The one thing that makes a company last forever | qz.com

According to Stanford Graduate School of Business professor Charles O’Reilly, long-lasting companies have a quality he calls “organizational ambidexterity” – the balancing of exploration and exploitation.

Escher hands drawing

“All companies hit rough patches from time to time. But only a few manage to survive decade after decade—some of them in a form that bears no resemblance to the original organization. Nokia began in 1865 as a riverside paper mill along the Tammerkoski Rapids in southwestern Finland. In the late 1880s, Johnson & Johnson got its start by manufacturing the first commercial sterile surgical dressings and first-aid kits. And in 1924, the founder of Toyota came out with his company’s first invention—an automatic loom.”

“You can’t just choose between exploiting your current opportunities and exploring new ones; you have to do both. And the companies that last for decades are able to do so time and time again.”

“The researchers looked specifically at what type of corporate culture was associated with growth in revenue and net income, and found that more adaptive cultures, or ones that emphasized speed and experimentation, did much better. “A culture that says, ‘We don’t have all the answers; we’ve got to try these experiments’—that’s the type of culture that promotes ambidexterity.””

This seems to be a remedy to The Innovator’s Dilemma which asserts that big companies fail because of their own inertia, giving way to aggressive if imperfect new entrants.

Being ambidextrous also calls for strong management that can articulate a vision and lead everyone to support the vision as well as aligning the company’s various businesses with the vision. Interestingly, Prof. O’Reilly maintains that large corporations have an advantage over startups because the large entities have resources to spare. Essentially, they can cover several bets while a startup is typically dedicated to a single direction in what is usually a “bet the company” move.

A couple of excellent examples in American business: GE and IBM. It remains to be seen if the likes of Microsoft and Apple are also ambidextrous.

Read more: http://qz.com/90969/companies-that-succeed-have-this-in-common/