experiences. Their
language included words that indicated paradoxical tensions, such as tensions, yet, but,
balance, and on one hand/on the other hand
(Andriopoulos & Lewis, 2009). They identified contradictions, both noting how they had to address them
simultaneously and recognizing that tensions persisted over time, impervious to resolution. Yet they

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Academy of Management Journal

January

TABLE 3
Data Analysis: Stages of Analytical Process
Stage

Analytical Activities

Output

1. Generate thick descriptions of each case

2. Share descriptions with informants to increase
reliability and comprehensiveness
1. Generate a list of issues based on four criteria:
(a) salience; (b) tension between exploring and
exploiting; (c) senior leaders span of
responsibility; and (d) multiple informants
2. Code issues using in vivo codes or short
phrases
3. Cluster and incorporate literature to identify
eight types of issue in three categories
4. Return to raw data to confirm all instances of
issues
5. Identify language that leaders use to describe
their understanding of issues

c Six thick case studies, one for each SBU

1. Code data to identify responses to tensions

(315 instances)
2. Cluster codes into meaningful groups (six
practices, two contexts)
3. Check coding reliability with external
researchers
4. Incorporate existing literature to aggregate into
dimensions

c Six leadership practices, aggregated into

dimensions of differentiating and
integrating
c Two themes of decision contexts

(b) Classify decisions in response

to issues

1. Identify decisions in response to issues

2. Classify decisions as (a) supporting
exploration, (b) supporting exploitation, or (c)
supporting both

c Classification of decisions in response to

each tension

(c) Aggregate each case over

multiple issues to define patterns
over time

1. Create tables by case with responses to each

issue to describe patterns over time
2. Code data to identify how leaders understand
decision patterns

c Three decision patterns: (1) exploring

and exploiting (three cases), (2) only
exploring (two cases), and (3) only
exploiting (one case)
c Two themes describing decision patterns
to explore and exploit
c Model of dynamic decision making to
sustain strategic paradox

1. Develop thick descriptions to

generate initial insights
2. Identify key issues in each case

3. Identify leadership practices,

decision contexts, and decisions
(a) Code data to elicit leadership
practices and decision contexts

4. Incorporate data and literature to

build a theoretical model

1. Combine data on leadership practices, decision

contexts, and decision patterns to describe
overall approaches
2. Integrate existing literature to inform an overall
model of dynamic decision making

also described issues as dilemmas, using language

such as tradeoffs, choice, resolve, and either/
or (Smith & Lewis, 2011).
Stage III: Identify patterns of leadership practices, leadership focus, and decisions. To investigate my research question about how senior
leaders make decisions to sustain commitments to
strategic paradoxes, I read through the raw data,
asking: How are senior leaders responding to issues?
Three types of code emerged: (1) practices or
leaders everyday activities (Feldman & Orlikowski,
2011; Jarzabkowski, 2005); (2) decision contexts

c 47 issues across all cases (approx. eight

per case)
c Eight types of issues in three categories
(resource allocation, organizational
design, product design)
c Two themes describing leaders
experience of issues

describing how practices impacted the leaders understanding of exploring and exploiting (Corley &
Gioia, 2004; Huff, 1990); and (3) decisions. To code
for leaders practices and decision contexts, I read
through the raw data and created in vivo codes or
short phrases for critical passages, which I clustered into meaningful groups. This process resulted in six themes describing leadership practices
and two themes describing the decision context.
I shared these themes with two researchers not
involved with this study, and used their feedback
to clarify and distinguish emergent themes. Noting

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similarities and differences, I clustered the leadership practices into two dimensions. Adopting labels
from existing literature, I labeled these differentiating and integrating (Andriopoulos & Lewis,
2009; Smith & Tushman, 2005). I further noted the
distinct context for the decision making, in which
the leaders stressed either the distinct strategic
domains or the interconnections between domains.
I then identified leaders decisions in response to
each issue. For example, they reallocated resources,
changed organizational structures, or reconsidered
leaders roles and responsibilities. I also noted instances in which leaders did nothing in response
to critical issues (i.e., Greenwood & Hinings, 1993;
Tversky & Shafir, 1992). I categorized decisions
based on whether they supported exploration, exploitation, or both. In the cases in which leaders
made no decisions, I coded these cases as either
exploring or exploiting, depending on the nature of
the status quo. For example, in one case, the senior
leaders noted that they needed to decide on organizational design. The existing design benefited
only the existing product and was limiting the
innovations success. Yet the leaders did nothing
in response.
To understand how leaders attended to persistent
issues, I identified patterns of responses over time.
I created a table for each case, which listed leadership practices and decisions in response to each
specific issue, and aggregated these for each strategic business unit (Miles & Huberman, 1994). Three
decision patterns emerged, supporting my initial
insight into the three different approaches to managing exploration and exploitation simultaneously.
In three cases, leaders decisions shifted support
between the existing product and innovation, with
a small number of decisions supporting both
domains simultaneously. In the other cases, leaders
supported one domain while avoiding the other.
Two cases only explored, while one case only exploited. Based on my research question aiming to
understand how senior leaders managed strategic
paradoxes, I focused on the three cases that supported both exploration and exploitation simultaneously, using the other three for comparison.
I returned to the data to investigate how leaders in
these three cases described their decisions. Using
a similar coding process to that already described,
I identified two key themes. Leaders in these
cases described approaches to managing competing demands as inconsistent, flexible, and dynamic.
Following Smith and Lewis (2011), I label this pattern consistently inconsistent.

Smith

65

Stage IV: Incorporate findings to build a theoretical model. I integrated data about leadership
practices, decision contexts, and decision patterns
to describe overall approaches. Finally, I embedded
existing theory to help inform relationships between constructs. These data and literature result
in a model of dynamic decision making to manage
strategic paradoxes. I shared the emergent model
with two peer researchers to clarify theoretical
insights.
Overall, I adopted prescribed methods for data
collection and analysis that sought to increase the
trustworthiness of the findings, including:
(1) a prolonged engagement with the research site
to become enmeshed in the context and data
(Lincoln & Guba, 1985);
(2) multiple sources of data and multiple levels of
informants to triangulate perspectives (Eisenhardt, 1989; Jick, 1979);
(3) retrospective and real-time cases to expedite
data collection, while minimizing bias (Eisenhardt & Graebner, 2007; Leonard-Barton, 1990);
(4) thick descriptions and informant feedback to
capture the rich context, and to ensure the
quality and validity of interpretations (Langley,
2007); and
(5) outside researchers reviewing the emergent constructs and models to vet ideas, and to in crease
the reliability and validity of interpretations
(Lincoln & Guba, 1985).
The output of these analyses describes a model
of dynamic decision making to manage strategic
paradoxes.

FINDINGS
Three Approaches to Managing Strategic
Paradoxes
The top management teams in all six cases
committed to both exploratory and exploitative
success, but only three senior leadership teams
sustained these commitments. In the other three
cases, the senior leaders focused only on exploring
or only on exploiting. In this section, I briefly describe the three cases that only explored or only
exploited to throw into sharp relief the remaining
narrative, which describes my findings that the
other three cases could support both exploration
and exploitation.
The Life Sciences and Semiconductor strategic business units focused only on exploring, but

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Academy of Management Journal

avoided or ignored the needs of the existing product. Life Sciences created IT services for the life
science industry. Its existing business provided
back-office hardware and software primarily for
big pharmaceutical companies. At the same time, its
new business offered IT solutions for biological
and medical research and delivery. Semiconductor
made ASIC chips primarily for computing hardware
and was launching a new business developing chips
for network technologies. In both strategic business
units, the general managers focused predominantly
on developing the innovations, seeking to grow
them quickly into billion-dollar businesses. To ensure that they provided the resources for the innovation businesses to success and were not burdened
by the existing product, the managers created new
senior team roles with responsibilities for only the
innovation, held offsite meetings to ensure the
success of these businesses, and focused almost all
of their monthly senior team agendas on the innovation. I describe these practices as differentiating: They enable the senior leaders to distinguish
the innovation needs from those of the existing
product. Doing so helped them to avoid inertial
pressures that could keep them bound to the past.
Yet they engaged in few practices that engaged the
existing product or linked the existing product with
the innovation. As the Life Sciences general manager noted: I have gotten pressure from others to
expend the money on helping us shore up solutions
that are more traditional conventional areas. Its not
very difficult to say no Its not strategic, not where
the puck is moving. As a result, the strategic business unit spent no time focused on the existing
product. The managers strategic decisions reflect
this pattern; all decisions made were in favor of the
innovation. One frustrated Life Science leader noted
[The senior team] is only focused on this futuristic
stuff, then asserted that he had nothing to sell today to achieve the revenue targets for the existing
product. Similarly, Semiconductors vice president
of business development said: We dont work on
the existing products. We are only looking for new
opportunities.
The Software 3 strategic business unit produced enterprise-wide collaboration software (e-mail,
calendaring, etc.), while building new businesses
for online collaboration tools. To manage both of
these strategic domains, the senior leaders engaged
practices linking the existing product to the innovation. For example, they articulated an overarching vision that encompassed both the existing
product and innovation, and then promoted this

January

vision to the whole organization by speaking about

it frequently, hanging signs on office walls, creating wallpaper for each employees computer, etc.
As one senior leader noted: We get it that we are
supposed to be ambidextrous. They also asked
each of the senior leaders to take responsibility for
both the existing product and innovation. They
structured senior leadership meeting discussions
around functional responsibilities, which meant
that they addressed issues associated with both the
existing product and the innovation together. I describe these practices as integratingpractices
that seek to create linkages and synergies between
the different strategic domains. Software 3 adopted
integrating practices, but unlike Life Sciences or
Semiconductor, none of its practices created distinctions between the existing product and innovation. As a result, inertia led the leadership to
focus all of their time, resources, and decisions only
on the existing product. As one Software 3 leader
summarized: We keep treating [the innovation] just
like the [existing product] and as a result do damage
to the innovation. Leaders reported feeling frustrated and stalled.
Comparing these three cases with the three cases
that both explored and exploited revealed several
critical differences around how the strategic business units manage exploration and exploitation.
In particular, Life Sciences and Semiconductor
adopted only differentiating practices, which were
associated with only exploring. Software 3 adopted
only integrating practices, which were associated
with only exploiting. The other three cases engage
both differentiating and integrating practices,
which were associated with supporting exploratory
and exploitative businesses. Table 4 highlights this
comparison.
In the narrative that follows, I describe how these
last three cases adopted both differentiating and
integrating practices, and how these practices were
associated with both exploration and exploitation.
To support this narrative, I include a data structure
display (Figure 1), a data table supporting emergent
constructs (Table 5), and a list of key issues and
decisions for each of the three cases (Table 6). I then
integrate these findings with existing literature to
build an overall model of dynamic decision making
(Figure 2).
Key Issues and Experienced Tensions
The Software 1, Software 2, and IT Services
strategic business units all committed to both

2015

Smith

TABLE 4
Comparing Approaches to Managing Strategic
Paradoxes
Cases
Software 1
Software 2
IT Services
Life Sciences
Semiconductor
Software 3

Leadership
Practices

Decision
Pattern

Differentiating and
integrating

Exploring and
exploiting

Differentiating

Only exploring

Integrating

Only exploiting

explore and exploit, and by doing so raised critical

tensions between these different strategic domains.
Softwares 1 and 2 were both growing existing
billion-dollar enterprise-wide software systems,
while developing new software for online support.
IT Services had several IT consulting businesses
that created long-term contracts allowing clients to
outsource their hardware servicing or to integrate
corporate information technology systems, while
building a new business that created shorter-term
contracts to manage software applications for
clients.
Managing both existing businesses and innovations surfaced a number of competitive issues between the two businesses. In particular, I categorized
three types of issues.
(1) Resource allocation included competition for
financial resources, human resources, and time
resources. For example, leaders grappled with
how to allocate engineering headcount between
strategic domains depending on short-term client needs or long-term demands to build the
business.
(2) Organizational design included differential
needs for structure and leadership roles, processes, and metrics. For example, leaders
debated whether to create a new subunit for
the innovation and, if so, whether its leader
should be from inside the organization or
outside.
(3) Product design involved competition for the
technological development or target markets of
the existing product or innovation. For example, leaders discussed whether the innovation
should leverage technology and/or existing
customers from the existing product.
Leaders experienced and described these competitive issues as both (1) either/or dilemmas that required resolutions and choices, and (2) paradoxical

67

tensions in which contradictory, yet interrelated,

elements defy resolutions.
Either/or dilemmas. Senior leaders experienced issues between the existing product and
innovation as tradeoffs that needed a clear decision one way or another. As one IT Services
leader noted, the process was a lot about making
tradeoffs. IT Services general manager further
reflected: The tradeoff is short-term, quarterly
and annual achievement of targets versus having to manage our innovation with a very different type of model. Resource issues surfaced as
dilemmas when leaders felt pulled between allocating financial resources, human resources, and
their own time to either the existing product
or innovation. As Software 1s general manager
noted, The trick was always how to allocate
money, while another leader said, The tradeoffs
were fairly headcount based. Leaders also described organizational design decisions as tradeoffs between strategic domains, including issues
around structures, processes, and metrics. For
example, an IT Services leader noted that the
strategic business unit would have to make
a clear decision about whether to create a distinct
subunit for the innovation or not. A Software 1
leader grappled with designing the innovation
team to include people who were committed to
the past or people who had skills for the future:
Are you better off breaking with the past and
going with something different in development
and marketing or not? Finally, product design
issues surfaced as dilemmas when leaders felt
under pressure to choose technological design
elements or to make either/or choices around
customers and target markets. For example, leaders in Softwares 1 and 2 described debates about
whether to adopt the technology platform for the
innovation that aligned with the existing product
or the one that took advantage of novel software in
the marketplace.
Paradoxical tensions. Beyond describing
either/or tradeoffs, senior leaders also depicted
issues as paradoxicalthat is, they recognized the
existing product and innovation as contradictory,
yet both necessary for long-term success. They
noted inherent contradictions within each issue
impervious to resolution. For example, leaders
pointed to short-term and long-term paradoxes
in allocating resources. Senior leaders wanted to
achieve performance in the long term, but doing so
depended on short-term successes. Investing in
the innovation often involved short-term costs for

FIGURE 1
Data Structure

Integrating leadership practices

Differentiating leadership practices

Experienced tensions

Dimension

Solving problems jointly

Stressing overarching goals

Allocating integrative roles

Comparing domains to raise novel

distinctions
Seeking information about domains
independently

Allocating domain-specific roles

Paradoxical tensions

Either/or dilemmas

Themes

We created my role in order to look across the organization. (VP Business Development, IT Services)
We had a number of different champions for different products. [The general managers] role was to look across the entire organization and
weave his way across each of those decisions and differences. (VP Innovation, Software 2)
The right answer is for us to rally behind common goals, and just do well enough as we can in the midst of all that. If our personal goals get in
the way of all that, we just dont do well together. I think that part of that has to do with the kinds of people that [the general manager] has
chosen for her board. (VP Research and Development; Software 1)
What happens on the team? Each of them wants to see their team contribute to the bottom line, and their bottom line is the success of the entire
business. (Executive assistant, Software 1)
I told the managers that our decisions have to be cross-business. It means that an individual who runs a particular line of business might have
to give us some of their budget to invest in opportunities in someone elses [lines of business]. (General manager, IT Services)
The general manager is slowly getting people who were on multiple paths to be on one path. (VP Innovation, Software 2)
Each fall, we have discussions where we look across the organization. We think of it as a portfolio, and make any major adjustments at that
time. (VP Innovation, Software 1)
The [senior leadership] meeting was used to get people all on the same page. [The general manager] would help talk about the overall strategy
for everyone to understand. (VP Innovation, Software 1)
We committed to each other that if someone needed to contact one of us, we would respond with immediacy. We wanted to show mutual
respect. (VP Innovation, Software 1)
The people who are actually working on the deals are seeing the appropriate cross-[lines-of-business] assistance. (VP Innovation, IT Services)

I went off and assessed the innovation, and how we should manage this business, and reported back. (VP Innovation; Software 1)
Im getting input from all my peers. Then I have a half day booked for a one on one meeting with the general manager to make sure that we are
heading in the right direction. (VP Innovation, Software 1)
At our meetings, each business leader reports on the products progress. (VP Existing Product, Software 2)
Ive added one metric to their personal business commitments, and told them that their participation in developing future strategy and their
thoughts on the future of the business will help us evaluate them. (General manager, IT Services)
We brought this to [the general manager]. He said I should figure it out. So I wrote a paper proposing what to do. (VP Innovation, Software 2)

Our investment strategy around the [existing product] is to keep the customer happy, protect the revenue stream and spend the least amount of
money. So you need the kind of person in those jobs who can go in and figure out how to do just enough with little and give the customers
enough for well-being and security. The [innovations not yet in the marketplace] is the entrepreneur, folks have to figure out how to scale and
build processes that are going to build efficiency. (General manager, Software 1)
We had different champions for different products. (VP Innovation, Software 2)

We needed to make a decision of whether or not to separate this out from the rest of the division. (VP Innovation, Software 1)
Much of the decisions were fairly headcount based. There was a lot of culture of how to track line items and input. We effectively moved key
thinkers over to the new product. I would make the decision to pull people back. (VP Innovation, Software 2)
We are always pointing fingers at each other, all trying to cut costs. We are touching them equally. (VP Innovation, Software 1)
She with her management team agreedhow do you look at a product portfolio and shift from what you are investing in to something new?
There is no incremental money during times like these, so its all about tradeoffs. (VP Innovation, Software 1)
We were trying to leverage the existing sales channels for growth, and it was determined that to keep the momentum, and also we needed to
jump start it by adding our own sales force. (VP Innovation, IT Services)
We can change the financial results of this operation by slashing coststhe sunbeam approach. We could get the quarterly results that
everyone was looking for. Or we could build a strategy for the long term that does both. (General manager, IT Services)
If you want to try to cut something that is on [the general managers] level its off limits. Cant save expenses for products that are that strategic.
It shows people that we need this yet, we are always shifting resources. (VP Business Development, IT Services)
The biggest challenge was that we needed to help [the engineers] get motivated to build [the innovation], because we just killed what they were
doing. (VP Innovation, Software 1)
The challenge is that as [the innovation] grew, it created growth for [the existing product]. But it also challenged [the existing products] value
proposition and forced them to grow and change. So [the innovation] needed to add value to [the existing product], even as it depended on
the [existing product]. (VP Innovation, IT Services)

Representative Quotes

TABLE 5
Data Supporting Interpretations of Second Order Themes

Decision pattern

Decision-making context

Dimension

There was a lot of culture of how to track line items and input. We effectively moved key thinkers over to the new product. I would make the
decision to pull people back. (VP Innovation, Software 2)
We are constantly allocating and reallocating resources. (VP Innovation, Software 1)
We have to make sure that the resources are allocated effectively. We are always looking at where the resources are being utilized, and how we
can allocate them more effectively. (VP Research and Development, Software 1)
[The general manager] is making decisions Its a lot of moving resources around. (VP Existing Product, IT Services)
We need more experiments [with our resources]. (VP Business Development, IT Services)
Until we can demonstrate that these [innovations] are successful, we need to temporarily define a person driving a solution, and then connect
all of the participants of the decision, rather than create a bunch of new roles. (General manager, Software 1)
We developed SWAT teams for everyone to be talking about [the innovation]. (General Manager, Software 1)
The innovation is currently a shadow [profit and loss statement], inside an exploitative business We may spin them out from the current
[lines of business] when they reach a certain stage of growth. (General manager, IT Services)

The right answer is for us to rally behind common goals, and just do well enough as we can in the midst of all that. If our personal goals get in
the way of all that, we just dont do well together. (VP Innovation, Software 1)
The person running outsourcing, thinks about outsourcing. But together, we think about the larger picture. (General manager, IT Services)
The [existing product vice president] started the meeting by saying before we begin talking about the client, we need to make sure that as
a team, we are motivated to work together to satisfy the clients requirement. (VP Innovation, IT Services)
The [general manager] airs out the conflict, and by the process of his own willingness to listen, his ability to refine it, refocus it, he gets people
who were on multiple paths to be on one path. (VP Innovation, Software 2)
The [general manager] has an integrated strategy, that he has built over a long period of time. (Chief technical officer, Software 2)
Our emphasis was on portfolio management. (General manager, Software 2)
The senior team is more risk taking, more collaborative, because we believe that the success or failure of the innovation is not my success or
failure, but is the whole teams. (VP Innovation, Software 1)

Valuing interconnections between

strategic domains

Consistently inconsistent decision pattern

The H1 and the H2 products were both important. (VP Business Development, IT Services)
I know that they needed the existing products, even though I wasnt as focused on it, others were. (VP Innovation, Software 2)
We knew it was important to preserve the investment in [the existing product] for the current customers. (VP Research and Development,
Software 2)
I think the management team has gotten the message. They have invested the strategy for the innovation, and now its to trickle it down to the
organization. (VP Innovation, Software 1)
I came to [the general manager] and said that [the innovation] is really important and that we want to move faster on it than we already are. So
we ran an offsite session applied to the [innovations] strategic investment and it picked up the speed. We also have flagged it as a pretty big
deal. (VP Innovation, IT Services)

Representative Quotes

Valuing distinct strategic domains

Themes

TABLE 5
(Continued)

Key Issue

Resource allocation: HR
Organizational design: Structure
Organizational design: Skill
Organizational design: Structure
Resource allocation: Finance
Resource allocation: HR
Resource allocation: HR
Organizational design: Structure
Product design: Technology/target markets

Product design: Technology

Organizational design: Structure
Organizational design: Skills
Resource allocation: HR
Organizational design: Skills
Organizational design: Structure
Organizational design: Structure
Product design: Technology
Resource allocation: HR
Resource allocation: Senior leadership time
Product design: Technology/target markets

Organizational design: Skills

Resource allocation: HR
Resource allocation: Senior leadership time
Organizational design: Structure
Resource allocation: HR
Resource allocation: HR
Organizational design: Process
Product design: Technology/target markets

Case

Software 1
1
2
3
4
5
6
7
8
9

Software 2
1
2
3
4
5
6
7
8
9
10
11

IT Services
1
2
3
4
5
6
7
8

New or existing leaders?

Integrated or targeted consultants?
Allocate time to innovation or existing product?
Integrated or distinct innovation unit?
Hire consultants with existing skills/new skills?
Integrated or targeted sales team?
Integrated or targeted revenue processes?
Target new markets or existing market?

Innovation uses same or different competencies?

Integrated or distinct innovation unit?
Use existing skills or hire new skills?
R&D resources for explore or exploit?
Hire for existing product or innovation skills?
Integrated or dedicated research labs?
Integrated or dedicated sales team?
Existing or new technology for innovation?
R&D resources for explore or exploit?
Spend time on existing product or innovation?
Existing or new technology?

Allocate sales people to existing product or innovation?

Integrated or distinct innovation unit?
Existing engineering skills or new skills?
Integrated or targeted sales team?
Budget cuts to existing product or innovation?
R&D resources for explore or exploit?
R&D resources for explore or exploit?
Integrated or targeted sales team?
Expand to new innovation?

TABLE 6
Individual Decisions in Response to Key Issues

Exploit: Hire new existing product leader

Exploit: Hire consultants with existing product skills
Explore: Protect senior leadership time for innovation
Explore: Create new innovation subunit with new leader
Explore: Hire new consultants focused on the innovation
Explore: Create new sales team targeted toward the innovation
Both: Create process enabling revenue sharing and collaboration
Explore: Expand product offering to new markets
Decision pattern: Exploit 5 2; Explore 5 5; Both 5 1

Explore: Create innovation with new technology/competencies

Explore: Create distinct innovation unit
Explore: Hire engineers with innovation skills
Exploit: Move engineers to update existing product
Exploit: Hire engineers with existing product skills
Explore: Dedicate R&D laboratory to innovation
Explore: Create innovation sales team
Explore: Adopt new innovation programming language
Explore: Move engineers to develop innovation
Exploit: Senior leaders spend time on exist product
Both: Develop existing product and innovation to be able to cross-sell together
Decision pattern: Exploit 5 3; Explore 5 7; Both 5 1

Exploit: Move sales team members to existing

Explore: Create innovation subunit with designated leaders
Explore: Hire engineers with innovation skills
Explore: Create temporary sales team for innovation
Explore: Minimize resource cuts for innovation
Explore: Move engineers to develop innovation
Exploit: Move engineers to existing product
Both: Unify sales team to cross sell both existing product and innovation
Explore: Expand innovation to accommodate new technology
Decision pattern: Exploit 5 2; Explore 5 6; Both 5 1

Individual Decisions in Response to Key Issues

FIGURE 2
A Model of Dynamic Decision Making to Manage Strategic Paradoxes

2015

long-term benefits. As Software 1s innovation vice

president summarized:
We are in cost cutting mode. Still, when the finance
people came in and said that you have to take out
$30M of the [innovation], the general manager said,
You dont get it, this is an innovation business. We
are so constrained on cost right now, that she has to
start cutting the bone off the other division And,
she is really serious about the innovation.

Leaders further acknowledged stability and flexibility tensions in resource allocations. Leaders
wanted to shift resources flexibly, yet could do so
better when stable resource commitments fostered
confidence that they were invested in the product.
Software 2s general manager noted: We were
constantly moving headcount yet we needed to
protect the innovation. Software 1 leaders talked
about [m]aking a lot of decisions to shore up individual products but saying no to reducing the
investments. IT Services vice president of business development talked about ensuring the innovation that we are behind it but being cautious
about investing too much.
Organizational design issues raised paradoxical
tensions between experience and novelty. To innovate effectively, leaders wanted to leverage
existing knowledge, relationships, and processes,
but also to develop novel design features in response to specific innovation needs. Relatedly,
leaders experienced tensions of uniformity or
specificity in issues of organizational designs as
they sought to benefit from uniform design features, but wanted designs that fit each strategic
domain. As the general manager of Software 1
noted: I had two different cultures that were
clashing, [one] wanted to build something that was
lean and mean. [The other] was a lower design
point, but we needed both. Software 1s innovation vice president further explored the tensions around financial metrics:
Finance needs to cut costs across the whole business.
Ive taken the equal amount of cuts as my peers. But
[the general manager] is not saying to me, you make
40% less in revenue so you should have 40% less in
resources.

A Software 2 leader noted that, to respond to the

competitors product:
We built [our innovation] within a year. If we had
gone through the normal process, with all the gates
and sign offs, it would have taken three years to
build but the existing product engineers did not
understand the process.

Smith

73

IT Services leaders also wanted to leverage existing metrics to the innovation to ensure comparability and fairness, yet recognized that the business
models are very different.
Finally, leaders depicted product design choices
as paradoxical. Leaders found that they valued freedom to develop the new product, but wanted to
align the innovation with the existing product,
which constrained their freedom. For example,
Software 2 leaders recognized that time constraints
to develop the innovation quickly resulted in introducing a lower quality product, but allowed them
to be a legitimate competitor:
[The competitor] put a product in the market [The
general manager] realized that if we were going to
capture some market share, we would have to put out
a product that might be less quality. But it was confusing to the [existing product engineers].

Product design decisions further raised paradoxical tensions around certainty and uncertainty. Innovating inherently demanded uncertainty as new
products unfolded over time. Yet being comfortable
with such uncertainty required confidence and certainty. Software 2s innovation leader noted that the
general manager had a strong vision, while also
recognizing that his vision was evolving, because
where he was going was a moving point. As a result, Software 2 leaders were enmeshed in deep
discussions about the innovations design to meet
this vision. Similarly, as IT Services innovation
vice president noted: As the innovation grew, it
also challenged the existing products to shift their
own business models. They wanted the growth of
the innovation, but didnt want the have to change
what they do.

Leadership Practices
Differentiating leadership practices. Analyzing
how leaders responded to tensions between the
existing product and innovation brought to the surface various categories of practices. One category
involved several practices to clarify how the existing product and the innovation differed from one
another, and to advocate for each domain separately. I label these as differentiating practices.
First, the leaders in these three top management
teams all created domain-specific senior leadership
roles. Each strategic business unit included senior
leaders with only responsibility for the existing
product and other leaders with only responsibility
for innovation. Software 1 leaders described the

74

Academy of Management Journal

value of these domain-specific leaders. When they

invested in the innovation, each leader managed a
function and had responsibilities for both domains.
These roles challenged leaders to allocate their own
time and resources. As the research and development vice president noted, the innovations werent
getting much traction, because of distractions by
the demands of current clients. Software 1 leaders
created an innovation subunit with distinct leaders.
Doing so freed the leaders from splitting their time
and commitments between both strategic domains,
and allowed them to focus only on one. One leader
noted the value of dedicated innovation leaders:
Our problem is that if we say we all own [the innovation], then nobody does. We need to clarify who
owns these products. Similarly, both Software 2
and IT Services created a position of a dedicated innovation leader, who reported to the general manager. These leaders raised issues and advocated for
their products. For example, the IT Services innovation leader faced aggressive stretch targets, but
felt that the other senior leaders eschewed their
commitment to the innovation. She went to the other
senior leaders and spit the dummy, demanding
and subsequently receivingsupport for the innovation. In these teams, the existing product leaders
also ensured that the team maintained commitments
to their exploitative goals. One Software 1 senior
leadership meeting involved an extensive exchange
during which the existing product sales leader laid
out his needs to ensure continued success.
Second, conversations among the senior leaders
involved explicit comparisons between strategic
domains, which raised critical distinctions between them. In both formal discussions at meetings
and informal conversations, leaders discussed the
specific needs of each domain and raised issues of
how these products differed from one another. In
Software 1, the general manager frequently questioned the innovation and existing product leaders
as a way in which to surface the distinct product
needs. In one senior leadership meeting, an issue
arose around sales resources for the innovation.
The general manager asked:
Do you guys think that we have plans [for the innovation] that are going to get us to where we need to
go? I dont know what you guys think, but this is just
a feeling. Are we taking actions that are really going
to allow us to make progress? Ive had this gnawing
feeling all morning.

This question sparked a long conversation about

how the innovations business plan differed from

January

that of the existing product. Senior leaders also

engaged stakeholder groups outside of the senior
teamincluding clients, leaders from other units,
and subordinatesto better clarify uniqueness and
distinctions. As a Software 1 senior leader noted:
[The general manager] spends an incredible
amount of time with customers She learns from
our customers what we are doing right or wrong to
realize next steps. When the IT Services general
manager first arrived in the organization, he went to
learn from its clientsI made calls on our top 10
customers to find out how they felt about us
noting that doing so helped to realize some of the
key differences in how the clients understood the
existing product and how they understood the innovations. In addition, Software 1 senior leaders
frequently invited executives from other parts of
the organization to present at their senior leadership meeting. This additional information proved
particularly useful in helping them to sort through
critical issues. Similarly, Software 2 leaders frequently reached out to other experts outside thenown unit to better assess and compare the needs of
each of their products.
Finally, senior leaders sought information about
each domain independently of one another. All three
top management teams allocated monthly meeting
time to each strategic domain. In Softwares 1 and 2,
product leaders updated their fellow senior leaders,
which was followed by extensive questions. IT
Services partitioned its meeting, allocating half to
the operational needs and the existing product, and
half to the strategic development and the innovation. The vice president of business development
noted the value thus: We realized that we wanted
to make strategic decisions as a team Every
month at our meetings, we now spend half the time
on [existing] business, and half the time on [innovation] businesses. These leaders also used offsite
conferences, white papers, or small group conversations to learn more about the existing product
or the innovation. For example, Software 2 leaders
debated whether the innovation should adopt the
existing products software, thereby benefiting from
complementarities across products, or a totally
new software platform with different functionality,
but also associated with different technical skills.
Several senior leaders held strong, opposing beliefs
about this decision and, facing a deadlock, they
brought the decision to the general manager. He
punted the decision back to them. One of the leaders
wrote a white paper to explore the issue, facilitating
new insight, as well as commitments from the other

2015

leaders. In another example, IT Services leaders

grappled with how to structure the organization to
better accommodate the innovation. They hosted a
three-day offsite conference with 40 leaders from
across the organization to raise issues and to clarify
the innovation needs.
Integrating practices. A second category of
leadership practices in response to tensions brought
to the surface the synergies and connections between exploration and exploitation. I label these
as integrating practices. First, all three strategic
business units included at least one senior leader
with responsibility for the overarching business
plan, and overseeing both exploratory and exploitative businesses. The general managers of each unit
held this role. In addition, Software 2s chief technology officer also assumed responsibility for integrating the products technologies, and IT Services
had a vice president of business development responsible for developing a coherent market strategy
across products. The general managers of Software 1
and IT Services expected each of their domainspecific leaders to understand overall organizational needs along with their own domain needs.
One leader described this as wearing two hats.
Integrative leaders advocated for the overarching
strategic business unit. For example, soon after the
general manager arrived at IT Services, he realized
that it faced a critical issue because the existing
business and innovation competed directly with one
anotherand neither was succeeding. He realized
that the organization could continue to invest in
only the existing product, but that doing so would
offer only a short-term solution to its problems. Instead, he offered a long-term insight to his senior
leaders that required building and developing both
businesses.
Second, all three strategic business units identified and stressed overarching goals that depended
on both the existing product and the innovation for
success. It is interesting to note that these goals were
not always necessarily formal vision statements for
the organization. Often, the senior leaders communicated a sense of addressing both businesses in
more informal ways. For example, several of the
senior leaders in this study used rhetorical devices
to communicate effectively that the units success
depended on both exploratory and exploitative
performance. Software 1 leaders described their
organization as a portfolio with multiple contributions, while Software 2 leaders depicted their strategy as an onion with multiple layers. Both of these
images pervaded multiple strategic conversations.

Smith

75

Comparing to other competitors further emphasized

the critical role of both exploratory and exploitative
success. The general managers talked about being
patient, to gain the rest of the senior leaders buy-in
to these overarching goals over time. A Software 2
leader noted the general managers patience in
letting people come to the overall vision at their
own pace as it takes a good amount of time to get
everyone to evolve in their own time. Similarly,
the Software 1 general manager gained buy-in to
this integrative vision by starting each meeting
stating the strategic business units overarching
goals, noting how this goal depended on the innovations success and existing products success,
and then evaluating the progress of each domain.
She further noted that she took every opportunity
possible to get the other senior leaders to connect
with this overarching vision. As she stated, part of
her role was to:
get people to view the business the way I view it.
You have to get them to identify with the whole
thing, because they are usually passionate about the
one piece that they have. There is a leadership ability
to get people to get to that point with you. You have
to be really good at getting them to link the piece that
they have to the whole thing. They have to think why
is [the innovation] important to the overall business?
Because the customers are important to the overall
business. We want to extend those customers, customers who we have had for over 30 years. You have
to look for ways to draw everybody into what they are
doing and why it is important to the overall growth of
the business. You have to be really good at communicating it and look for ways to communicate it at
every chance that you have.

One instance depicts how the general manager of

Software 1 linked the team members efforts to the
overarching goal. The innovation leader was being
attacked by the other leaders for how she would
develop this domain. The general manager stepped
in, saying:
Let me make one thing clear. The [innovation vice
president] is taking responsibility for [the innovation] on behalf of our whole strategic business
unit. But make no mistake; everyone in this room has
responsibility for this product and for the overall
success of the business.

The general managers also eventually fired senior

leaders that were too myopically focused on their
own domain and could not, over time, buy into this
overarching goal. As the IT Services general manager reflected:

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Academy of Management Journal

We needed people who were going to play in the

same game [Some people] were not thinking about
the group as a whole but rather thinking, I can do it
better in my organization. We eliminated these folks
in under 30 days.

As one Software 1 leader noted:

There is not a lot of individual grandstanding. We are
made or broken by how our business does. If our
business is going into the toilet, and Im doing a great
year, then I dont get much benefit from this. The
right answer is for us to rally behind common goals,
and just do well enough as we can in the midst of all
that. If our personal goals get in the way of all that,
we just dont do well together. I think that part of that
has to do with the kinds of people that [the general
manager] has chosen for her board.

Finally, leaders stressed integration by solving

exploratory and exploitative problems jointly.
Juxtaposing domains in conversation forced leaders
to confront issues between them, reinforcing the
value of each product and surfacing synergies. Each
top management team allocated formal meeting time
to addressing overarching issues. IT Services used
part of its business meetings for considering its
overall portfolio. A small group of Software 2 leaders met with the general manager to discuss issues
across the strategic business unit. Leaders also held
joint problem-solving sessions in response to specific tensions. For example, Software 2 leaders frequently met in the general managers office to work
through issues. IT Services and Software 1 leaders
reflected on working through problems one-on-one
with each other. As one Software 1 leader described:
We all agreed that [the innovation] was a critical business in our portfolio review. But we all required more
resources from development than [the research and
development vice president] had. [The research
and development vice president] developed a plan
and my development director came back and said
that we are going to have to cut some of our resources. I called the [research and development vice
president] and said, tell me what your problem is that
you are trying to solve and let me help you solve it.

Decision-Making Contexts
Differentiating and integrating practices fostered
a context to inform the leaders decisions that involved two key themes. Senior leaders valued each
distinct strategic domain and its contribution to their
overall organizational success, as well as the interconnections between domains. This context highlighted the product (exploration or exploitation) and

January

organizational levels of analysis, facilitating dynamic

and iterative decision patterns.
Valuing distinct strategic domains. Differentiating and integrating practices encouraged leaders to
understand and support both the exploratory and
exploitative products. Practices such as identifying specific roles among senior leaders and carving time in which to focus on each domain proved
particularly important. For example, the Software
1 innovation vice president noted how one-on-one
meetings with other leaders fostered a deeper
knowledge for an innovation plan that he was developing, which in turn informed their decisions:
I will go to the others in the unit before I bring the
plan to the General Manager I can get the tensions
out on the table and then we will sit as a group If
everyone is in sync, then we will agree on it and then
move on. But if not, everyone will have been briefed
and we can get these ideas out on the table and discuss them.

Similarly, IT Services senior leaders recognized

how salient the innovations needs were after a
three-day offsite: The [offsite] session identified
[some of our needs]. Some of the senior leaders were
at the [offsite] session. I identified requirements for
a couple of very senior folks.
Differentiating and integrating practices further
catalyzed ongoing support for each domain. In these
strategic business units, the senior leaders talked
about being serious about the exiting product or
innovation. Leadership practices signaled this support. For example, domain-specific rolesparticularly for the innovationreinforced commitment
to these products. As one of the IT senior leaders
noted: When we elevate something to [the general
managers] level, we protect the investment It
shows people that we need this. Software 1s innovation vice president further noted that creating
a distinct subunit with its own leader for the innovation showed the top management team that they
were really serious about the innovation. The IT
Services three-day innovation offsite further solidified this support. Before the meeting, the IT Services innovation vice president felt that the rest of
the senior leaders were not living up to their side
of the bargain and investing in the innovations
success. After the offsite meeting, she felt that they
[were] really committed to this business.
In contrast, senior leaders in the other three business units that only differentiated or only integrated
noted significant gaps in understanding and supporting both strategic domains. For example, in Life

2015

Sciences, the role of vice president for the existing

product remained unfilled for more than a year and
a half. When the unit hired a leader, he noted that
the existing product had taken a back seat. For
Software 3, the innovation faltered. As its research
and development vice president said: We are not
delivering business results on [the innovations].
The problem iswe dont understand these products Most of the top management team are living
in today.
Valuing interconnections Between strategic
domains. Differentiating and integrating practices
further fostered a context focused on interconnections between strategic domains, valuing collaboration and linkages. First, practices to identify
distinct domain needs, while also supporting an
overarching role, drive leaders to create a context of
collaboration. Leaders talked about how exploratory
and exploitative products both needed to contribute
the strategic business units success. Software 2s
research and development vice president captured
this idea:
I thought that [the general manager] should give me
all his money. I felt that I had a premium part of the
business. But I really had some more business acumen than that, and I realized that there were other
products that were important to the business. I also
know that we needed some of these products (for the
innovation to succeed).

Software 1s executive assistant further noted this

context, suggesting that the general manager consistently stressed the overarching portfolio that the
team sought to achieve, creating a context of collaboration: What happens on the team? Each of
them wants to see their team contribute to the bottom line, and their bottom line is the success of the
entire business.
Differentiating and integrating practices led leaders to expose conflicts between strategic domains
and to seek compromises. In Software 1, probing for
additional insight encouraged leaders to address
conflicts. As the research and development vice
president noted:
The General Manager wants to invite some level of
conflict into the process If I was going to say this
plan is wonderful, she would say, What do you
think about this? to the head of sales. Then we
would spend the next 45 minutes [sorting] out why
we think what we think We raise a lot of conflict.
We get to get in there and get into issues.

Similarly, IT Services leaders recognized how

the value of addressing conflicts enabled further

Smith

77

connections among each, in contrast with their

previous culture of avoiding conflicts:
[The previous general manager] was a very nonconfrontationaldont want to hear the issues, dont
want to work through the real problems, avoid it
at all costtype of individual. Probably one of the
most non-confrontational: In his senior team meetings, I mean, it was like people smiling at each other
and you knew the background, none of the problems
were getting out on the table. [The current general
manager] addresses things head-on. No question
about it. As a result, he personally has created an
environment where hes made it very clear that were
supposed to be a teamthat we are supposed to
tackle these roadblocks, and work together. Hes
made that very clear.

The Software 1 chief technical officer noted: We

tend to run a very proactive debating society. The
idea is to debate these things out. Those that come
from the outside are always surprised at the free for
all nature. Software 2 leaders dealt with conflict by
discussing it in small groups in the general managers office. As the innovation vice president noted:
[The general managers] style is to handle the
conflict in his office. He is not a big conflict guy in
a full meeting. If it broke out in a meeting, he would
say that he would take it off line.
In response to key conflict, senior leaders depicted a context of compromise. They were willing to
work together to seek beneficial solutions to both
strategic domains. As Software 1s innovation vice
president noted:
The team has to be willing to forgo their own business for the benefit of the total business. I know that
Im in [Software 1]. If something in [my innovation]
doesnt get invested in, Im going to have to go back
into my own business and disinvest. Who signs your
paycheck? We are in this together.

IT Services leaders offer another example. Traditionally, IT Services organizational design was
siloed and fostered competition between lines of
business such that leaders frequently rejected opportunities for cross-selling services to the same
client. As one senior leader noted:
Im not even sure I would have had the conversation
and attended the meeting, because I know that he
would have intentionally tried to suck up every piece
of business that would have otherwise flown to my
organization into his.

This dynamic created problems for the innovation, which relied on cross-line business support.
Yet the senior leader recalled a more recent

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Academy of Management Journal

conversation that suggested a dramatic shift in this

mindset: I just said [to the existing product leader]
if I can secure more business, Im happy to contribute to the total. Done. We didnt even talk about
math of how to allocate revenue. Its just done.
As the business development leader noted: The
leaders are now seeing the appropriate cross-[lines
of business] assistance in helping getting their job
done.
In contrast, the three strategic business units
that only differentiated or integrated described suppressing and avoiding key conflicts, and fostering
a context of competition and mistrust. Often, these
suppressed conflicts burst out in a frustrated outrage. In one meeting, the Software 3 general manager banged on the table, shouting his frustration at
the lack of progress for the innovation. As he noted:
Right now, everyones attitude is, Im here to protect
my turf. Semiconductor senior leaders found that
the tensions built up for so long that they required
a full-day emergency meeting in a war room to sort
out their problems.
Decision Patterns
In response to the issues that emerged between
strategic domains, leaders made choices. These
choices predominantly supported exploration or
exploitation, with only a few decisions supporting
both simultaneously. For example, in response to
a debate about organizational design, Software 1
senior leaders reorganized their business unit to
support the innovation. To address existing customers demands, IT Services senior leaders allocated more resources to develop their existing
products. Software 2 senior leaders grappled with
the technology platform for their innovation, ultimately deciding to adopt a new platform to support
the innovation.
Making decisions in response to individual issues
spurred new issues. For example, after Software 1
senior leaders decided to create a subunit for their
innovation, additional issues arose around whether
to hire a leader for that unit from the existing team
or someone from outside, whether or not to have
an integrated sales team across the existing product
and the innovation, and how to allocate research and
development resources. These issues persisted over
time. As a senior leader in IT Services noted, there
were issues throughout the process, while another
in Software 2 pointed out that battles continued
throughout. A critical insight was that addressing
both exploration and exploitation simultaneously

January

was reflected in the patterns of decisions that leaders

made over time, not in understanding the responses
to individual decisions. The key pattern for supporting both exploration and exploitation involved
iteratively shifted support between the two strategic
domains. Table 6 depicts this pattern of decisions by
identifying for the full year each issue that arose and
the leaders decisions.
The senior leaders described how they experienced this pattern, noting that their decisions were
flexible and temporary. These leaders depicted
decisions as dynamic, referring to their resources
as flexible and to organizational designs as temporary. For example, one leader in IT Services
described decisions in general as experimental.
Both Software 1 and Software 2 senior leaders
talked about moving sales resources. Similarly,
as Software 2s innovation vice president noted,
engineers were a critical resource for developing
both the existing product and innovation, and
leaders were frequently moving headcount. They
also thought of the organizational design as flexible. An issue emerged for Software 1 about how to
sell the innovation when the skills, knowledge,
rewards, and contacts of the sales team reinforced
existing product sales. While they needed a dedicated sales team, they eventually wanted to crosssell their existing products and innovations to the
same clients. Rather than create a new permanent team, they developed a SWAT team to focus temporarily on innovation sales, to integrate
knowledge back to a broader sales team, and
eventually to disband the SWAT team itself. Similarly, in IT Services, the general manager noted
that, to support the innovation, leaders created
a shadow profit and loss structure so that it could
start tracking its own finances, without yet creating
an entirely new unit. They used this temporary
unit to support the innovation, to learn about how
to manage it, and to decide whether to create an
independent line of business or to integrate this
product with other existing lines of business.
In contrast, the teams that did not sustain commitments to both exploration and exploitation made
decisions that consistently supported one domain
over time. Tracking the patterns of decisions by
leaders in Life Sciences or Semiconductor reveals
a pattern of frequent decisions shifting resource and
designs from the existing product to the innovation.
As the vice president of human resources summarized: We are focusing our decisions on supporting
the innovation. There is no focus on the existing
business. For Software 3, the senior leaders made

2015

relatively few decisions to shift resources or to alter

designs. Those few decisions that they made all
reinforced the existing product and the status quo.
Software 39s vice president of strategy noted: We
have some nice ideas for the [innovations], but have
done nothing to build them out.
A DYNAMIC DECISION-MAKING MODEL
Up to this point, I have described how leaders
experienced and responded to issues of exploration
and exploitation to sustain commitments to both
strategic domains. Combining these insights with
existing literature informs a model of dynamic decision making, depicted in Figure 2. Decision making can be considered dynamic because leaders shift
resources and designs between the existing product
and innovation to support both. I now develop this
model in more depth.
Scholars argue that organizations inherently host
paradoxical tensions (Ford & Backoff, 1988; Smith &
Lewis, 2011). The act of organizing creates distinctions, but binds these dualities within a unified
system, resulting in inherent paradoxes. Exploring
and exploiting present one type of paradox: These
strategic domains are inconsistent with one another,
yet are both necessary for long-term success (March
1991; Smith & Tushman, 2005). Moreover, exploration and exploitation define one another as the
seeds of exploration emerge from exploitation, and
vice versa (Farjoun, 2010). These tensions often
remain latentexisting in the organization, but not
particularly challenging for leaders or members of
the organization. However, several conditions can
surface these tensions. For example, Smith and
Lewis (2011) suggest that tensions become salient in
response to an individuals adopting paradoxical
frames, or in response to environmental conditions
defined by plurality, scarcity, and change. The data
in this study identify an organizations annual
strategic commitments as an additional factor that
can render latent tensions salient. In this study,
these dual commitments created pressure to succeed in each business, and raised increased conflict
and tension between them. As Figure 2 depicts,
strategic paradoxes embedded in an organizations
annual plan surfaced issues between competing
domains and triggered dynamic decision making.
The data from this study revealed three types of
issue that emerged for top management teams between exploring and exploiting, including issues
of resources allocation, organizational design, and
product design. The responses to each of these issues

Smith

79

critically impact success. A key insight from these

data depicts how senior leaders experienced these
issues as both dilemmas and paradoxes. Dilemmas
are either/or tradeoffs resolved by choices, while
paradoxes involve tensions that are impervious
to resolution (Cameron & Quinn, 1988; Smith &
Lewis, 2011). Leaders experienced issues as both.
Responding to either/or dilemmas became critical
for effectively managing tensions. As the data shows,
senior leaders raised a number of issues in the three
cases that did not sustain paradox, but they made
no choices in response. As a result, senior leaders
felt unable to advance the innovation or extend the
existing product. At the same time, leaders also
depicted these key issues as paradoxical tensions
that persisted over time and recognized that they
were impervious to resolutions. This idea informed
an understanding of managing paradox through a
consistently inconsistent decision pattern, in
which leaders could address individual issues with
an either/or choice, but maintain commitments to
both tensions over time.
To sustain exploration and exploitation, leaders
responded to these experienced dilemmas and paradoxes with differentiating and integrating practices.
Differentiating practices raise distinctions between
exploration and exploitation, and stress their unique
characteristics, whereas integrating practices emphasize synergies, connections, and interdependencies (Andriopoulos & Lewis, 2009; Smith & Tushman,
2005). As Figure 2 depicts, I identified three differentiating practices and three integrating practices
that leaders in this study adopted. Differentiating
practices included allocating domain-specific roles,
comparing domains to raise novel distinctions, and
seeking information about domains independently.
Integrating practices included allocating integrative
roles, stressing overarching goals, and solving problems jointly. Yet research suggests other possibilities.
For example, mindfulness scholars describe practices
such as cultivating uncertainty and developing new
categories to facilitate novel distinctions (Langer,
1989). Organizational learning studies point toward
practices for experimentation, reflection, and problem solving to surface differences (Edmondson,
Bohmer, & Pisano, 2001). Other literatures identify
practices for encouraging integrating. Studies on
integrative thinking involve fostering synergies
through practices such as depicting connections
(Suedfeld, Tetlock, & Streufert, 1992), or considering
multidirectional relationships (Martin, 2007).
Differentiating and integrating practices enabled
leaders to sustain commitments to strategic paradox

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by creating a flexible context to support decision

making. Differentiating focuses leaders on exploring and exploiting independently of one another
by communicating substantive and symbolic investments in each domain (Ocasio, 1997), while
also surfacing new knowledge, ideas, and insights
(Langer, 1997). Information and commitments
motivated decisions to support each strategic domain. At the same time, by stressing overarching
goals and exploring connections between domains,
integrating practices elevate leaders attention to
the organizational level. Juxtaposing both domains
brings conflict to the surface, and motivates connections and compromises between strategic domains (Suedfeld et al., 1992). Critical to dynamic
decision making are differentiating and integrating
practices that together urge leaders to shift attention consistentlyboth between the different
products and from the product level to the organizational level. This shifting focus facilitated
an adaptive context, which motivated flexibility
in decisions.
Contrasting the three cases that adopted a dynamic decision-making approach with the other
three cases highlights the necessity of both differentiating and integrating practices. By adopting
only one type of practice, senior leaders fall prey to
defensive responses and vicious cycles of paradox.
Differentiating without integration fostered conflict,
resulting in leaders consistently choosing only one
outcomein this case, the innovation. Differentiating practices helped to emphasize the unique
aspects of the innovation, to avoid inertia, and to
detach the past from the future. However, in the
absence of integrative practices that sought to create
synergies between time horizons, these leaders paid
attention only to the future. Conflicts between exploration and exploitation emerged. Leaders adjudicated conflicts and tensions by stressing only
exploration. Classic change management studies
emphasize this approach, in which leaders explicate a vision for the future and then align the organization to achieve this goal (Tushman & Nadler,
1997). Doing so depends on liberating the future
from the shackles of the past (Leonard-Barton, 1992;
Sull, 1999; Tripsas, 2009), resulting in more radical
change (Tushman & Romanelli, 1985). However,
these radical changes occur at the expense of the
existing product. In this study, both the Life Sciences
and Semiconductor strategic business units demonstrate how an overzealous emphasis on creating
distinctions can enable change, but diminish the
existing products.

January

Integrating in the absence of differentiating

proved equally problematic for sustaining paradox.
In an effort to leverage value and engage synergies
across domains, cognitive commitments and myopic thinking overemphasize exploitative demands
and keep leaders focused on the present (Benner &
Tushman, 2003; Leonard-Barton, 1992; Levinthal &
March 1993). Leaders may become entrenched in
existing cognitions and fail to see unique innovation
needs (Taylor & Helfat, 2009; Tripsas & Gavetti,
2000). Ineffectively adopting practices from the
existing product to the innovation can result in a
false synergy. For example, Tripsas and Gavetti
(2000) note the demise of Polaroid: In service of
fostering linkages, executives insisted on leveraging a razor and blade strategy from their instant
camera to apply to digital products, despite the lack
of printing of digital images. In this study, Software
3 depicts how integrating without differentiating led
to unwavering emphasis on existing competencies
and processes, constraining innovation.
In contrast, as Figure 2 depicts, differentiating
and integrating together fostered a context that
focused leaders both on the needs of individual
products and on the connections between them, and
in doing so encouraged flexibility and adaptation.
Fluctuating attention and focus between strategic
domains and levels of analysis urged leaders not
only to make temporary and flexible decisions, but
also, over time, to embed inconsistency into these
decisions by alternating support between the existing product and innovation. Cognitive commitments and focused attention drive leaders to make
each subsequent decision consistent with past
ones (Chanowitz & Langer, 1981; Tripsas & Gavetti,
2000). In contrast, in this study leaders adopted a
more adaptive approach by making individual decisions in response to specific tensions, yet allowing
these individual decisions to be inconsistent with
previous decisions. The leaders depicted these
decisions as flexible and temporary.
This study therefore resulted in the critical insight
that managing paradoxical tensions was reflected
in the pattern of decisions over time, rather than
in each individual decision. Paradoxes persist over
time, such that making choices in response to each
issue spurs new issues (Jarzabkowski et al., 2013).
Figure 2 depicts this persistence in the feedback
arrow between the individual decisions in response
to each issue and the creation of new issues. The
aggregation of individual decisions over time accumulated to the pattern of shifting support between
exploration and exploitation. Following Smith and

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Smith

Lewis (2011), I describe this pattern as a consistently inconsistent pattern of decision making. I
label this overall approach as dynamic decision
making to capture the flexibility of support for
exploration and exploitation. This shifting decision
pattern allowed leaders to manage paradox by make
choices in response to specific dilemmas in the
short term, while embracing competing demand
inherent in paradoxes in the long term.

DISCUSSION
Implications for Theory
If competitive contexts increasingly impose paradoxical demands on firms, then senior leaders must
be able to address these tensions. Yet even as scholars
find that embracing paradox can foster creativity
(Miron-Spektor, Erez, & Naveh, 2011), build dynamic
capabilities (Harreld, OReilly, & Tushman, 2007),
and enable sustainability (Cameron, 1986; Smith
et al., 2011), effectively implementing strategic
paradoxes is complex and challenging for senior
leaders. The data in this study highlight this difficulty. I interviewed senior leaders from six strategic
business units with annual plans to exploit existing
products while exploring innovation, yet only three
executed this strategy. Therefore the main goal of
this study was to understand how senior leaders
effectively addressed this challenge, making decisions to support competing strategies simultaneously amid the intense pressures to focus on only
one. Comparing across these six units informed
a model of sustaining strategic paradox through
dynamic decision making, the details of which
contribute to our understanding of organizational
paradox in at least three significant ways.
First, this model complicates our understanding of tensions, depicting the interwoven nature of
dilemmas and paradoxes. Previous research delineates dilemmas from paradoxes (Cameron & Quinn,
1988; Smith & Lewis, 2011), in that dilemmas are
said to involve tradeoffs that can be resolved by
weighing alternatives and choosing one option,
while paradoxes are contradictory elements that
persist over time and defy resolution. Choosing one
element sparks the alternative, creating a vicious
cycle (Andriopoulos & Lewis, 2009). However, as
Smith and Lewis (2011) suggested, dilemmas can
become paradoxes if understood over a longer time
horizon. The data from this study complicate our
understanding of paradoxes and dilemmas by depicting an interwoven relationship between them.

81

This study surfaced three types of issues that

emerged between the existing product and innovation around resource allocation, organizational
design, and product design. Leaders described these
issues as both either/or dilemmas that demanded
choices, as well as paradoxical tensions that eluded
resolutions. For example, resource allocation issues
forced leaders to make tradeoffs between how to
allocate financial resources, human resources, etc.
At the same time, resource allocations fostered
paradoxes of stability and flexibility. The more
stability leaders experienced in allocating resources to exploring and exploiting, the more they
could entertain flexibility to shift resources
around. These circular and self-referential relationships persisted over time. This more complicated
depiction shifts our understanding of both the nature
and management of tensions: Whereas paradox
scholars and practitioners emphasize that managing paradox depends on changing our cognitive
frames from either/or thinking to both/and
thinking (i.e., Bartunek, 1988; Martin, 2007; Smith
& Tushman, 2005), this research suggests the need
for more complicated frames. Moreover, this interwoven nature of tensions demands more complex management strategies.
This study therefore surfaces a more complex
management strategy to engage tensions as both
dilemmas and paradoxes, which constitutes the
second key contribution. Existing research depicts
three dominant approaches to paradox, including
choosing, accommodating, and accepting. Choosing involves making a choice between alternative
demands. Choosing one alternative brings its opposite to the fore, fueling vicious cycles over time
(Lewis, 2000). Accommodating strategies involve
addressing specific issues by finding a novel synergy between competing demands (i.e., Rothenberg,
1979). For example, Eisenhardt and Westcott (1988)
describe how the senior leaders at Toyota approach
tensions by seeking creative solutions that engage
competing demands simultaneously. As new issues
emerge, executives consistently look for new creative synergies (see also Osono, Shimizu, & Takeuchi,
2008; Takeuchi & Osono, 2008). Accepting strategies describe approaching paradoxical tensions by
engaging, but not resolving, the tensions. For example, Luscher and Lewis (2008) suggest finding a
workable certainty to offer a way forward without a specific decision. Others describe individual
practices (Hatch & Erhlich, 1993), communication styles (Argyris, 1988), or organizational practices (Andriopoulos & Lewis, 2009) that can expose

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paradoxical tensions and allow leaders to move

forward, without making decisions. Even as these
different approaches fuel cycles over time, research
predominantly describes a consistent application of
these strategies.
In contrast, dynamic decision making involves
addressing a paradox by choosing, accommodating,
and accepting over time. Expanding on the dynamic
equilibrium model of Smith and Lewis (2011),
this approach involves making explicit choices in
response to individual issues. These choices predominantly involve either/or decisions between
competing demands, with some of the decisions
that create a novel synergy to accommodate both
options. Yet these decisions are not consistent with
one another; rather, they shift in their support between contrasting demands over time. A key insight
here involves exploring the pattern of responses
to issues over time, rather than a response to an individual issue. This pattern adopts multiple different
approaches to paradoxchoosing, accommodating,
and accepting. This pattern is consistently inconsistent because it involves frequent, consistent shifts
between inconsistent demands. This model challenges scholars of paradox to be mindful of the time
horizon within which they explore responses to
tensions and shifts our understanding of managing
paradox from addressing discrete issues to managing paradox as a pattern of responses over time.
A dynamic decision pattern echoes more historical decision-making literature. Early strategic
decision-making scholars acknowledged that multiple external and internal stakeholders impose competing strategic demands on organizations (Cyert &
March 1963; Selznick, 1957), and proposed decision
models such as quasi-rationality, sequential attention
(Cyert & March 1963), or logical incrementalism
(Braybrooke & Lindblom, 1970) with which to manage these tensions over time. Similar to dynamic
decision making, these models involve shifting support between alternative strategies over time. A key
distinction, however, is the goals of the senior leaders. These more traditional models acknowledged
inconsistencies in strategic decisions over time, yet
they did so in service of overarching strategic consistency, which they believed to be critical for efficiency and long-term survival (Lamberg, Tikkanen,
Nokelainen, & Suur-Inkeroinen, 2009). In contrast,
a consistently inconsistent pattern assumes that
leaders adopt a shifting decision-making pattern in
service of sustaining strategic paradoxes. This insight
joins the research of others suggesting that a dynamic
and contradictory response to complex challenges

January

enables simplicity amid complexity and supports

inconsistencies through consistency (Follett, 1996;
Klein, Ziegert, Knight, & Xiao, 2006; Weick, Sutcliffe,
& Obstfeld, 1999).
As a third contribution, a dynamic decisionmaking model describes how both differentiating
and integrating leadership practices are necessary to
sustain strategic paradoxes. These insights extend
our understanding of the nature and relationships
between differentiating and integrating. Building
on early insights from Lawrence and Lorsch (1967),
paradox studies depict differentiating and integrating as complementary. These studies demonstrate
differentiating and integrating in organizational
structures (Tushman & OReilly, 1996), managerial
cognition (Smith & Tushman, 2005), or organizational practices (Andriopoulos & Lewis, 2009).
Beyond structures, cognition, and organizational
practices, the data in this study describe leadership practices (Whittington, Jarzabkowski, Mayer,
Mounoud, Nahapiet, & Rouleau, 2003), showing
what leaders do to differentiate and integrate. Differentiating leadership practices include allocating
domain-specific roles, comparing domains to raise
novel distinctions, and seeking information about
domains independently. Integrating leadership practices include allocating integrative roles, stressing
overarching goals, and solving problems jointly.
Differentiating and integrating leadership practices
together sustain paradoxes by facilitating a multilevel, flexible, and dynamic context for framing
decisions. Contrasting three strategic business units
that supported exploration and exploitation with
three that did not highlights how either differentiating and integrating alone can lead to choosing
only one domain, with the three units unable to
sustain paradox engaged in only differentiating or
integrating practices, but not both. Differentiation
focuses leaders on distinct products, but in the absence of integrating, domain-specific advocates become entrenched in their own position. Doing so
engenders increased conflict, diminishes the motivation to compromise, and stresses only one domain. Integrating without distinctions also failed to
sustain competing demands. Integration emphasizes synergies between distinct elements. Yet in
the absence of recognizing nuanced distinctions,
an overzealous commitment to one domain could
cloud the unique aspects of each and take precedence, resulting in a false synergy. However, together, these forces facilitated a context that shifted
focus between multiple strategic domains (exploring and exploiting), at multiple levels (product and

2015

organizational) to foster a dynamic, flexible approach to decision making. In doing so, this study
expands our thinking about differentiating and integrating, recognizing not only that they are complementary (Andriopoulos & Lewis, 2009; Smith &
Tushman, 2005), but also that both are necessary for
sustaining paradox.
Finally, by investigating strategic paradox in the
context of exploration and exploitation, this study
makes several contributions to ambidexterity research. Ambidexterity studies argue that long-term
organizational success depends on addressing exploration and exploitation simultaneously (OReilly &
Tushman, 2008; Raisch & Birkinshaw, 2008;
Tushman et al., 2010). Scholars identify paradoxical
tensions that emerge from exploring and exploiting,
suggesting that ambidexterity depends on effectively engaging these paradoxes (Andriopoulos &
Lewis, 2009; Raisch & Birkinshaw, 2008; Smith &
Tushman, 2005). The data from this study expand
our insight into the paradoxical nature of exploration and exploration, by describing specific issues
arising for senior leaders around resource allocation, organizational design, and product design. In
addition, existing empirical studies depict insights
into the demographics and characteristics of the
top management teams, suggesting that effectively
managing ambidexterity is associated with transformational leaders (Jansen, George, van den Bosch,
& Volberda, 2008) who have more decision-making
authority (Mom, van den Bosch, & Volberda, 2009)
and top management teams with more behavioral integration (Carmeli & Halevi, 2009; Lubatkin, Simsek,
Yan, & Veiga, 2006) or social integration (Jansen,
Tempelaar, van den Bosch, & Volberda, 2009). These
characteristics suggest the critical role of strong
leaders that have the capability to work together to
manage the challenges of exploring and exploiting.
But they offer fewer insights into what the leaders
do to work together to manage these challenges.
Complementing this existing research on ambidexterity and top management teams, this study
describes specific leadership practices of differentiating and integrating in a decision context to address the challenges and frustrations of managing
exploration and exploitation simultaneously.
Implications for Practice
Practitioner literature increasingly calls for leaders to embrace paradox (Cronin & Genovese, 2012;
Handy, 1994; Jensen, 2013). Collins and Porras (1997)
suggest that great leaders are those who can reframe

Smith

83

strategic challenges from the tyranny of the or

to the genius of the and. More recently, Martin
(2007) argues that leadership success derives from
engaging an opposable mind to embrace contradictory demands simultaneously. Warnings about
the need to manage paradox and advice about how
to do so now infuse leadership blogs across the
Internet. For senior leaders, effectively managing
paradoxes is critical to their success.
The data from this study offer at least two recommendations. First, a dynamic decision-making
model proposed an alternative approach for decision making. Echoing the academic scholarship,
managerial literature emphasizes either accepting
or accommodating strategies for managing paradox
in response to a single issue. This study encourages
managers to shift the time horizon for managing
paradox from responding to a single issue, and instead to focus on the pattern of decisions over time
and to embrace inconsistencies in decisions, rather
than to strive for consistency.
Second, existing advice to manage paradox emphasizes cognitive strategies for framing tensions
(Collins & Porras, 1997; Martin, 2007). To do so,
leaders must hire or train others to be capable of
paradoxical or integrative thinking (Smith & Tushman, 2005; Suedfeld et al., 1992). Yet leaders might
not have the capability to hire new people or, if they
can hire, may have limited insight into potential
employees capabilities for paradoxical thinking.
Moreover, it may be hard to train existing employees
to adopt paradoxical frames, because this perspective may reflect deeply engrained ontological beliefs
driven by societal cultures and myths (Keller &
Loewenstein, 2011). Instead of depicting leadership
capabilities, skills, and traits, this study highlights
practices for managing paradoxesspecifically,
differentiating and integrating. Senior leaders who
want to sustain commitments to strategic paradoxes
can focus on embedding these practices into their
top management team.
Limitations and Future Research
The context of this study raises questions about
the models generalizability and posits possibilities
for future research. First, additional research could
extend these insights to a broader context beyond
the tension of exploring and exploiting. As environments become more complex, leaders face pressures
to address multiple competing demands that are
core to their strategy and inconsistent with one another, including tensions between social missions

84

Academy of Management Journal

and profits, or global demands and local needs

(Besharov & Smith, 2014; Greenwood et al., 2011;
Kraatz & Block, 2008). Additional research could
further investigate conditions that facilitate or thwart
dynamic decision making. The strategic business
units in this study were embedded in one Fortune
500 corporation that encouraged and supported
strategic paradoxes. Additional research might investigate how different corporate contexts impact
models of managing strategic paradox. In addition,
each of the cases in this study launched innovations
to the market no less than six months and no more
than a year before beginning the study. As a result,
many of the tensions that emerged in the study involved pressures to expand the innovation. Leaders
may face different types of pressure in attending to
exploration and exploitation at different innovation phases.
This study further raises question about how
leaders can engage subordinates while embracing
paradoxical strategies. The results from this study
stress the benefits of leaders being consistently inconsistent in their decision making to engage paradoxes. Yet extensive research suggests that doing so
raises problems for subordinates. In general, research argues that individuals have a strong preference for consistency (Cialdini, Trost, & Newsom,
1995). Inconsistencies raise ambivalence and anxiety
(Wang & Pratt, 2008), and lead individuals to respond
by seeking to regain alignments and consistency.
Specifically, in the face of inconsistencies, subordinates often judge their leaders as hypocritical
(Cha & Edmondson, 2006) or rationalize the decisions
of leaders to emphasize only one of the goals (Kunda,
1990). These existing studies raise questions about
how leaders can engage and communicate a paradoxical strategy embedded with inconsistencies to
subordinates who strive for consistency (Huy, 2002).
Finally, future research can consider how a
dynamic decision-making model informs insight
into organizational dynamism and change. Scholars depict a mutually constituative relationship
between exploration and exploitation (Farjoun,
2010). Exploration embeds the seeds of exploitation, such that supporting exploration ultimately
extends exploitation and vice versa. Practices to
sustain both over time could provide insight into organizational dynamism and flexibility (Feldman &
Orlikowski, 2011; OReilly & Tushman, 2008).
A dynamic decision-making model offers one possibility of practices that fuel these relationships,
and invites future research into how this model
sustains dynamism and change in organizations.

January

CONCLUSION
In increasingly complex environments, leaders face
pressures to manage paradoxical demands. The data
in this study suggest one means of doing so. If these
results survive further empirical testing in broader
settings, they will shift our understanding of senior
leaders as offsetting organizational complexity with
clarity and stability toward leaders instead embracing complexity with inconsistency and dynamism.
Together, these ideas contribute to existing research
and invite future research on strategic paradoxes and
senior leadership.

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2015

Wendy K. Smith ([email protected]) is an associate

professor of management in the Lerner College of
Business and Economics at the University of Delaware. She received her PhD in organizational behavior
from Harvard University and the Harvard Business

Smith

89

School. Her research investigates strategic paradoxes,

particularly exploring how organizations and their senior leaders address tensions between exploring and
exploiting and between social mission and financial
profit.

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