CHAPTER 1
Cognitive Ambidexterity: The Underlying Mental Model of the Entrepreneurial Leader

Heidi Neck

IN 2003 JIM POSS WAS WALKING DOWN A BOSTON STREET WHEN HE noticed a trash vehicle in action. The truck was idling at a pickup point, blocking traffic, smoke pouring out of its exhaust, and litter was still prevalent on the street. There has to be a better way, he thought to himself. In investigating the problem, Poss learned that garbage trucks consume more than 1 billion gallons of fuel in the United States alone. The vehicles average only 2.8 miles per gallon, and they are among the most expensive vehicles to operate (BigBelly Solar 2010). In the early 2000s, municipalities and waste collection services were considering more-fuel-efficient vehicles and better collection routes to reduce their overall costs and environmental footprint. Poss was not convinced that this was the right approach.

Through interactions with diverse stakeholders, he turned the problem upside down. He considered that the answer might not be about developing a more efficient collection process but about reducing the need for frequent trash collection. As he considered this solution, he discovered multiple benefits: if trash receptacles held more trash, they would not need to be emptied so often; if trash did not need to be collected so often, collection costs and associated pollution would be reduced; and if receptacles did not overflow, there would be less litter on the streets. There were many advantages to this approach.

By applying the solar technology he used at work, Poss envisioned how a new machine might better manage trash. His initial concept of a solar-powered trash compactor was dismissed in favor of other ideas for environmentally friendly inventions, including a machine that would generate electricity from the movement of the ocean. Nonetheless the problem and the potential solutions continued to occupy his mind. Poss said, “I took pictures of trash cans on my honeymoon” (Simpson 2007).

He began to involve others, choosing a team based on who he knew might be interested within his social network. “We are motivated in part because we care about the environment and in part because we know this can be financially successful” (Xing 2007). Poss and his assembled team experimented with a variety of options and finally returned to the solar-powered trash receptacle—the BigBelly—an innovation that provides clear solutions to the problems he noted on the city street that day. The current version can hold up to five times more trash than traditional receptacles. As a result, it dramatically decreases the frequency of trash pickup and cuts fuel use and trash truck emissions by up to 80 percent.

Entrepreneurial leaders such as Jim Poss need the skills and the knowledge to define the world rather than be defined by it. To achieve this, entrepreneurial leaders must identify, assess, and shape opportunities in a variety of contexts—ranging from the predictable to the unknowable. They use creative and innovative approaches to create value for stakeholders and society. They create opportunities using a method of observing, acting, reflecting, and learning that is a constant and ongoing process. This is the method Poss used when observing a waste collection problem, pondering new technology-based solutions, reflecting on the possibilities, and creating the BigBelly solution.

In this chapter we introduce the way of thinking and acting that underlies entrepreneurial leadership: cognitive ambidexterity. Cognitive ambidexterity presumes two different approaches to thought and action: prediction logic and creation logic. To be an effective entrepreneurial leader, one must be skilled in both prediction and creation logics and able to cycle between them. It was through the use of both prediction and creation logics that Poss was able to create economic and environmental value; he literally turned garbage into an opportunity.

This chapter explains cognitive ambidexterity in more detail and provides examples of how to develop entrepreneurial leaders who engage cognitive ambidexterity. To do this, however, management education must move beyond teaching entrepreneurial leaders what to think to teaching them how to think.

Cognitive Ambidexterity: Linking
Prediction and Creation Approaches

Entrepreneurial leadership requires cognitive ambidexterity—a way of thinking and acting that is characterized by switching flexibly back and forth between prediction and creation approaches. The prediction approach, which is based on analysis using existing information, works best under conditions of certainty and low levels of perceived uncertainty. Creation, on the other hand, involves taking action to generate data that did not exist previously or that are inaccessible. It is most effective in environments characterized by extreme uncertainty or even unknowability.

In some instances prediction and creation logics are portrayed as incompatible methods of thought and action. In theory and in practice, this distinction is artificial. Through conscious effort, one way of thinking can be used to inform and progress the other way of thinking, making the approaches complementary. Moreover, by engaging prediction and creation approaches, entrepreneurial leaders are able to create greater value than if they had tried only one of these approaches.

Consider the example of Yvon Chouinard, who founded the outdoor apparel company Patagonia in 1974. When asked how he knows if he’s making the right move, he responded, “If you study something to death, if you wait for the customer to tell you what he wants, you’re going to be too late, especially for an entrepreneurial company. That comes from Henry Ford: Customers didn’t want a Model T, they wanted a faster horse” (Wang 2010, 23). Chouinard takes action first (the creation approach) and uses data from his actions and experiments to make decisions (the prediction approach). His cognitive ambidexterity is producing impressive results. Patagonia is still a private company, 100 percent owned by Chouinard, with approximately 1,300 employees and $315 million in sales for 2009. In addition, Patagonia continues to receive numerous awards for its emphasis on social and environmental responsibility and sustainability (Wang 2010).

Framing Cognitive Ambidexterity
for Entrepreneurial Leaders

To understand the abstract concept of cognitive ambidexterity, we developed an exercise that enables entrepreneurial leaders to experience the difference between the prediction and creation ways of thinking. The exercise we describe is based on Sarasvathy’s (2008) seminal work on effectuation, where the contrasting metaphors of a quilt and a jigsaw puzzle expose the differences between effectual and causal thinking, which are akin to creation and prediction logics (see exhibit 1.1).

This exercise can be used at the beginning of any course that discusses entrepreneurial leadership. At the start of the course, students are least comfortable with one another, the professor, and the course content. In this way course participants simulate the experience of being in an unknowable world. The exercise begins as the professor asks students to count off into groups of six. The professor tells students that this is a time-limited competition. Groups are instructed to go to their assigned table, which has the directions.

Exhibit 1.1 Exercise to introduce cognitive ambidexterity

At each table participants read the instructions, which indicate that their task is to complete a 300-piece jigsaw puzzle as quickly as possible. While the initial setup may be a little chaotic, order quickly appears at each table, as most students have experience doing jigsaw puzzles. Group members use their experience as they begin to separate edges from center pieces, search for corners, and use the picture on the box to begin assembling the puzzle.

After five to 10 minutes, the professor announces that one volunteer is needed from each group. The volunteers leave the puzzle area and are brought to a large, empty room. In one corner of the room are hundreds of pieces of fabric of different colors, textures, and sizes. The group of volunteers are again confused and concerned. The instructor tells them that each student will now become a quilt leader responsible for designing a quilt that will be judged. Quilt leaders are told that they don’t need to sew; they can simply place fabric on the ground and start designing the quilt. They begin the process by choosing six pieces of fabric, selecting a space in the room to create the quilt, and laying their pieces down. The quilt leaders are also told that over the next 45 minutes, other volunteers will be brought into the room and will be invited to join in designing quilts.

The quilt leaders get to work, and in five minutes six more volunteers join the quilt-making room. These volunteers are told to select six pieces of fabric and join any team they want. Every five minutes a new group of volunteers leave the puzzle-making area and enter the quilt-making room. As more people join the effort, some quilts grow larger or become more creative. Soon the entire class moves from putting together puzzles to designing quilts. Though participants don’t yet realize it, they have just experienced the prediction and creation logics of cognitive ambidexterity.

The Jigsaw Puzzle as Prediction Logic

Assembling a jigsaw puzzle is analogous to prediction logic within cognitive ambidexterity. The puzzle box itself offers a number of known variables, including the number of pieces inside and a picture of the solved puzzle, both of which can be used to reduce uncertainty around the level of difficulty and potential time to completion. The process begins by establishing the goal: complete the puzzle. The second step is to acquire resources to achieve that goal: open the box and get the puzzle pieces. The third step is to analyze everyone’s experience with puzzle building and to design a process for completing the puzzle. This might involve separating pieces by color, doing the edges first, and so on. The fourth step involves measuring progress and making adjustments by reviewing the box cover and revising the plan. Finally, the project is complete when all the pieces are connected to match the picture on the box. Participants start with a clear goal and follow a linear process to completion.

Prediction logic, which is vividly illustrated by the experience of assembling a jigsaw puzzle, is the established analytical approach taught by most management educators. The concepts and the teaching methods that underlie this approach provide students with the tools, frameworks, and processes for analyzing the causes and predicting the effects of a given event or action. Through this approach management students learn how to predict the outcome of actions using observation, experience, analysis, and reasoning. They learn that through rigorous analysis of the causes and the effects of a situation, they can make decisions that yield the intended results.

The six principles that guide the use of a prediction approach are shown in the following sidebar. Like putting together a jigsaw puzzle, a prediction approach is applicable in organizational situations in which goals are predetermined, issues are clear, and data are reliable and available. In these circumstances entrepreneurial leaders focus on assessing the situation, defining the problems and the opportunities, diagnosing the problem, evaluating alternative actions using established frameworks and tools, and identifying the best solution or plan to reach established goals. This sequential process of assess, define, diagnose, design, and act assumes that we can predict the future based on past experiences.

Principles of a Prediction Approach
to Thought and Action

1. Goals are predetermined and achievable given known information.

2. Enough information is known for rigorous analysis and testing.

3. Tools and frameworks are available to guide decision-making.

4. Optimal solutions are identifiable within a given set of constraints.

5. Through analysis, risk can be minimized or mitigated to achieve optimal returns.

6. Outside organizations are seen as competitors and barriers to future growth.

Adapted from Dew et al. 2008; Greenberg et al. 2009; and Sarasvathy 2008.

In management education prediction logic has been the dominant paradigm for teaching everything from accounting to organizational behavior to entrepreneurship. To develop their cognitive ambidexterity, entrepreneurial leaders will still need to be taught the prediction approach. They need to learn established tools and frameworks for following a rigorous, analytical decision-making process.

Yet the ambiguity of today’s business environment means that a prediction approach to leadership is not enough. In complex situations where cause-and-effect relationships are unknown or uncertain and where information is ambiguous, a prediction approach must be complemented by the creation approach based in action, discovery, and shaping opportunities. Entrepreneurial leaders use the creation approach to learn about a situation by acting and then observing and analyzing the outcomes of their actions.

The Quilt as Creation Logic

The creation approach illustrated by this experiential exercise is analogous to a form of quilt-making called crazy quilting. Crazy quilting is one of the oldest forms of American patchwork quilting and is defined by combining irregular patches of fabric with little or no regard to pattern or design. This form of quilt-making became popular among Victorian women in the late 1800s. The design, shape, and color of the quilt depended not only on the knowledge and the experience of the quilters but also on the amount and the type of fabric and the creativity they brought to the project.

The quilt-making portion of the exercise highlights the creation component of cognitive ambidexterity. Participants enter the quilt-making room with little information and few resources (six pieces of fabric). They employ a means-focused process in which they begin designing the quilt based on the materials they have. This is very different from creating a quilt design and then going to find the materials that fit it (a prediction-oriented process).

As other participants enter the room, they self-select to join a quilt leader. How they choose a quilt-making team varies. Some participants are attracted by a quilt leader’s design and feel they have something to offer. For instance, some may be drawn to a quilt that is unconventional. Other participants connect to those who fit with their knowledge of what a quilt is supposed to be. Still others see that some teams do not have many people, so they join out of perceived need. Regardless of the reason why, each volunteer brings additional resources (fabric), and the quilt design continues to emerge. Sometimes new fabric brought to the team may force the team to go in a different direction. For example, a team may have an emerging design based on hues of blue, and then someone joins the team with red, orange, and green plaid pieces. Should the team accept the resources and go with a different design? The creation approach would argue affirmatively because with each additional set of resources the pool of possibilities expands.

Entrepreneurial leaders use creation logic when the future is highly uncertain and unpredictable and past information is not predictive of future activity. Creation logic is an action-oriented approach based on the notion that new inputs (actions, information, and resources) expand the available opportunities. Furthermore it is an approach in which teams of individuals are co-creating. Individuals bring to the table different knowledge, resources, and networks. They take action and create opportunity by engaging these different forms of capital. The six principles that form the basis of a creation approach are shown in the following sidebar.

Principles of a Creation Approach
to Thought and Action

1. If perceived resource needs are beyond your control, start to create something with what you have.

2. When the future is unpredictable, create the future by shaping opportunities.

3. When operating with limited information, take action in the real world to acquire information but expect and leverage surprises or failures.

4. Optimal decision-making is never possible in highly uncertain environments. By starting something with current available means, you are “satisficing” to take swift action.

5. Determine what you are willing to lose (money, time, and social capital) to engage in the activity. Once you know what you are willing to lose, risk is no longer an inhibitor of entrepreneurial action.

6. Outside organizations, customers, and self-selected stakeholders are co-creators and not competitors.

Adapted from Dew et al. 2008; Greenberg et al. 2009; and Sarasvathy 2008.

The creation approach is central to cognitive ambidexterity, as human behavior is never entirely predictable and globalization and technological changes produce novel and complex situations. It is not always possible to gather the appropriate data or to use historical trends to apply a prediction approach.

The application of the creation approach can be seen in the example of Chris Cranston, a small-business owner who founded FlowDog in Waltham, Massachusetts. FlowDog is a canine aquatic and physical rehabilitation center. Prior to starting FlowDog, Cranston was a physical therapist practicing sports medicine. Wanting a change and having a strong desire to work with animals, she learned about a new program at the University of Tennessee that offered certification in canine physical therapy. In 2004 she was among the first 100 graduates of the program. Upon graduating she wanted to open her own facility but realized that few people knew that physical therapy was an option for dogs. There were no data on market size, growth potential, or acceptance by dog owners to using physical therapy. At the time few facilities existed in the country.

Personally, Cranston had limited financial resources and no startup experience. She had no connections in the veterinarian community, and Massachusetts law made it impossible to practice physical therapy on animals without a referral from a veterinarian. Using prediction logic a traditional data analysis would suggest that this was a risky opportunity to pursue, not unlike Clorox’s launch into the natural cleaning products market.

Cranston had a car, however, as well as some equipment and her experience and education, which provided her with both knowledge and a network. She started a mobile canine physical therapy practice in 2005. After making a few connections with area vets, she started to get referrals and the business grew by word of mouth. This early market test encouraged her to go a step further, and in 2009 she opened FlowDog—a 3,500-square-foot facility with a 3,000-gallon pool, physical therapy rooms, and a retail store.

The FlowDog example is one in which a creation approach is being used to transform the unknowability of a new situation by taking action that enables one to further learn and assess the problems and the opportunities and to select the next course of action. This process of acting, observing, reflecting, and learning is dynamic and assumes that the future is created, not predicted, and is based on an entrepreneurial leader’s access to resources and interactions with partners. Without taking small actions and applying learning from every action, FlowDog would not exist today.

Exhibit 1.2 Cognitive ambidexterity: the complementary logics of entrepreneurial leadership

Cognitive ambidexterity represents a continuous cycle of applying the creation and prediction approaches (see exhibit 1.2). Stable environments associated with prediction allow one to analyze and then act. Uncertain and even unknowable environments align better with creation thinking that requires action and then analysis. The world, however, is not easily interpreted as either stable or unknowable; therefore the ambidextrous approach of our mental model is necessary.

Greg Treverton (2007), director of the RAND Center for Global Risk and Security, says we cannot solve mysteries with the same mindset with which we solve puzzles. He states, “Puzzles may be more satisfying, but the world increasingly offers us mysteries. Treating them as puzzles is like trying to solve the unsolvable—an impossible challenge. But approaching them as mysteries makes us more comfortable with the uncertainties of our age.” Entrepreneurial leaders need to solve both puzzles and mysteries. To be cognitively ambidextrous, they must be alert to changes in the environment and able to select a creation or prediction approach based on what they know about the current and future environments.

Teaching Entrepreneurial Leaders
to Be Cognitively Ambidextrous

Teaching entrepreneurial leaders to develop a cognitively ambidextrous approach to decision-making is comparable to teaching people to work with either hand. Most people have a dominant hand they prefer to use to throw a ball, open the door, and sign their name. Each time a task is performed, one unconsciously uses the dominant hand. While ambidexterity is extremely rare, it can be learned with practice and patience.

In a similar way, most individuals prefer a certain approach to thinking—prediction or creation in this case—and select this dominant approach. In the same way that most people are right-handed, most managers are, we believe, more competent with prediction logic. This may have developed because management educators have been more focused on teaching prediction logic, much like teachers historically encouraged all children to use their right hands. Through a change in our management education approach, however, we can introduce and support those leaders who are more oriented to creation logic. More importantly, with a different management education paradigm, we can encourage entrepreneurial leaders to become cognitively ambidextrous as they learn to cycle between the two approaches as the environment demands.

Management education’s process orientation presents another challenge to our ability to teach entrepreneurial leaders to be cognitively ambidextrous. With a process-driven pedagogy, students learn to employ frameworks and models in sequential steps. While a process orientation works well under the prediction model, its effectiveness is reduced when used with the creation approach. To teach creation and prediction logics as complementary, educators need to teach a method of entrepreneurial leadership (Neck and Greene 2011). This goes beyond understanding, knowing, and talking and demands using, applying, and acting. Most importantly, a method requires practice and experimentation. In an ever-changing—and often unknowable—world, we need to teach methods that stand the test of dramatic changes in content and context.

With a process approach, by comparison, there is an assumption of known inputs and known outputs, as in a manufacturing process. A process also implies that there is a correct result once you decide on the right inputs. Obviously, a process approach limits one’s ability to teach entrepreneurial leaders to navigate in unknowable environments. A method approach, by comparison, requires creative and nimble thinking based on a body of skills and techniques. This thinking leads to a heightened level of experimentation, where subsequent iterations represent stages of learning rather than a series of successes and failures. The concept of method requires consistent practice so that knowledge and expertise can be continuously developed and applied to future endeavors.

In the following section, we introduce some unique methods for helping students become cognitively ambidextrous as they engage both creation and prediction approaches. Central to teaching these methods of cognitive ambidexterity is the development of a pedagogical portfolio (Neck and Greene 2011). Finkelstein, Seal, and Schuster (1998) reported that out of 172,000 faculty in the United States, 76 percent still list lecturing as their primary teaching method. We need to try more-diverse methodologies that enable students to practice management or, more importantly, entrepreneurial leadership.

FME: An Experiential Course in
Being an Entrepreneurial Leader

One course we have developed to teach students to be cognitively ambidextrous is Foundations of Management and Entrepreneurship (FME). By starting and running a mock new-business venture, course participants learn the tenets of entrepreneurial leadership. The focus of FME is on opportunity recognition, resource parsimony, team development, holistic thinking, and value creation through harvest. The vehicle of learning is a limited-duration business startup steeped in entrepreneurial leadership and a basic understanding of all functions of business. Specific course objectives include:

Identify, develop, and assess opportunities that create social and economic value

Practice entrepreneurial leadership

Identify when and how to use creation and prediction logics

Understand the nature of an integrated business enterprise

Because FME is a required course, all first-year undergraduates experience the entire cycle of entrepreneurship and learn general management tools through a blend of theory and practice.

FME is a two-semester course. The fall semester is separated into phases in which a method is used to identify 20 business ideas, develop and assess those ideas, and then select two business opportunities that will be pursued in each 60-person FME section. Students align themselves with one of the two opportunities and create a business organization of self-selected stakeholders. The spring semester is reserved for implementing, managing, and harvesting those business ventures.

Specific business topics, often grounded in prediction logic, are covered throughout the two-semester course in addition to the method of FME business creation. The process of developing, launching, managing, and harvesting a business creates a real-world context in which students can practice the basics of business, including accounting, marketing, sales, operations, human resources, information technology, and general management. Instructors introduce these basics in a specific sequence that maps to the startup process, exposing students to topics on an as-needed basis so that they are prepared for each stage of the startup experience. In this way course participants are introduced to traditional prediction logic as they develop their skills and confidence with creation logic.

An example helps illustrate the relevance of both prediction and creation logics in this course. One student group proposed a business idea where they intended to purchase and sell hand sanitizers and refills to large businesses in local communities. The opportunity was based on a predictive analysis that included research into the health benefits of using hand sanitizers and the emergence of wall-mounted dispensers in public spaces. During the spring semester, the team ran into a number of obstacles. One of these obstacles occurred when they encountered challenges in selling to large local businesses. After many failed sales calls, it became clear that many purchasing decisions were made at the corporate level and that purchases were made from pre-approved, established organizations. The team reassessed their target market and used their own networks (parents, professors, and fellow students) to shape the market. Through these relationships, a new opportunity was created. The business began targeting small businesses, organizations that needed to make onetime purchases, and health-conscious friends who wanted units for their dorm rooms. By learning from their initial failure, engaging a variety of stakeholders, and taking action to learn more about the market, the team reshaped the opportunity. Through instruction and experience with both the creation and prediction approaches, students learn the principles behind cognitive ambidexterity.

Additional Pedagogies for
Teaching Cognitive Ambidexterity

Beyond a highly experiential course such as FME, there are other pedagogical approaches that can be easily adapted to teach cognitive ambidexterity. Here we briefly highlight three of these approaches: design thinking, serious games and simulations, and reflective practice.

Design thinking Simon (1996) argued that applied disciplines couldn’t be taught under the auspices of the traditional scientific method. Businesses are designed by humans interacting with one another to create something of value. Courses should be designed to help students solve real-world customer and social problems and apply ethnography, data visualization, divergent and convergent thinking, and iterative problem-solving techniques to design new products and services. The learning objectives of these courses can be easily tailored to focus on teaching creation and prediction logics.

Serious games and simulations Whether games are played on a laptop, game console, or mobile device, evidence is mounting that the combination of gaming and learning as a valuable pedagogy is growing. Edery and Mollick (2009) write about how companies of all types are using games to interact with various stakeholders, including customers (through “advergames”) and employees (through training games). They state, “Games are compelling because, at their best, they represent the very essence of what drives people to think, to cooperate, and to create” (4). A colleague, Patricia Greene, has used off-the-shelf games—such as The Sims with expansion pack Open for Business—to teach students about organization design and how to consciously build company culture as a source of competitive advantage. Through the use of these games, students experience firsthand how and when to engage creation and prediction logics.

Reflective practice As students work with creation and prediction logics, they will develop their own capabilities further if they have the opportunity to reflect on their own thinking. Journaling, blogging, deep-dive reflection on one incident, and reflective essays—all provide opportunities for students to critically reflect on their own cognitive ambidexterity and to create a plan for their continued development. The key to doing this well is to make reflection an integrated activity across the curriculum so that the responsibility for making connections lies with not only faculty but also students.

Conclusion

In this chapter we emphasize the role of hands-on exercises, repeated practice and experimentation, and continuous learning in teaching entrepreneurial leaders to develop their cognitive ambidexterity. Management education programs need to teach students to become adept with both prediction and creation approaches. When we teach this method, we enable participants to develop a mental model for entrepreneurial leadership. This model includes a toolkit that can be adapted to meet the needs of an ever-changing environment and can be used for solving the known and unknowable social, environmental, and economic problems that we will face in the future. We can no longer teach students what to think; we must teach them how to think. Giving equal attention to creation and prediction within the mental model of cognitive ambidexterity represents a significant change in management education. Yet we believe that this change is a necessity if management educators are to fulfill our obligation to management students and society as a whole.

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