Designing Organizations for Exploration and Exploitation

All organizations face the core challenge of deciding on investments in two very different types of activities: exploration and exploitation. Exploration activities are future-oriented, such as developing new capabilities, experimenting with new technologies, and pursuing new customers and markets. Exploitation activities, in contrast, focus on the refinement of existing competencies, processes, and products. Because an organization’s design should reflect its goals, it is difficult to accommodate exploration and exploitation activities within a single organization. This article discusses four major approaches used to tackle this problem, and notes the strengths and limitations of each approach.