Striving for the innovation balance: between exploring and exploiting.

We never seem capable of adapting as well as we should do.

Adapting always seems a work-in-progress, or it is often something where we are simply making little or no progress!

We often stay ‘stuck’ in the way we do ‘things’ around here, never seemed able to break out into something new or different.

To adapt we need to open ourselves up to learning and adjusting our organizational ‘form’ in new ways.

In business, there should be a constant battle to reconfigure the assets and extend the existing capabilities. Yet often these stay ‘static’ not learning or improving.

In our innovation activities, there is an even greater pressing need to build into our thinking the ability to find more dynamic capabilities. It is a constant innovator’s dilemma to think through and get right.

What might help?
Recognizing our need to think differently
Here I am wanting to outline some opening thoughts for you to consider in becoming a more adaptive organization.

There has been a lot of discussion about finding new organizational forms that need to somehow reflect on pushing out and developing around unique combinations building into our existing structures these four distinct ‘classification’ states: a) collaborative, b) learning, c) emergent and finally d) ambidextrous.

These ‘states’ are viewed to be really helpful in accelerating an organization’s growth potential and improving greatly on the innovation cycles.

Partly this is being driven by a recognition that we are becoming more dependent on a growing set of challenges that include: a) gathering and synthesizing far more knowledge than ever before, b) the fact we are increasingly becoming dependent on the performance of others, c) the assets that we simply own and have in place are just not good enough today and d) our abilities to “read, react and respond” to changes occurring that just seem to be constantly accelerating away are becoming more difficult to keep adjusting too in our present organizational structures.

Somehow we need to respond in more agile, fluid and adaptive ways. Roger Martin suggested some time back “that modern leaders need integrative thinking to embrace complexity, tolerate uncertainty and manage tension in searching for creating solutions to problems“. It is learning to make different choices in a far more creative process, often more disruptive to our established norms.

All these are challenging our existing organization’s systems, structures and processes and it is a growing process of understanding that will emerge to form these new ways of operating, far more reliant on technology, rapidly available and adaptive systems and flexible thinking and design.

The need to become bolder in our thinking

We need to encourage fresh and bolder investments in knowledge, in infrastructure, systems and in managing these. Ones that focus on activities that pursue new approaches that lead to exciting innovation, that really does spurs growth. These are about learning, searching and delivering the winning value on the new innovation value scale of ‘new generation activity’ from recognizing how we balance out exploitation (extending the life) and exploration (new understanding). We need to appreciate the separation effect for innovation.

Most of our organizations today struggle with applying the ‘appropriate’ resources into these two ‘dual’ approaches. Many try to separate them, often hiving off the more radical innovation development part to protect it from being overwhelmed by the often overbearing focus on the short-term and exploitation. Yet this is a real mistake, as they are necessary to be combined to improve what we have, as well as add in a significant change to keep the business healthy (efficient and effective) and equally growing (through innovation)

We are living in a world of apparent contradictions

We need to manage with one eye on austerity, the other on emphasizing the need for innovation. The popular ‘answer’ to this is simultaneously exploring and exploiting, yet these two organizing and managing styles are hard to find the right balance we need. We want to have a stable environment but we need to equally be dynamic, constantly improving and introducing new innovations.

These are a significant range of questions we have to consider before we decide to establish the ‘appropriate’ position of how much we need to emphasise on the exploit and explore, both needed to be balancing the stability and delivering the dynamic. Much is dependent on the diversity and dynamism of the business environment we are operating under, the resources we have available or can call upon, the market conditions we are facing, as well as predicting where all of it is heading. Easy huh!

Equally, it is dependent on what we are attempting to do.

Exploitation is the “refinement and extension of existing competencies, technologies and existing knowledge” whereas exploration is “our ability to experiment with new alternatives” and each is certainly built on our learning and accumulating experiences. Exploitation on its own, or if heavily emphasized to the exclusion of exploration, can eventually lead to failure, whereas too much exploring and experimentation can limit exploitation. Each can become a “failure trap”.

The “success trap” is when exploration leads to exploitation and exploitation to more exploration, a reinforcing cycle through clarity of mindset and managing between routines and experimentation. These can have very different activities to manage and are the cause of many of the tensions within the balance needed in organizations to innovate the new and manage the existing. Each is often competing for scarce resources, a constant interplay.

The argument for establishing an ambidextrous organization has proffered different opinions for pushing for variations based on: a) clear separation, b) developing the abilities to switch, c) become self-organizing or d) using an external ecosystem thinking to establish the right mix between exploit and explore. Each is determined by a unique mix of considerations.

The answer for each of us is that it really does depend. It has a paradox only you can solve in your unique situation. It comes down to trade-offs. So what do we need to consider? Do you tightly couple these or seek degrees of separation?

We need to seek balance, strive for dynamism and accelerate innovations
With this ever-increasing set of tensions, we are in real need to shape capabilities. It has been suggested * that we have to resolve four closely interrelated ‘tensions’ to help us in leading to understand what, where and how we design ambidexterity into our management within organizations.

We need to consider how we would balance these four tensions:

1. Differentiation and Integration. How do we separate our exploitative and exploratory activities into distinct organizational activities or units? Integration is deciding the mechanisms that can address these. This deciding point between these two will often boil down to the degree of importance placed on the need for exploitation and exploration; these should not become mutually exclusive positions.

We must balance in constantly adaptive ways this duality. It is the specific task or activity that can largely determine this but it needs a conscious designing in.

2. Individual or at the Organizational level. The ability to ‘fuse’ any approach across multiple levels of need at organizational design and the individual’s ability to explore and exploit together, or at separate times, needs resolving. Having different teams, one exploring, one exploiting or having individuals who have a higher propensity for one or the other, to be blended into a diverse team solving a complex challenge that needs this dual thinking purpose are some suggested approaches.

Again it comes back to the challenges that need to be addressed, as the management of contradictions and conflicts needs different alternatives, in our creative thinking. The orientation between the short-term and longer-term need equally to be well thought through. We need to fit innovation into its appropriate context, contributions and characteristics of the people working on this.

Finally, here, it is the diversity in knowledge coupled with experiences. that give us richer linkages for innovation. It is the working consciously on the alignment and adaptability within the mix and at these different levels required. There is a fluid need to move between these levels of design and need.

3. Static versus dynamic perspectives. We do need to find a way to simultaneously pursue the two activities of exploring and exploiting. We need to reduce the static and emphasis the dynamic, by constantly adopting ‘certain’ configurations to meet the innovation needs we are working towards. Achieving a sequential state or pushing for a simultaneous pursuit of the two becomes the key consideration.

The key is to repeatedly and intentionally orchestrate the firm resources; it is striving to gain interactions not separating them. Hiving exploring off into a discrete unit creates problems in any down the line handing off back to the operating unit responsible for the execution of innovation. There is this real need to think through a more comprehensive innovation life cycle here, as innovation is certainly far more dynamic (or should be)

4. Internal versus External Acquisition and Interplay. The need is to gain and utilize the knowledge and this ideally comes from both internal and external resources. The stronger we have in place alliances, outsourcing arrangements and partnerships, we are building our ‘combinative capabilities’ and how we can consciously apply a more absorptive capacity approach to synthesize, apply, acquire and absorb knowledge.

This allows us to develop a higher degree of knowledge flexibility across organizational boundaries and find different ways to integrate this into our innovation thinking. We are always in need of novel, diverse alternatives to any innovative thinking.

Knowledge diffusion becomes vital to manage the exploit and explore and this needs to flow across the organization, not stay limited within one part, reducing the opportunities to leverage this acquired knowledge. Here lies the seeding of corporate renewal.

Each of these interrelated tensions needs a high level of resolution.

The level of insights into the strategies, structures and processes that allow them to be in this ‘dynamic tension’ for innovation to occur, is one we must constantly strive towards a balance and harmonization between the two activities of exploitation and exploration. These tensions will actually require a high level of constant and often contradictory levels of requirements. How can we design this into the fabric of the organization?

This set of challenges does require this deeper thinking about the development of a more ambidextrous approach to innovation. How can the organization be designed in adaptive ways around this constantly evolving innovation need.

The real hard questions to answer will eventually lie in asking “what are the similarities, differences and interactions between the individuals, a group’s and an organization’s creative capacity, diffusion capacity, absorptive capacity for knowledge and risk-taking capacity”.

Where are the balances needed to be achieved in organizational adaptation, innovation need and learning? How can we design the type of dynamic environment that I believe can evolve by an appropriate design unique to you, one that I regard as requiring the understanding of building our innovation fitness landscapes

Building these changing landscapes to meet opportunities and situations to respond to, at you need to adapt,  manage and operate within; then determining what you need to have available, knowing the how to go about bridging the gaps, to arrive at a state of being constantly adaptable as your goals adjust and change?

It is certainly complex and we all need to learn, adapt and work through this balance in our exploitation and exploration needs. It is one critical part of future organizational design. It does need individually working through to meet your own specific needs for growth and protection.

It does mean that the level of sensing, seizing and reconfiguring is critical to work upon and that means it has to be highly dynamic, in building the dynamic capabilities required for innovating because nothing can be static for very long in today’s world.

The key reference used is drawn from the paper “Organizational Ambidexterity: Balancing Exploitation and Exploration for Sustained Performance” written by Sebastian Rush, Julian Birkinshaw, Gilbert Probst and Michael Tushman. This paper has been at the core of the post.
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