Exploitation vs Exploration

Life is simple. We only have to do two kinds of things:

A. Things that make us survive today

B. Things that make us survive in the future

Life will not be what we hoped for if we focus too much on either A or B. In an organizational setting, A. represents doing what we do and is often referred to as Exploitation.

B. represents engaging in activities that hopefully give value in the future. It is referred to as Exploration. Unfortunately, Exploitation and Exploration are fundamentally different. But successful organizations master both.

In this short article, we will try to define these two concepts and look at how it affects innovation.

Exploitation: We know what we’re doing. There is low uncertainty and we can optimize operations. We work on reducing time, waste, resource usage and variances.

Exploration: We don’t know what is the best thing to do. There is high uncertainty and we have to learn. Our success depends on our ability to learn. We cannot avoid failures, but we can fail fast and cheap.

It is important for all individuals in the organization to be part of the Exploration activities. It gives energy and possibility to grow. If the learning challenges for the organization are large, e.g in radical innovation, it makes sense to set up special projects or units.

We become good at Exploration, and then also innovation, if we become good learners. What characterizes good learners? They are humble, curious, motivated, good listeners and they dare to try.

The challenge of innovation lies in the completely different approaches required for Exploitation and Exploration. Exploitation requires control, predictability and low level of creativity. Exploration requires some extent of chaos, creativity and it is unpredictable. Effective leadership fosters both, at all levels.

Posted in Hi3

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