Charles A. O'Reilly ^©Drew Kelly

Charles A. O’Reilly is a Professor of Management (Organizational Behavior) at the Stanford Graduate School of Business (Stanford GSB), where he teaches “Leadership Perspectives” and “Beyond Disruption: Entrepreneurial Leadership Within Existing Organizations.” His research spans studies of leadership, organizational demography and diversity, culture, executive compensation, and organizational innovation and change. He is well-known as one of the world’s leading authorities on Ambidexterity. His latest publications include “Lead and Disrupt: How to Solve the Innovator’s Dilemma The Second Edition” (Co-Author, Stanford Business Books, 2021), and “The Corporate Explorer”(Co-Author, Wiley, 2022). “Lead and Disrupt” has long been a bestseller in Japan.

Sato currently serves as an Independent Director at a leading IT company in Japan. Sato holds an MBA from Columbia Business School and a Bachelor of Liberal Arts from The University of Tokyo.

--AGC has promoted its ambidextrous strategy since 2015. To begin with, could you tell us why you think it important for any large corporations to ‛explore and exploit’ in the present world filled with uncertainty and ambiguity?

The other is the acceleration of the pace of change. With the emergence of new technologies, government regulations change and consumer preferences change. Larger, older companies are especially affected by all of these forces.

And what we’re seeing is that many great companies around the world are in trouble. Their core businesses are being disrupted. I think the only way a big successful company can survive in the face of change is to not only exploit their existing business, but to also explore new opportunities and move their assets and capabilities into growth areas. This is what ambidexterity is about.

Takuya Shimamura　As we set in Vision 2030 and AGC plus, Ambidexterity has been a critical strategy for AGC since I became a CEO in 2015.

We are a company with a history of more than 100 years. We have produced flat glass for more than 100 years. But there will not be dramatic growth in the core business anymore. If we want to survive and grow, we have to reconstruct our style for the future. We believe Ambidexterity is the only way for us to survive and grow.

--AGC was featured in the Stanford GSB case “AGC Inc. in 2019: Your Dreams, Our Challenge.” Could you tell us the purpose of the case and the response from students and employees?

Charles O’Reilly　I was looking for the companies that were pursuing Ambidexterity for my case studies, and I thought AGC would be a wonderful example, firstly because AGC was an old and large corporation that was trying hard to be ambidextrous, secondly because AGC was a company outside the US.

I have already taught this case in my courses at Stanford GSB, and it has been very well-received because it challenges the stereotypical view of Japanese corporations. Many American students have a perception that Japanese companies are old and have difficulty with change.

AGC is an old Japanese company with more than 100 years of history that is exploring and exploiting simultaneously. AGC is dramatically changing organizations and businesses and leveraging its assets into new markets. Chairman Shimamura and AGC’s approach is applicable not just in Japan but around the world. Our students find it very instructive to see how a leader might change a large organization.

Moreover, I didn’t know there was a management theory called Ambidexterity. I participated in the AMP (Advanced Management Program) course at Harvard Business School in 2007, and I learned innovation from Professor Michael Tushman, co-author of Lead and Disrupt. But I did not realize what I was trying to do as a CEO was called Ambidextrous Leadership.

Charles O’Reilly　As academics and researchers, we watch and learn from leaders like Chairman Shimamura. It is terrific that Chairman Shimamura was engaging in ambidexterity before he even knew the theory. So, we were just privileged to be able to document what he and AGC’s employees had done.

--AGC is also featured in the second edition of Lead and Disrupt: How to Solve the Innovator’s Dilemma. The book highlights the importance of the corporate culture in implementing Ambidexterity. From a cultural standpoint, how do you view AGC’s ambidexterity?

Charles O’Reilly　First of all, we wrote about corporate culture in the second book because culture is such an important part of any transformation. Corporate culture can be a hidden barrier or a silent barrier to change, and so I thought it was very important to be explicit about the role of culture.

I think part of AGC’s success is that top management not only used the ‛explore and exploit’ aspect of ambidexterity, but also simultaneously got people involved and changed the corporate culture and gave them a larger purpose. Chairman Shimamura is a great example of a leader who is simultaneously managing the culture and structure of the company.

Takuya Shimamura　I thought the book Lead and Disrupt: How to Solve the Innovator’s Dilemma was very impressive. Most books teach us how to brush up on management skills, but there are few on how to revitalize a big company, really. Every leader at a large corporation struggles with growing the business. In this world filled with volatilities and uncertainties, a company’s legacy alone is no longer effective.

I think Professor O’Reilly’s book is especially helpful for leaders and managers at a large corporation with a long history like us. And it is also helpful for young employees. With the book, they can better understand what top management is trying to do.

Charles O’Reilly　From a cultural standpoint, I was impressed with leaders’ honesty and openness. I did lots of interviews for my case-writing. When I interviewed them, they – from top management to middle-level managers –were all very candid with us. They told me what did not work. It’s courageous of leaders to be completely open about both what they are doing well and what they are not doing well.

Takuya Shimamura　All of us thought there was nothing to hide. We just wanted the case to be a great learning tool for Stanford GSB students and future leaders. Also, this was a learning process for us. Without speaking candidly about our failures, how could we get helpful advice from Professor O’Reilly?

Charles O’Reilly　I was also impressed with the entrepreneurial spirit of young employees. I met some of the leaders who were running these new businesses. They were quite amazing. They reminded me of some of the entrepreneurs that I talked to in Silicon Valley. So, I felt both the Monozukuri culture and entrepreneurial culture co-existed in the company.

I have often seen young people in large organizations become demotivated because of inflexible and hierarchical structures and processes. They sometimes let down those young employees who want to change or make things happen. On the contrary, the employees I met at AGC were so motivated.

So, the key to empowering employees is to help organizations design themselves in ways that these young people can actually get involved and pursue some of their ideas. I think this is one of the things that AGC’s management team has been trying really hard, and its reform really worked.

--At AGC, a lot of Top Management Talk Sessions have been held since 2015. Could you tell us the aim and the effect of the meetings?

Takuya Shimamura　When I became CEO in 2015, the company environment was very gloomy. A year before I became the CEO, our profit level was a quarter of what it had been in 2010. I wanted to really brighten up the organization. While it was crucial for me to restructure portfolio, it was equally important to manage culture, because I believed people were one of the most important pillars of AGC’s growth.

As Professor O’Reilly said, young people had great ideas but they did not have opportunities to speak up because middle managers did not want them to fail.

I once had a session with middle managers and I asked, “Why don’t you give more challenging experiences to the younger people?”. And then one manager raised his hand and said, “I do understand what you say. But as a manager, I don’t want to see the young people fail.” So, I decided to talk directly with all employees at any level.

In my first three years, I probably visited approximately 50 sites per year. On each site, I had several sessions. So, I would say I had almost 150 face-to-face meetings per year for three years.

Initially, young people were reserved. But after three years, they become more open-minded and more straightforward. We did surveys in 2019, and we saw significant improvements in such sections as ‘Respect & Recognition’ and ‘Development Opportunities’.

Charles O’Reilly　I think having 150 face-to-face meetings per year for three years is admirable. Transformation efforts require senior managers to be constantly interacting with employees. Transformations often fail because the senior managers don’t put in enough effort to communicate with employees. They stay in the office and don’t go talk to employees. I think what Chairman Shimamura did was consistent with what other successful change leaders did.

Takuya Shimamura　At the meeting, I highlighted our founder’s spirit: Never take the easy way out, but confront difficulties. Trust is the best way to inspire people. Strive to develop technologies that will change the world. A sense of mission leads us to advance.

I dared to do so because it was the concept that every AGC Group members could resonate with. It explicitly stipulated why the company was built. It showed what employees should aim for.

In this changing environment, there are factors that you can control and those that you cannot. It was obvious that our employees looked at the same goal. So, I thought, “Why don’t we go back to our founding spirits so that everyone can be re-convinced of the need to rebuild?”

--What would you expect for the future of AGC?

Charles O’Reilly　First of all, I would love to write another case on AGC because I would like to follow up on the company’s story. When we write a case, we take a snapshot of something that’s going on at a particular time. But who knows what’s going to happen in the future?

So, if I were to write a second case, I would like to do a couple of things. I would like to know what has worked and what has not worked with new businesses – mobility, electronics, and life sciences. I would like to talk to some of the younger employees. Do they feel engaged? Do they feel enthusiastic? Now I would like the second case to be a success story for AGC.

Takuya Shimamura　It’s an honor.

Charles O’Reilly　But there is no guarantee that it would be a success. If the current top management continues the journey, then I think it will be a success.

His role is to incubate and scale our strategic businesses for the further growth of the company. He clearly understands his role and reinforces our goal over and over for all employees.

Charles O’Reilly　I hope that when we write the next case, the company will be even more successful because not only top management but also the employees have made it successful.

I think exploiting the core businesses and exploring and scaling the new businesses are critical to the future of the company.

I hope that the employees both in core businesses and new businesses understand the ambidexterity and remain engaged in AGC and feel proud of the company.