Innovation dilemmas: Exploring versus exploiting

As an innovative company, you often find yourself facing choices about how to structure innovation for your business. There is simply no one right path to successful new products or services. A robust innovation strategy can assist in this, but it can be quite challenging to formulate or identify strong driving factors within your company.

In this series of blogs, Evelien Veldhuizen and I address the innovation dilemmas you may encounter when developing your innovation strategy, so that you can make an informed choice..

Today: explore versus exploit.

An enthusiastic innovation manager naturally wants to do everything at once: extract as much as possible from the existing business while constantly generating and validating new ideas. However, we also know that resources, people, or time can be scarce. If you have to focus, which one do you choose?

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Exploring versus exploiting

First of all, many companies tend to exploit: they manage the growth of their current business models and propositions through innovation. This is like playing in your own backyard: you know the market, you know the products or services, and you want to do as well as you can there.

 Exploringcan be challenging: searching, stepping outside your comfort zone, in pursuit of new propositions, target audiences, issues, opportunities, or business models.

Both require specific knowledge and skills, and compete for the same resources in the company.

Examples

Let's look at some good examples. The supermarket chain Albert Heijn is strong in operations. Since their founding in 1887, they have been doing one thing: selling groceries to people.

Certainly, much has changed in those years. Think of more and better shops, an extensive range, delivery services, self-scan checkouts, and digital price tags. However, all of these innovations are still in line with the sale of groceries. In all those years, that hasn't changed at all.

On the other side of the spectrum, there is Philips. They started with the light bulb but changed course every decade in an exploratory manner. Suddenly, there were electric shavers, televisions, audio devices, and washing machines. Even their primary target audience shifted: now, Philips is a major player in the medical equipment market. All of these are outcomes of their exploratory innovation, always aimed at a new market or a new product category.

Impact and applicability of your innovation choice

You need different resources for different innovation strategies. Exploration requires strong researchers, a high degree of curiosity, a little distance from your current business and most importantly: a long breath. Exploitation, on the other hand, can be more incremental, leans very close to your current business and can be done in short stints.

If a company hopes to achieve higher revenue in the short term, exploration alone won't yield immediate results. However, without exploration, you won't tap into new markets and products. Shifting from exploitation to exploration requires different individuals and a different way of measuring: prioritizing learning speed over revenue.

Those who can do both very well are called ambidextrous: two-handed. First, aim to execute one strategy that suits your business well.

What can you do first now? Initially, ensure that you can bring focus to your own innovation strategy. Do you want to improve in what you already do? Aim for strong exploitation through innovation. Is your market disappearing or do you want to truly switch gears? Start with exploration. But be aware of what resources and people you need to truly execute a tactic well.

This blog is part of a series on innovation dilemmas. Check our other blogs on the dilemmas internal vs external innovation focus and small budgets vs big budgets.

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