Ambidextrous OrganizationsManaging Evolutionary & Revolutionary Change

Source: Michael L Tushman &Charles A O’Reilley III

2

How to Cook Sweet & Sour

Recipe forLong-term Success

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Value Creation: What A Business Aims to Achieve

Com

mitt

edm

anag

emen

t

CommittedEmployees

ContinuallyRefine

Processes

DeliverGreater

PerceivedValue

DelightedCustomers

IncreasedMarketShare

RevenueGrowth

DelightedShareholders

ReducedWaste

GreaterProductivity

LowerCosts

Improved MarginsImproved Asset Utilization

ImprovedCompetitive Position

INNOVATIOn

+ Flexibility

4

ChangeIn

Profits

ChangeIn

Costs

ChangeIn

Revenues

ChangeIn

OutputPrice

ChangeIn

OutputQuantity

ChangeIn

InputQuantity

ChangeIn

InputPrice

5

ChangeIn

Profits

ProductDifferentiation

Productivity &Output

Adjustment

ChangeIn

OutputPrice

ChangeIn

OutputQuantity

ChangeIn

InputQuantity

ChangeIn

InputPrice

6

Semiconductor Industry 1955-951955Vacuum Tubes

1955 Transistors

1965 Semiconductors

1975 Integrated Circuits

1982 VLSI

1995 sub-micron

1 RCA TI TI Motorola Intel

2 Fairchild TI NEC

3 GE Motorola NEC Toshiba

4 GI Intel Hitachi Hitachi

5 TI GE Motorola National Motorola

6 GE RCA Toshiba Samsung

7 RCA Intel TI

8 RCA Philips

9 Motorola Fujitsu

10 Raytheon Fairchild

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Employment in Swiss watch Industry 1955-85

0

500

1000

1500

2000

2500

M-55 M-65 M-70 M-75 M-80 M-85

Year

No. o

f Firm

s

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

100000

No. o

f Em

ploy

ees

Firms

Employees

Throwing Away the Quartz Advantage to the Japs (Seiko)

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Of 10 leaders in Vacuum Tubes in 1955,only 2 were left in 1975

3 Types ofERRORS

Decision not to invest in New Technology

Invest, but in Wrong Technology

Cultural – inability to play 2games at once

e.gBSE

e.gEssar,IOL,

e.g.JindalSteel

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Consider two fundamentals….

How organizations grow and evolve

How discontinuities affect this process

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Punctuated Equilibrium andOrganizational Evolution

CriticalTasks

Culture

Structure

Skills

Strategy

Innovation(Variation)

Differentiation(Selection)

Cost(Retention)

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The Success Syndrome

Fit Success

Size & AgeInertia• Structural

• Cultural

Success in

stable markets

Failure when

markets shift

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Two Invisible Forces: Technology Cycles & Evolution

Rat

e of

I nno

vati o

n

ProcessInnovation

ProductInnovation

ProcessInnovation

ProductInnovation

DominantDesign # 1

SubstitutionEvent

DominantDesign # 2

TimeVHS<>BetamaxWindows<>Mac

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Organizational Evolution (has parallels in) Evolutionary Biology

Organizational Ecology

Evolutionary Change(Gradual Changes in

temperature/vegetation etc)VariationSelectionRetention

Revolutionary ChangeDiscontinuous change( temperature/food etc)Punctuated equilibriumSurvival of those species which can exploit the new environment

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The Paradox of Culture: Both helps and hinders organizational progress

Culture mentioned as a factor of success or difficulty in these varied firms…..

American European JapaneseP & G BA Kao

Coca Cola Siemens Nissan

HP Royal Dutch/ Shell Toshiba

GE Philips Matsushita

Motorola Nokia Samsung(Korea)

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Examples

Good news from…

BA

Nordstrom

Bad news from…

IBM

Sears

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British Airways (BA)1987 Profitable

with same Workforce Routes Technology

culture change!

1981 BA = Bloody Awful

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Ambidextrous Manager: role is one of a symphony conductor rather than a general

Variation: decentralize, eliminate bureaucracy,individual autonomy, accountabilitySelection: winners in the market (co. selects)Retention: by the market (market selects)

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Ambidextrous Organizations

Mature markets – incremental innovation

Emerging markets – Discontinuous innovation

HPHP Way

J & JThe Credo

ABBPolicy Bible

InstrumentsComputerPrinters

Consumer productsPharmaProf. Medical products

Power plantsElec. Transmission Transportation SysEnvironmental Con

Sys

50 divisions 165 companies 5000 profit centres of ~ 50 persons each

Tolerance for failures Barnevik’s 7-3 formulaQuick decisions

No fragmentation } social controls/ normative controlsNo loss of synergy } Autonomous Groups

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Multiple CulturesSocial Controls – simultaneously tight & loose

Tight: Corporate culture broadly shared Emphasizes norms critical to innovation Innovation norms: openness, autonomy, initiative,

risk taking

Loose: Manner in which common values are expressed

according to type of innovation required. Common standards but unique personalities.

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Most Traditional Companies

Constraint

Compliance

ContractControl

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Organizational RenewalSTRETCH

DISCIPLINE

SUPPORT TRUST

Persistence Confidence

CommitmentLearning

Collaboration

Initi

ativ

e

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Cash Flow for a Magazine or Restaurant

Time

CashFlow

+

-

0

Invest

Harvest

Growth Option

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Cash Flow for Disc Drive Business

Time

+

-

0

CashFlow

14”8”

5.25”2.5”

Reality

Projection