Posted by: Monideepa Tarafdar | June 22, 2009

Exploration and Exploitation

The Exploration-Exploitation perspective has been an important one in explaining the contradictory forces that organizations must contend with. They respectively reflect the strategic emphases of an organization on discovery of new innovations, and on refinement of existing processes and technologies. Since the publication of “The Productivity Dilemma” (Abernathy 1978), firms have tried to answer the question: Should we focus resources in exploring new products, markets and processes, or should we exploit and improve on existing ones? This question has spawned a widely utilized perspective : The Exploration-Exploitation dilemma (March 1991). The notion of the dilemma comes from the fact that these two sets of activities are associated with substantially distinct processes and cultures. Exploration is characterized by risk taking, and experimentation in the context of new technologies and competencies. It is required for firms to stay relevant in fast changing markets, to keep pace with rapid technological developments, and for superior long-term returns. Exploitation includes modification, fine-tuning, and efficiency regarding existing technologies and processes and necessary to meet the needs of existing customers or markets efficiently and cost -effectively

So what does this perspective have to do with the business and social environments we face today? We see both of these ideas playing out in different industries, nations and indeed among individuals as well. Looking at exploration, higher education and healthcare for instance, are being churned around by the Internet and the increasingly enhanced abilities for long distance communication and interaction. Universities are asking questions such as – Who are we? How do we facilitate learning? How important are physical campuses and buildings for our future? These questions are prompting fundamental  re-thinking and reflection in universities and will likely result in the kind of  changes in their structure and functioning not often seen since the modern university emerged in Europe as early as a little before 1100 A.D.  Healthcare, similarly, because of the possibility of large scale computerization of medical records, is looking to bring out fundamental process changes in the way that doctors interact with nurses and other staff . Electronic medical records and computerized order entry systems have resulted in a slew of exploration type activities as hospital administrators and healthcare professionals experiment with different ways of structuring their processes. Other industries such as advertising and entertainment (movies, music and television), subject to never ending waves of technological innovation are in the exploration mode as companies continually bring out new products (e.g. launch of the Palm Pre and iPhone 3G within the space of a week), change our notions of what a book is (e.g. Kindle) and make us explore new ways of entertainment (e.g. the Sony Bravia TV that can connect to the Internet and directly access programming from there).

At the level of the society, as a nation and indeed as a world, we are facing imminent and acute constraints in resources.  It is not inconceivable to imagine a world where there is not enough grain, water or fossil fuel (i.e., gasoline). Nations and societies have therefore launched into the exploration mode, accomplishing research and experiments on how to live without existing kinds of fuels, how to devise new machines (i.e.cars) that run on other fuels such as ethanol  and in general figuring out ways for reducing energy consumption.

Partly as a result of the above, we as individuals are increasingly being called upon to explore. We are being called upon to take risks with career choices that we make, to work at the edge in areas such as alternate energy and medicine, and to respond to the challenges that face us. At work, there are no such things are permanent jobs or even careers, and we are being required to be nimble, flexible and continually learn new skills. At home our kids force us to understand new technologies almost on a daily basis.

In a nutshell therefore, we are living in a world of increasing exploration.

References:

Abernathy, J. The Productivity Dilemma: Roadblock to Innovation in the Automobile Industry, Johns Hopkins University Press, 1978

March, J.G., “Exploration and Exploitation in Organizational Learning,” Organization Science, Vol. 2, no. 1, 1991, pp. 71-87.

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