Exploration vs. Exploitation Mindset in Breakthrough Innovation

estelThe following is a guest post by Estel Maskagna. Estel is a freelance and creative writer whose work has been featured on PreScouter. She writes on subjects covering innovation, green tech, and environmental topics. She is passionate about self-learning and intellectual exploration.

When a company stumbles upon a breakthrough innovation with great potential, should it explore the possibilities or exploit it for maximum profit?

This article aims to elaborate the explorative vs. exploitative mindset explored in Matte’s article “What Makes Breakthrough Ideas Successful?”

Challenges of Breakthrough Innovations
Breakthrough innovations will not progress beyond initial stages in an exploitative development process because of its characteristics.

Some of the challenges outlined by Mattes regarding breakthrough innovations are:

-Need for recognition of new opportunities
-High uncertainty
-Development of new business models
-Acquiring new resources

An exploitative mindset will have difficulty getting around a breakthrough innovation because it challenges established traditions and expectations. On the contrary, an exploration mindset does not rely on typical KPIs (Key Performance Indicators) and is therefore more open to possibilities that a breakthrough innovation presents.

Aspects Exploration Mindset Exploitation Mindset
Uncertainty/Risk Profile High Low  to Moderate
Target Markets New markets Existing markets
Marketing Goals Transform current industries or discover new ones Refine and improve competitiveness within current markets
Innovation Goals Introduce new technologies, products, or services Optimize existing products, services, or business models 

Uncertainty vs. Reliability
Because breakthrough innovations are characterized by high uncertainty, management needs to be open and flexible rather than dictated by rigid rules. Tasks should be broadly defined and should not require highly specialized skills. Remember, the goal is to come up with something new – even something that will require a new set of specialization skills. The telephone created a new industry and necessitated the training of a whole new workforce with it. So did airplanes and the invention of the original iPhone. A management style bent on reaching certain goals through time-proven processes will be bewildered with breakthrough innovations and its challenges.

High Risk vs. Safe Bets
Breakthrough innovations are high risk ventures because it necessitates the recognition of new windows of opportunities. It challenges time-tested, traditional product bases with no past performances to rely on. The exploration mindset makes room for new business models. Breakthrough innovations should be nurtured in a management style that is open to risk-taking and experimentation.

Teamwork vs. Individual Effort
In contrast to a highly controlled environment, an exploration management style relies on intensive collaboration in order to come up with the best possible innovation.

Moreover, an explorative mindset ensures rewards and recognitions go to teams, not individuals. Whereas an exploitative mindset elevates the person with the yellow jersey, the exploration mindset gives the medal to the whole team. This is in line with the explorative management style’s dependence on collaboration and teamwork.

Hierarchical vs. Decentralized Management
Input and rigid instructions from superiors therefore are not what drive the development of a breakthrough innovation. The highly hierarchical chain of command is replaced by a decentralized management in an explorative mindset.Communication among the individuals and groups involved shifts from vertical to horizontal.

More Efficiency Does Not Exist
In a nutshell, an exploitation mindset relies on efficiency to meet its goal – to make as much profit from existing technologies and markets. However, efficiency is not the key to innovative progress. As Jorge Barba puts it, more efficiency doesn’t exist. New markets and industries are not discovered because a product or service was perfected in efficiency in doing what it does. On the other hand, new markets are discovered by breaking out of the ordinary and traditional. A breakthrough innovation is valuable precisely because it is unprecedented, and it will take an explorative mindset instead of an exploitative one to help it reach success.

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