Exploration vs. Exploitation- the ship analogy

This CIO article adresses an age-old problem: does an excessive focus on processes have an adverse impact on the innovation ability of a firm?

The article touches upon a 20-year study of the paints and photography industry, where leading firms missed out on disruptive innovations such as digital photography. The conclusion is that this was partly because the firms were so busy exploiting their current capabilities that they did not have the peripheral vision to explore new avenues.

This is always a confounding dilemma for companies. They can not let go of their current processes, and in fact have to get continually better at them. This gives them small sustaining innovations. The cost is that department heads and mid-level managers who hold budgets are wary of sacrificing their short term results for the sake of a risky and uncertain future.

What is the solution? Imagine your company to be a ship. You are racing against a fleet of other competitor ships, and so have to get the most of out of your engine. The engine is your current capability. While you figure out ways to push the limits of your engine harder and harder, you also have to think about new routes- new strategic directions which can put you nautical miles ahead of the competition. These strategic routes are the disruptive innovations. To change direction, sometimes you have to slow down, perhaps even turn the knob off your engine. You can't change direction unless you do that- the ship will overturn.

The job of the senior management is to decide when to turn, in which direction, to what extent, and what is the best possible way to maneuver when the time comes. In corporate-speak, this translates to:

- timing of disruptive change
- nature of disruptive change
- extent of change
- implementating the change effectively

Are you at the helm yet?