Michael Tushman and Charles O'Reilly - Mastering Ambidexterity: Core And Explore

Conceptually the logic of ambidexterity is simple to be successful core and explore businesses require different architectures people structures metrics and culture so they need to be set up as separate units. One for exploit and the other for explore. This is straightforward in theory, but not necessarily easy to do in practice.

The need to manage different organizational architectures brings with it significant challenges for leaders. Do we have the right resources set up in separate units? Can we use different metrics and rewards? Will the existing systems allow us the interdependence to pursue very different strategies? Finance, Purchasing, Legal, HR.

While these demands are difficult, perhaps the biggest silent killer of ambidexterity and the most Difficult challenges for many leaders is the need to develop very different cultures across the core and explore units.

That's the setup today. It's the penultimate of our corporate explorer series. And I want to thank our sponsor, Wazoku, who helped large organizations create effective, sustainable innovation ecosystems that accelerate efficiency gains and new value growth. Wazoku does this through intelligent enterprise software that connects and harnesses the power of employees, suppliers, startups, universities, And the unique Wazoku crowd of over 700, 000 plus global problem solvers.

Wazoku calls that connected collective intelligence, and you can find our friends at Wazoku at www. wazoku. com.

It is a great pleasure to welcome the spawners of this book. the two faces of Janus, one is Charles O'Reilly the third. The other is Mike Tushman. Welcome back my friends. Aidan, so great to be with you and so great to be with all your Corporate Explorers, I am so honored to be part of this. Let me get us going and then we'll go to Charles.

This notion of core and explore, building structural and by dexterity has been at the heart of our both research and our consulting over the past maybe 25 years. I think it's easy to say everybody, and you all know as Corporate Explorers, it's hard to do. Much of our more recent work has been focused on linking purpose, passion, and by dexterity, social movement.

As you have seen with the various other members of this, Corporate Explorer field book team at the end of the day, it is around Organization renewal, and over the course of this series, you've seen Intel, Sanus, AGC, UNIQA. At the end of the day, it is both organization renewal and personal renewal. And your ability to step into this role of a corporate explorer, that's one. And two, shape your boss and perhaps your boss's boss.

Just got off the phone today with a client and part of the issue is this corporate explorer has to change her point of view on dialogue with her colleagues in the social movement and manage her boss. And so partly what hopefully you've gotten from this series is the importance of ambidexterity, organization renewal, at the end of the day, it's linked to personal renewal and obviously organizational culture. Thank you, Michael. And let me add my thanks to all of you who are corporate explorers.

Mike and I, over the years have understood. In great detail. It's easy and fun to study this. It's often very difficult to do. So we have great admiration for those of you who are attempting to change organizations from within.

So let's talk a little bit about culture as a silent killer of of exploration. If you think about culture as values, you can't manage them. And many executives think about culture in terms of values. But our perspective is if you're going to manage culture, you've got to take values and drive them into a set of behaviors. And once you have, once you think about culture as the pattern of behavior, That's reinforced within an organization. Then you can actually manage it.

So if you think about the culture required for a big exploit organization, a mature organization and organizations that making money, that culture, that pattern of behavior is typically around. Efficiency, complying with procedures and processes, staying close to customers. There are a set of behaviors that make you successful in a big core business. If you think about the culture required in an exploit, in an explorer business, a new business it's almost the opposite.

It's a pattern of behavior that rewards initiative and failing and trying again and not being bound up by rules. So the two cultures are completely different. And the problem that many organizations face when they try to become ambidextrous Is they set up to separate organizations, as Mike said, that's pretty straightforward. You can even set up separate metrics. You can set up separate incentive systems. But at the end of the day, the cultures are different.

And the problem is that the culture of a big exploit or core business can smother the culture needed , in an Explorer unit. And so part of the trick of transforming an organization, I think is to be sensitive to these cultural differences and the ability to transform the organization.

So as we have worked over the years with a variety of companies around the world, it's become clear to us that there really are a set of, levers, if you will, that successful managers, leaders use to change cultures.

And let me just use Microsoft , as an example. For those of you who have followed Microsoft in the last 10 years, Satya Nadella has done a remarkable transformation in both Microsoft in terms of its strategy. Going from office and windows to mobility and cloud and now making yet another pivot into AI. And part of that transformation was structural and strategic, but a huge part of it was. actually culture.

And the way he changed the culture, if you step back and you look at how they've transformed it, it becomes pretty clear that he did five things. What we talk about as the leash model. Each of these levers is really predicated on a psychology that says that to change the culture or the pattern of behavior, what you need to do is get very consistent signals to people saying, this is the way we need you to behave. Under the old system, you behave this way.

Under the new system, this is the behavior we need. And so the psychology is really a psychology of getting very clear signals to people about what the behaviors are that you need.

And there are these five levers. The first are the senior team. The senior, think of the senior team as a signal generator. People in the organization watch the senior team, they want to know what's important, what the senior team really thinks is important. Their careers, their promotion, their compensation is often based on their ability to understand and behave in the way that the senior team wants. So the senior team signaling is the first lever. the L in leash.

Then you have to get people involved. That's employee engagement, the E for the second letter. And the reason that's important is because when people are involved in a change in a culture change and a change of patterns of behavior, they feel some psychological ownership. So the degree to which people , are surveyed, and town halls, and pulse checks, and focus groups.

The people, the degree to which people can actually, believe that senior leaders are listening to them, that helps drive the change. The third lever is the A, and that's aligned rewards. And what, not money really, but status and recognition and approval. Who's seen as a great person, who's seen as an outlier. The fourth lever is the S, and that's symbols and stories and language that often are associated with a new way of doing things.

And the last letter is H, and that's aligning the HR system. How we recruit people, how we onboard people, how we train people, how we reward people and promote people. When all those levers are lined up together, they're all sending the same signals. These are the behaviors we need. It is very difficult for people not to comply.

Let's use Microsoft as a quick example. In 2013, Steve Ballmer, the then CEO of Microsoft, announced that he was going to step down, and they began a search for the new CEO. The culture at the time at Microsoft was a very political, individualistic, hierarchical culture. It reflected both Bill Gates and Steve Ballmer in the way they ran the organization. You had to know the right answer. If your boss asked you a question and you didn't know the answer, you were in trouble.

So 2013, Ballmer announces he's going to step down. There was a business journalist for Business Week, Big American Business Magazine, who wrote an article in January of 2014, saying why anybody would be a fool to be the CEO of Microsoft. And the reason was because of this culture and the history of Microsoft. Microsoft was under existential threat, office servers, windows were all under threat as people moved to the cloud and other devices like your mobile phone.

So the journalist said you don't want to be CEO. In February of 2014, Satya Nadella, 22 year veteran of Microsoft, was appointed the CEO. And what he did over the next several years, along with Kathleen Hogan, his chief people officer, was a dramatic change in the culture. And here's what they did. It's the leash model. The first thing he did with respect to leader actions is he took nine months and he went on a listening tour.

They had surveys, they had meetings, they had town halls, they had focus groups. And what he kept asking was, What is the, what is it about the culture, the existing culture that we don't want to lose, that is valuable and we want to honor? What is it that we need to be successful in the future as we move to mobility and cloud? And what is it we have now that might stop us from getting to the future? At the end of nine months, he had a meeting of his top 180 people.

And they agreed on a growth mindset as the overarching meme to drive the culture. But more importantly, they identified a set of behaviors that the growth mindset enabled around listening, learning, not always having the right answer. They then cascaded that into the organization. They actually trained 27, 000 managers on how to think about and talk about and drive the culture. And they cascaded it in. So that's the L model. You got lots of employee involvement. They had town halls.

They did some very interesting, sophisticated network analysis. They used their internal communi email to identify hubs in the communication networks. These were the influencers. And they actually got them involved in the culture change effort, help to help drive this new change. So that was the employee engagement. They then changed the performance system under the old Microsoft. They had a stack ranked performance management system. This is a management system that many of you know.

where every year you've got to identify the bottom 10%. They either are eliminated or put on performance improvement plans. That led to huge amounts of politics and silo thinking and aggression among the managers. They did that away and they put in a much more collaborative Performance management system. They, they began to reward growth mindset. They changed the metrics that they were evaluating people on from individualistic to more group. So that was the aligned rewards.

They also did a lot of sort of symbols and signaling around mobile first, cloud first, over communicating this, the stories about people who, who exhibited a growth mindset, holding them up. They would start each meeting. with a story about somebody in the organization who had modeled a growth mindset. So there's this constant repetition of, this is what the growth mindset looks like.

And the last letter, H, HR alignment, not only did they change the performance management system, but they also changed how they select and recruit and onboard and train people. If you step back and you look at how Microsoft changed, www. microsoft mechanics. com And what Nadella and Kathleen Hogan did. It's not a mystery. It's not easy. It takes incredible relentless effort on the part of the senior team. But we know how to do it. I, I could describe similar events.

A big Japanese company that did basic, basically the same thing. So we would encourage you. is you think about as corporate explorers, think about creating the culture in your explore unit. And it has to be different from the exploit unit, but also think about what can we do to really change the culture of the larger organization, especially if you're a senior manager. So that, that's the kind of that's about three years of research in 15 minutes.

Charles, the, the thing that came to my mind when say that meeting okay, let's start our meeting. And i'm going hey mike tell me about somebody in your team that showed the growth mindset that there would be this resistance to that at the start like dude are we really doing this kind of you know that the cynics would be out in force at the start and that leads them to the HR.

The training but also then the personal renewal cause without renewing those guys or girls that you're gonna have that resistance and you have to get them out of the organization or upscale them, i'm not that's where it most resistance come and they're the people who beat the crap out of the corporate explorer or undermine them in often. Very damning ways Yeah. So the first time you do it, It's exactly what you said, Aidan. The third time you do it, they're probably still there.

The 20th time you do it, especially when you're asking people for examples, they're either on board or they're outlier. thrown overboard. Mike, it comes back to what you're saying about the personal renewal I hold up your work in workshops, I talk about all the time that the, I actually call it the infinity curve that you used to get to the top of the S curve, you have to jump when you curve, but now.

You actually can go i need exploit and explore feeding each other and the old feeds the new and that means that. i need them to be collaborators not enemies cause the old way creates this kind of enemy oh you guys are dinosaurs and you guys are wasting our money on your bean bags in your post it notes, how do you reconcile that exploiting explore in the middle

Let me just finish this session with this notion of linking personal renewal and organization renewal. Charles last examples , were the Microsoft example, which really very much top down. But for those of you who are corporate explorers, you can, the same logic, the same leash, model that Charles just described, you can do in your particular piece, your explore piece of the organization, but also managing up this notion in one of the chapters of the handbook is creating social movements.

As you do your work in your exploring unit, and you make links to the exploit unit, Partly it is done through appealing to purpose, like why do we exist? Why do we have these inconsistent architectures? It's partly for this overarching sense of Microsoft is and what they do. So it's partly you're managing up your boss or your boss's boss, helping them see the importance of both and, not either or. Partly this notion of purpose and structural ambidexterity.

And partly, it's the role of the, to me, the corporate explorers, to me, the unsung heroes of incumbent firms reinventing themselves, is your ability to manage down, your ability to manage your peers, and importantly, your ability to manage up, to help your more senior colleagues, this paradoxical both and point of view. So, corporate explorers. Wow, you're the best. As Charles observed, it's easy to understand. It's hard to do. Keep up your great work.

awesome it's always a pleasure to have you on the show it's lovely to. Have you to close it you open it you close it and i want to remind you as well i did a brilliant session with charles and mike on all their books in the past some of my favorite books as well, really i recommend them i'll link to those in the show notes but for now, the two faces of Janus charles O'Reilly the third mike Tushman for joining us. Thank you, Aidan. Thank you, Aidan