Explore vs. Exploit

Alison Gopnik, a Berkeley psychology professor, described how babies learn in a recent NYT op-ed she provocatively titled, “Your Baby is Smarter Than You Think.”  The article shot to the top of the paper’s “most popular” list, partly for its challenge to the widespread investment in trying to get babies to behave like Type A adults — goal-oriented, focused, socially motivated to achieve.

I was struck by her observation that babies are most engaged when they’re exploring new things, while adults prefer exploiting known skill sets:

Very young children imagine and explore a vast array of possibilities. As they grow older and absorb more evidence, certain possibilities become much more likely and more useful. They then make decisions based on this selective information and become increasingly reluctant to give those ideas up and try something new. Computer scientists talk about the difference between exploring and exploiting — a system will learn more if it explores many possibilities, but it will be more effective if it simply acts on the most likely one. Babies explore; adults exploit.

This distinction matters in organizations, too.  Despite our best managerial intentions, most organizations are primarily designed to do one or the other well.  In our business, we call it “organized to execute” or “organized to learn.”  The concept is the brain child of Frances’s HBS colleague, Amy Edmondson.  A firm’s strategy, operations and culture generally line up to either explore or exploit opportunities, rarely both.

But success often requires pivoting from one to the other (and sometimes back again) over the life span of a company.  This is a clear pattern in start-ups, which usually require a high experimental capacity in the beginning, but then have to shift to head-down execution once the business model falls into place.  The transition can be painful, as explorers often have to cede control to exploiters before they’re emotionally ready. And the young firm’s culture, built to dwell in possibility and manage significant risk, can often be one step behind. Similarly, market leaders faced with a disruptive competitor often have to learn how to learn again.  This pivot can be even more wrenching.

Great organizations learn to do both before their survival is on the line, but it often means separating the explorers from the exploiters.  Just as babies and adults rarely play well together, world-class exploiters and outstanding explorers are different animals that need different environments to thrive.  Practically, this often means walling them off from each other, as many firms do with separate R&D shops.

The biggest risk here is that these departments are not separate enough.  Each function needs its own rules and inputs to perform well — think of it as the kids’ table at Thanksgiving dinner — and companies often resist these separations. The exploiters at the top don’t like the messiness of multiple systems, and the idea feels vaguely unfair to someone.  If staying power is your goal, however, the lessons are clear.  A few ruffled feathers and some added complexity are worth it.

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