Skip to content

Exploiting the Present to Explore Tomorrow’s Innovations

Searching for Both Solutions

As i8 Ventures points out in its blog, “Exploitation versus Exploration,” in Charles O’Reilly and Michael Tushman’s Lead and Disrupt: How to Solve the Innovator’s Dilemma, published in 2016, the book maps two types of innovation.

Exploitation innovation emerges from existing assets of the organization and improves them through innovation. This kind of innovation is relatively moderate, focused mainly on enhancement and efficiency — most managers of organizations feel comfortable with it. It deals with questions familiar to them, such as improving existing products. They know the customers and their expectations and thus find it relatively easy to address the challenge of exploiting.

Meanwhile, exploration is the type of innovation that requires the organization to leave its comfort zone and examine new markets, products, and business models unfamiliar to them. From the managers’ perspective, this type of innovation obliges them to venture into unfamiliar territory.

Despite the challenges and opportunities for both perspectives, certainly in an ideal environment, the management, innovation leadership and team could be focused on both. The authors suggest that the team first needs to exploit existing assets and capabilities, and develop incremental improvements, by getting more efficient. This pipeline would then provide for sufficient exploration programs and more radical developments so that the company is still moving forward, and not rendered irrelevant by changes in markets and technologies.

Staying Ambidextrous

All Things Innovation recently looked at the ambidextrous organization, in “Balancing Innovation with Ambidexterity.” Innovators have long been tasked with being a flexible part of an ambidextrous team, as part of an organizational cog that can easily pivot and manage tasks on several levels—both exploitative and explorative. This approach entails focusing on the big picture for the company when needed, yet at the same time being focused on the small, incremental steps that often define and are necessary for entrepreneurship and innovation. Yet, this is a complex and challenging task for both managers and teams in the innovation field. It is a balancing act that looks to require executives to explore new opportunities while exploiting existing capabilities. It is this balance between exploratory (radical) and exploitative (incremental) that is key to the manager’s ability to multitask.

TMRE will be held this year from October 23-25, at the Gaylord Rockies Event & Convention Center, Denver, CO. In the moderated panel, “Examining The Evolution Of Insights Spend & Trends,” All Things Insights’ Seth Adler will explore how dynamic shifts in consumer behaviors have met a flood of new solutions to create a completely unique industry inflection point. Client-side and solution-side industry leaders discuss and debate how organizations have been grappling with change and are now harnessing new tools for transformational outcomes. The panel includes Keith Phillips, Director, Dynata, and Kathryn Topp, CEO and co-founder, Yabble.

Exploiting the Present

Exploitative innovation refers to the development and improvement of existing products, processes, or technologies within an organization. While it might seem that macroeconomic factors primarily influence explorative innovation (creation of entirely new products or services), they can indeed play a significant role in exploitative innovation as well. Here’s how macroeconomic factors can impact exploitative innovation:

  1. Market Demand and Consumer Behavior: Macroeconomic factors such as economic growth, consumer confidence, and income levels influence market demand and consumer behavior. In times of economic expansion, consumers may have more disposable income, leading to increased demand for improved or upgraded versions of existing products. Exploitative innovation can help businesses capitalize on this demand by delivering enhanced offerings.
  2. Competitive Landscape: Macroeconomic conditions can affect the competitive landscape. In a competitive market, businesses need to continually innovate to maintain their market share. Exploitative innovation can involve adding new features, improving efficiency, or enhancing customer experience to stay competitive.
  3. Cost Efficiency and Resource Management: Macroeconomic factors such as inflation, changes in input costs, and supply chain disruptions impact a business’s cost structure. Exploitative innovation that focuses on cost reduction, process optimization, and resource efficiency becomes more relevant during economic downturns when cost pressures are high.
  4. Regulatory Changes and Compliance: Macroeconomic factors, including changes in regulations and compliance requirements, can necessitate improvements in existing products or processes. Exploitative innovation might involve making adjustments to ensure compliance while maintaining product performance and quality.
  5. Technological Advances: Macroeconomic trends can drive technological advancements. Businesses often engage in exploitative innovation to adopt emerging technologies and incorporate them into their existing offerings. These advancements can enhance efficiency, reduce costs, or improve product quality.
  6. Customer Retention and Loyalty: During economic downturns, customers might be more cautious about their spending. Exploitative innovation can focus on retaining customers by enhancing the value proposition of existing products or services, thereby promoting customer loyalty.
  7. Consumer Preferences and Trends: Macroeconomic factors can influence shifts in consumer preferences and trends. Exploitative innovation allows businesses to adapt to these changes by modifying existing products to align with evolving customer needs and preferences.
  8. Globalization and Market Expansion: Macroeconomic factors such as international trade agreements and global economic shifts can impact market expansion strategies. Exploitative innovation can involve tailoring existing products for new markets or modifying them to meet local preferences.
  9. Risk Mitigation and Business Continuity: Macroeconomic uncertainties, such as economic downturns or geopolitical events, can create risks for businesses. Exploitative innovation can focus on diversification, risk mitigation, and building resilience to navigate challenging conditions.

The Explore/Exploit Continuum

In essence, macroeconomic factors influence the overall business environment, which in turn affects the motivations and opportunities for exploitative innovation. Organizations must carefully consider these factors and their implications when planning and executing their innovation strategies, even when the primary focus is on improving existing products or processes.

The explore and exploit continuum rests on different levels of uncertainty, points out Strategyzer in its blog, “Juggling between the future and the present.” For existing exploit business models, you operate with relatively high certainty, and it is possible to make accurate forecasts about sales, and predictions about growth. These business models can be managed and improved through detailed planning and proper execution.

Exploration, meanwhile, is about searching for new value propositions and business models in an environment with high uncertainty. And the further an innovation is from your core business, the higher the uncertainty. A different financial approach, skillset and culture are required to cultivate creation, discovery, validation and acceleration of new ideas. As Strategyzer notes, “However successful today, they don’t rest on their laurels—they are already working on tomorrow.”

Video courtesy of University of Oxford Saïd Business School

Contributor

  • Matt Kramer

    Matthew Kramer is the Digital Editor for All Things Insights & All Things Innovation. He has over 20 years of experience working in publishing and media companies, on a variety of business-to-business publications, websites and trade shows.

 
 

Related Content

Bulletin board with post it notes. One in center says Make Things Happen.
innovation team

Managing Productive Innovation

Conservatively, I estimate that I’ve attended 20,000-plus meetings throughout my career. I’ll admit, many of them should have been replaced with email…

A blueprint with a pencil and ruler.
innovation culture

Innovation Principles, 7/7

Once adequate competency, support, and size of a new team are secured, clear direction based on a purposeful vision, alignment with a winning game pla…

coin operated binoculars and open blue sky
analytics for innovation

The Road to FEI24: Analytics for Innovation

Anu Sundaram, Vice President, Business Analytics, Rue Gilt Groupe, is planning an interactive analytics session for FEI 2024, taking place this June….

A smiling little robot
robotics

The Road to FEI24: Brunch with the Bots

Samantha Johnson, Founder & CEO at Tatum Robotics, will take part in FEI 2024 in several ways, including participating in the keynote sessions, “Bru…

mountain climbers trekking
artificial intelligence

Discovering the Innovation-Led Growth Journey

Advances in artificial intelligence are powering AI-driven innovation. As machines become smarter and tech developments are rapidly progressing, there…

explorer in a cave
anthropology

Applying AI to Anthropological Research

Agile research and methodologies are of primary importance to the innovation discipline, as they promote a more versatile, rapid, adaptive approach to…

entrepeneurship

Innovation Principles, 5/7

Gross Profit Margin and Net Present Value are two primary profitability indicators for evaluating an intended entrepreneurial offering. Even if suffic…

innovation culture

Gaining an Innovation Edge with Automation

With the focus on how artificial intelligence, as well as digital transformation efforts, can help streamline operations, it’s worth another look at…

innovation culture

Creating the Right Innovation Partnership

Corporations often face many challenges when it comes to developing innovation in a fast, evolving market. They can face barriers such as inertia, the…

innovation and sales

Bringing Sales and Innovation Together

Just how can innovation and sales work together to find success? Too often, companies find themselves stuck in their respective departments and the si…

opportunity incubation

Innovation Principles, 4/7

The front end of innovation is a distinctly iterative endeavor based on human-centered, design-thinking principles. It could be represented by a spira…

innovation team

Winning the Innovation Strategy Game

We know that having a creative mindset can fuel innovation, and that fostering a culture of innovation is also important to get the job done. Yet ther…

innovation culture

Taking Next Steps with Innovation Talent

As we head into the new year, taking the next steps with innovation talent remains an important question to explore. With the competitive landscape in…

innovation team

PIE: Get Your Slice of Success

How can someone really stand out and succeed as a corporate innovator, get the most exciting projects, or secure a promotion? This is a question I enc…

digital transformation

Shaping the Future with Disruptive Technology

As we head into 2024, innovation of all types, most especially in technology, will continue to disrupt, transform and impact our lives, from the workp…

future of work

Keeping Your Innovation Career Resilient

With the rise of technology, such as AI, impacting workers and workplaces, it’s safe to say the future of work is evolving—in innovation and in ma…

innovation principles

Innovation Principles, 3/7

The main premise behind an integrated end-to-end continuum of innovation and new product development is that a holistic understanding of sequential de…

open innovation

Embracing Open Innovation

Open innovation is a growing tactic for today’s globalized enterprises. Rather than focusing just on closed loop systems and internal sources, such…

marketing innovation

Shaping the Next Generation of Innovation

Generation Z is in a unique position as they are often viewed as one of the first to be shaped and influenced by technology such as the Internet, soci…

innovation principles

Innovation Principles, 2/7

Successful innovation endeavors are built on creative tension between key enabling entrepreneurial trade-offs associated with four must-have constitue…

innovation culture

Unlocking Business Growth Through Innovation

The business world is changing quickly for innovators and there is a growing and ever-present imperative to keep up. Business model transformations an…

technology

Living in A Digital Transformation World

Digital transformation (DX) has been a hot topic in the innovation space for some time, but the term can be easily misunderstood as well. As we accele…

innovation principles

Innovation Principles, 1/7

Imagine a case where a company’s growth depends on an innovation involving complex cross-disciplinary technologies such as electro-mechanical hardwa…

disruptive innovation

Sustaining the Self-Disruption Journey

The adage “disrupt or be disrupted” may not necessarily always mean the same thing to the same companies. Even the original architects of disrupti…

disruptive innovation

Playing the Game of Disruption

At FEI, Angelina Carvajal, Strategy & Innovation Partner, Sr. Dir. (Optum Advisory), UnitedHealth Group, had a chance to share her thoughts on disrupt…

innovation mindset

Creating the Happiness Mindset for Innovation

With 2023 often being labeled the year of uncertainty, it comes as no surprise that consumers, and the innovation community, has had its fair share of…

breakthrough innovation

Breaking Through Challenges to Problem Solve

While it’s important to learn from best practices from large and innovative enterprises, it’s also valuable to hear from the startup community. At…

long-term innovation

Powering Innovation’s Long-Term Play

Ishan Jaithwa, Manager, New Growth Areas, Cummins Inc., sat down with All Things Innovation’s Seth Adler at our studio at the FEI conference. Jaithw…

desirability

Design Thinking Faces the Pace of Change

Seth Adler of All Things Innovation recently caught up with Prapti Jha, T.H. Chan School of Public Health, Harvard University, at this year’s FEI co…

ideation

Opening the Doors of Innovation Perception

Seth Adler of All Things Innovation caught up with Cory Sorice, SVP and Chief Innovation Officer, Masonite International, during this year’s FEI con…

disruption

Beyond Innovation Theater

At FEI, All Things Innovation conducted a special roundtable, bringing cross industry, cross disciplinarians together to talk about transformation and…

innovation talent

Supporting Data with Design Thinking

At FEI, All Things Innovation conducted a special roundtable, bringing cross industry, cross disciplinarians together to talk about transformation and…

innovation talent

Achieving Transformational Innovation

At FEI, All Things Innovation conducted a special roundtable, bringing cross industry, cross disciplinarians together to talk about transformation and…

innovation team

The Finance Factor in Innovation

The finance function in an organization often gets tabbed as a bottom line-oriented, conservative department that more often than not stifles innovati…

innovation team

Setting the Strategic Direction

A chief strategy officer (CSO) is increasingly becoming a more relevant element to a research and development team in an organization. An innovation t…

business innovation

Managing the Marketing of Innovation

Even some of the best new innovations might fail if there’s no effective marketing behind the product or service. With an emphasis on cross-collabor…

innovation leadership

Playing Moneyball for the Win

In the popular baseball movie “Moneyball,” the character Peter Brand (played by Jonah Hill) highlights the “epic failure” of MLB leadership in managin…

innovation mindset

Putting Together Your Innovation Team

As the community’s recent Innovation Spend & Trends Report indicated, innovation teams are not working in a bubble, or at least not as much as they…

innovation strategy

Generating Innovation Through Ideation

Ideation is often confused with innovation, along with other related terms regarding the creative process, such as brainstorming or design thinking. W…

talent

Managing Talent to Drive Innovation

With the economy producing mixed signals, and companies often in a state of flux, managing innovation talent has never been a more challenging and imp…

ambidexterity

Balancing Innovation with Ambidexterity

Innovators have long been tasked with being a flexible part of an ambidextrous team, as part of an organizational cog that can easily pivot and manage…

disruptive innovation

Defining Disruptive Innovation

Disruptive innovation is often a phrase used to make a splash in the business world. Some may debate that the label has been applied carelessly at tim…

business innovation

Growing a Culture for Business Innovation

Whether it entails a large jump or a small step, the innovation pipeline for a business keeps it moving forward through a competitive landscape. Busin…

innovation strategy

Gaining True Value While Moving Forward

The All Things Innovation community came together in this Gathering on Innovation Strategy to drive immediate lessons learned through the first half o…

humanize data

Diving Into Humanity-Centric Innovation

With the continued emergence and evolving development of artificial intelligence, there rises a question of how humans and AI can work together more e…

human resources

Tapping Into the Innovation Talent Pipeline

In the last few years, the pandemic and a range of other economic factors have influenced the talent recruitment, development and retention practices…

human resources

Ignite a Culture of Innovation

From the successes to the failures, from the breakthroughs to the breaking points, the innovation community knows all too well that fostering a cultur…

innovation culture

Innovation During A Downturn

Whether you believe the USA is headed toward or already in a recession, there are signs of a slowing or reversal of economic activity. Of the 15 metri…

successful innovation

Striving for Successful Innovation

In the quest for innovation, there is often a fine line between success and failure. The road to success is not always clear, easy or convenient. Howe…

inclusion

Innovation Diversity

Black, Indigenous and People of Color have always been leaders in innovation and it’s time for us to put that at the forefront. DEI, or Diversity Eq…

innovation culture

Fostering Innovation

When you start to talk that way and lead that way, people do feel more psychologically safe to support change and support innovation that’s happenin…

disruptive innovation

Breakthrough Innovation

While the rest of the industry relies on iterative change, Alex Moyes explains the breakthrough innovation happening at Dominion Energy. “So Dominio…

virtual reality

Innovation Reality

When working remotely, the main challenge is bringing people into an office when they live across the country or around the world. The AES Corporation…

innovation culture

Control The Sails

Although the world was affected heavily with change in the last few years, not much in the business world has changed as far as topics and issues go….

innovation leadership

Innovation Culture

Innovation starts with the employees of an organization. As we know, the people that work for a business are some of its greatest assets. In today’s…

corporate innovation

Interaction Innovation

We are at a time in history of incredible change and technological innovations, such as the rise of machine intelligence, and companies who keep doing…

humanity-centric innovation

Humanity-Centric Innovation

Humanity-centric innovation is the idea of solving the biggest problems facing humanity in an economically viable way. Pete Dulcamara, Chief Scientist…

innovation culture

Measurable Innovation

Each company has their own KPIs that are important to their specific business in place to progress and be successful. Are people at the forefront of i…

innovation leadership

Certain Uncertainty

Life is uncertain in every way. It’s always interesting to meet new people and try new things. On the other hand, attackers may sometimes appear out o…

rolling innovation

Rolling Innovation

If you’ve done it once, you can do it again. Make sure to keep doing it, it’s rolling innovation. Amber Case sits down with us to discuss how impo…

transformation

Strategic Innovation

Any new concept or technological advancement will continue to change and advance. Landlines were commonplace before smartphones. Remember those? What…

transformation

Innovation Intelligence

It seems that innovation is one of the biggest buzzwords in business now. To sustain growth and be competitive in the marketplace, companies in every…

innovation culture

Innovation As Constant Change

The key strategy to a successful business is to know when they are being innovative or are just transforming their status quo according to market tren…