4 min read

πŸ’£ The explore/exploit fallacy in innovation

πŸ’£ The explore/exploit fallacy in innovation
Photo by Jakob Owens / Unsplash

I'm encountering more and more this explore/exploit framework with the innovation departments of large corps. Explore/exploit means that they are two modes in the organization. Some teams will be in the first one, while the rest of the organization will be in the other:

Thank you, Osterwalder, for this new over-simplification, I guess? πŸ™ƒ

Exploit teams are from Mars?

In this narrative, the explore teams are the scouts working in the dangerous fringes and taking risks, sifting through weak signals to bring home high potential ideas to be implemented more linearly by the exploit teams concerned with processes and return on investment. Superb storytelling and yet weak implementability.

To quote Strategyzer on this: "Explorers excel in uncertainty, are strong at pattern recognition, and can navigate between big picture and details," while "Managers Β are strong at organizing and planning and can design efficient processes to deliver on time and budget." And you thought that the 16 Myers-Briggs profiles were reductive?

In real life, the job of the regular Joes in your company is also primarily to explore the market you're in. If not, what are your salespeople doing? They are the ones really on the frontline, as much sometimes as your maintenance and engineering team or your supply chain. Now that becomes tough because there is no blue and red team anymore.

Not to mention that explorers are not just doing cocaine in fancy offices with table tennis and free sushi bars. The ones I've been working with for about fifteen tears are usually understaffed and under a lot of financial reporting and challenging processes to manage.

Where's the comfort zone again? Β 

What Strategyzer gets right is that it's all about the level of uncertainty we're dealing with. Then again, it's no brain surgery to understand that. What is tricky is where you draw the line between high and low uncertainty.

If only because it's a moving line. How much certainty is left in your current business after Trump single-handedly blew up the multilateral economy of the world, two years of a global pandemic where a significant part of the wealthy population of the world chose not to be vaccinated, and now Russia started a war in Europe background? The Just-in-time supply chain is nowhere to be seen anymore, and hedging risks on raw material or energy costs is like playing drunk at Las Vegas with mob's money. Not to mention that some industries are discovering that paying employees below a decent wage doesn't cut it anymore.

I'd say that high uncertainty is the new normal.

Tough cut-off

Finally, I'd be remiss not to point out that in this oversimplistic framework transitioning from explore to exploit is quite the cut-off:

Entertaining the illusion that you can focus your company around two different mindsets is one thing, but how do you eventually bridge the gap?

Going through a go-no-go decision bottleneck is then mandatory. This is a process proven inefficiently in the context of high-risk exploration because by the time you can give a rational "go" to a derisked project, it has become exactly what all of your competitors are also okaying at the very same time.

Again, the process is reassuring and makes sense on paper; it doesn't work at delivering innovation, only the next consensual vanilla innovation. In that context, you'd be better scrapping exploration altogether and building hyper-agile capabilities to copy and improve upon what your competitors are doing:

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Sometimes there's no simple solution

I'm afraid that whereas the notion of building an exploration portfolio is indeed key, the explore/exploit framework ends up just being a pipeline logic in disguise.

And admittedly, there's a reason: thinking in terms of portfolio is hard. A few years ago, I was already trying to summarize a few rules about it. But however you want to slice it, a realistic and efficient innovation portfolio framework is not something you can read about and wrap your head around in 10 min. Β 

The reverse-pipeline portfolio framework works for corporations in short to medium market cycles that are essentially customer-driven.

I know this is not the information you want about innovation. But sometimes, you need a screwdriver over a hammer, and sometimes you need a programmable 3D laser-cutter to do the job.