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Organizational Ambidexterity in Action:
How Managers explore and exploit
Charles A. O’Reilly III Michael L. Tushman
he life span of the average American is 79. Japanese can expect to live to age 83, Liberians to only 46. The average age of a large company is much less than any of these. Research has shown that only a tiny fraction of firms founded in the U.S. are likely to make it to age 40, probably less than 0.1 percent.1 In this study, for firms founded in 1976, only 10% survived 10 years later, leading the authors to conclude that “Despite their size, their vast financial and human resources, average large firms do not ‘live’ as long as ordinary Americans.”2 While this is partly understandable because of the high mortality rates among newly founded companies, other research has estimated that even large, well-established companies can only expect to live, on average, between another 6 to 15 years.3 Ormerod, in a study of firm failure, noted that “Over 10 percent of all companies in the U.S., the largest and most-successful economy in the history of the world, fail every single year.”4 In a study of the world’s largest companies between 1912 and 1995, Hannah reported that only 20 firms remained on her list for the entire period— and many of those were in industries like natural resources without disruptive change. In her study, the modal large firm failed.5 Why this should be is a puzzle, since when firms are doing well they have all the resources (financial, physical, and intellectual) to continue to be successful. Yet the evidence is that most organizations do not survive for long periods of time. In addressing this conundrum, James March notes that central to the ability of a firm to survive over time is its ability to exploit existing assets and positions in a profit-producing way and simultaneously to explore new technologies and markets—to configure and reconfigure organizational resources to capture existing as well as new opportunities. In March’s terms, this is the fundamental tension at the heart of an enterprise’s long-run survival. “The basic problem confronting an organization is to engage in sufficient exploitation to ensure its
CALIFORNIA MANAGEMENT REVIEW VOL. 53, NO. 4
Organizational Ambidexterity in Action: How Managers Explore and Exploit
current viability and, at the same time, devote enough energy to exploration to ensure its future viability.”6 March also notes that this requires not the blind variation-selection-retention process of biological evolution but what he refers to as “evolutionary engineering” in which organizational experience and memory are used to strengthen exploitation and exploration processes and adapt to changed environmental conditions.7 Hannah, struggling to explain the survival of a comparatively small number of the world’s largest companies, suggests that a plausible explanation for the survivors is that...