Strategy: how to balance exploitation and exploration
Are you looking to radically innovate your organization's business or do you want to improve your current set up? Not an easy question to answer. Because however you look at it, strategy development isn't black and white. It is always a balancing act between exploitation and exploration, even more so at a time when the pandemic, internationalization, digitization and the rapid arrival of new players on the market can put strain on your carefully laid strategy. How do you, as a senior manager, manage this ambidexterity?
In order to have a meaningful discussion on the interplay between exploitation and exploration, you must have the following four preconditions in place:
1. Awareness of the (inhibiting) power of your organization
In many cases, an organization's existing structure and culture unintentionally drive the strategy process. How things are currently done is a key determinator for the future. The reward and assessment system, for example. Plus, does the organization allow experimenting, risk-taking and making mistakes? When the existing forces are strong, there's a tendency to exploit more than to explore, even if this isn't a conscious choice.
2. Mobilizing the organization
Introducing innovation in an existing organization isn't easy. That's why it's important to genuinely involve everyone in the strategy process. Not only will you produce better ideas this way, but you will also garner more support for the implementation of the strategy. Unfortunately, for many people and organizations, “creating buy-in” has become synonymous to a plethora of discussion groups, brainstorming sessions and memos on whiteboards that fail to lead to tangible results in later stages of the process – stages they're no longer even involved in. This is counter-productive. Mobilizing the organization requires authentic and genuine leadership.
3. Embracing different perspectives
You'll come to much better solutions when you look at the challenges your organization is facing from different perspectives. This might even include being willing to embrace conflicting perspectives. This is not a black and white scenario or some kind of vague compromise, it's about truly managing various – and at times conflicting – challenges within the organization, such as simultaneous exploitation and exploration. It requires knowledge, as well as forcing yourself to truly look at strategic issues from different perspectives.
4. Organizing diversity
When you know that you struggle to adopt certain perspectives, you'll have to source these perspectives within the organization. By creating a management team with people who view things differently than you, for example. This requires the ability to be self-critical and a culture in which the expression of opposing views is accepted, or one that makes space for people with a completely different vision on strategy. You need this diversity if you want to have a fruitful discussion about the balance between exploitation and exploration and, ultimately, make the right strategic decisions.
Practical tools for the discussion on exploitation and exploration
There are several practical tools that can help you find the right balance in the combination of exploitation and exploration. Associate Professor Eric Dooms
has written a onepager
on one of these models, that maps out which activities on the exploitation-exploration spectrum your organization should currently focus on. The onepager shows how this practical tool can help your organization get started. It also focuses on the classic exploitation-exploration pitfalls of strategy development and addresses a number of practical cases.