Wednesday, April 11, 2018

Exploring and Exploiting for Innovation (part 1)

In so many ways it often feels like innovation is both wholly new, and ancient at the same time.  Tools that we use to innovate aren't new, in fact many are very old, but put to appropriate use they help us create miraculous new things.  Too often we distrust old tools or methods, thinking that newer tools or methods are more current, more viable, but fail to realize that some things are simply grounded in truth, no matter hold old they are.

Take, for example, the idea of exploring and exploiting.  These are the "yin and yang" of corporate America today.  But they aren't new.  Companies and even countries have been exploring and exploiting for centuries.  We extol the idea of the ambidextrous corporation as if this is new insight, when in reality being able to do both exploration and exploitation well has been a key success factor for decades if not centuries.  I think increasingly we are going to hear more and more about exploring and exploiting as a corporate philosophy.  This renewed focus at a strategic level is very valuable, but I'm concerned we're going to get it wrong.  There is a shift underway that will require corporations to rethink their explore/exploit intention and balance.  Over the next few blog posts I'll be describing why I think this is so.

But first a history lesson

As the guys in Monty Python would say, now for something completely different.  Let's look at the history of exploring and exploiting before we describe why it might change.  Human kind has understood the dichotomy of exploring and exploiting for centuries.  Let's take, for example, the exploration of the New World.  Major European powers were determined to find first new trade routes and then make claims on newly discovered territory in the western oceans.  These kings and queens weren't doing exploration for the public good, they hoped to find and conquer new lands to extend their holdings.  In other words, exploring led to the direct consequence of exploitation.

We can pause for a second to consider the aftermath and consequences of colonization and European exploitation of both Africa and South America, but that's for another post.  Many European countries saw opportunities to exploit the people, the minerals, the wealth of the lands they "discovered" and eventually conquered.

Perhaps none better than Spain, which propped up a relatively secondary power in Europe with lots of gold, silver, minerals and other valuables from Mexico and South America.  The cost of exploration was very low - a few ships, manned by explorers who often weren't even Spanish, a Papal Edict, a brief skirmish to defeat the locals and then 300 years of exploitation.

What lessons did we learn then?

Based on many of these early explore and exploit events in the past, we learned that exploration was something we could outsource - something that mercenaries or outsiders could do to push off the risk.  We learned that with a tiny investment in exploration we might hit the mother lode of wealth to exploit.  We learned that exploitation, when combined with national agreements, major edicts, some military power and a globe of unexplored lands would allow exploitation to go on uninterrupted for centuries.  We've learned these lessons about exploration and exploitation, and taken them to heart.  In many cases we've built operating models and business plans that incorporate much of this thinking.

Fast forward to today.  When companies talk about explore and exploit, they have some of these same characteristics in mind.  A short, low cost, low risk exploration phase that can probably be outsourced that may discover outsized opportunities that the company can exploit uninterrupted for years.  This thinking is rife with misunderstandings about the nature of both current exploration and exploitation.  It is based on old thinking and old competitive models  While it is absolutely correct to suggest that companies need to be good at both exploration and exploitation, the old models or philosophies don't reflect new competitive realities.

What are the new competitive realities and how should we rethink innovation strategies to align more closely to the new way of working?  That will be the subject of my next post, and an eventual white paper on this subject.  More to come shortly....
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posted by Jeffrey Phillips at 6:15 AM


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