Contrary to popular belief, an innovative company is not just a business capable of putting out new and original products and services. A truly innovative company also needs to be capable of deploying its innovations, i.e. bringing them to market in a profitable manner. To be genuinely innovative, businesses must be able both to explore ideas and to exploit them.
This essential complementarity between exploration and exploitation was highlighted by James March, a professor at Stanford. However, March warns, there is a paradox at work here: the qualities which make businesses capable of exploration are, by and large, very different from the qualities required for effective exploitation:
– Exploiting new ideas is all about efficacy, using mechanical analogies, resolving complicated problems and making progress via a process of evolution. In order to exploit an idea you need to recruit precise, meticulous, ordered individuals capable of continuously improving procedures and systems, thus guaranteeing their efficiency.
– Exploration, on the other hand, is about creativity, biological analogies, resolving complex problems and achieving progress through revolutions. To explore ideas you need individuals who are creative, imaginative, rebellious and capable of ignoring old procedures and systems, and replacing them with new and original approaches.
Uniting these two tribes within a single organization is often very difficult: Ultimately, the goal of the explorers is to make the work of the exploiters obsolete.
The aim is to simultaneously nurture your capacity for exploration and exploitation
So how can we reconcile the two dimensions? How can we make our organizations ambidextrous, capable of both exploration and exploitation?
Within a company primarily focused on exploitation, one solution is to establish pockets of freedom and ambiguity, zones devoted to exploration. Within these zones of exploration, the usual hierarchies, budgets, norms and procedures – which are indispensable to exploitation but inhibit exploration – need not apply.
In practice, this method may take one of several forms. You may decide to set up more-or-less temporary project teams, to create dedicated entities for specific innovations, or else collaborate with external partners in open innovation mode.
In all of these scenarios, the aim is to simultaneously nurture your capacity for exploration and exploitation. Only then can a business be considered truly innovative.
This was previously published in French by Xerfi Canal.
This post gives the views of its author, not the position of ESCP Business School.
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