What are the competing priorities in your organization? Perhaps it’s scale versus flexibility, discipline versus creativity, diligence versus speed, or prudence versus risk taking. Each of these trade-offs reflects a deeper paradox, the tension between exploit and explore:
Decades ago, James March, the organizational theorist and Nobel Prize winner, argued that the "basic problem confronting an organization is to engage in sufficient exploitation to ensure its current viability and, at the same time, devote enough energy to exploration to ensure its future viability.”
The evidence suggests that few organizations get this right. Incumbents seldom invent the future. As a rule, they’re not the ones that create new business models or redefine customer expectations. They’re not the first to exploit new technologies or harness emerging trends. Instead, they reap efficiencies by turning the crank, and doing the same things over and over again.
In most organizations, what should be an evenly matched contest between exploit and explore is a one-sided thrashing. Consider your own employer. Where does it come down on the following trade-offs? What gets top management’s attention and what is considered optional?
I'm betting the answer skews to the right. It’s not that people are oblivious to these trade-offs; it’s just that they systematically favor that side of the spectrum.
Several years ago years ago, the penalties for clumsily managed trade-offs might have been tolerable, but no longer. Today, a business must be a paragon of penny-pinching efficiency on one hand and a champion of rule-busting innovation on the other. In a world of hypercompetition and hyperchange, the winners will be organizations that are capable of making subtle and perfectly timed trade-offs or, better yet, of radically redefining the frontier of exploit and explore.
Question is, how can you achieve this in practice? How do you avoid artless, top-down trade-offs? How do you escape the curse of either/or thinking?
At the recent Rendanheyi Open Talk conference, I had the privilege to explore these questions with three prominent management thinkers and practitioners:
- Julia Hautz, professor at Innsbruck University and co-author of the excellent book, Open Strategy;
- Tom Van Der Lubbe, the iconoclasitc co-founder of Viisi | Hypotheken;
- Markus Nordberg, Head of Resources Development at CERN.
If you're interested in this topic, I encourage you to check out the video recording of our conversation:
Note: I've set up the YT link so that you're taken straight to the speaker intros, since I take the first few minutes doing a set up that is essentially what you've just read above... Enjoy!