Exploitation and Exploration – a Modern Spin on Hunters and Farmers
In their book Lead and Disrupt: How to Solve the Innovator’s Dilemma, Charles A. O’Reilly (Professor of Organizational Behavior at Stanford Graduate School of Business) and Michael Tushman present a number of case studies of “ambidextrous” managers running organizations built on “exploitation and exploration” silos. O’Reilly and Tushman argue the successful managers study, analyze and manage strategies and tactics for both silos simultaneously (hence they demonstrate an “ambidextrous” skill). In contrast, the history of the remaining managers, who are not successful, demonstrate an out-of-balance approach.
So what do the authors mean when they use the terminology “exploitation and exploration”?
Exploitation is simply a modern name for the “farming” metaphor often used in business writing. An example of the use of this metaphor is the notion of sales people as “Farmers”. Businesses “farming” customers for recurring revenue assign “farmers” (in the form of sales people who are designated territory managers) to focus on relationship-building, nurturing and cultivating repeat-buy purchasing over the long term. Because the impact on the bottom line from sales of existing, established products is usually mission-critical to the health of the business, “farmers” are not encouraged to stray off the property looking for new greener pastures. Even if they were to be given the latitude to scout around, “farmers” are rarely successful, since the more successful have already grown into their roles and are loathe to “take a hike off the property”.
Exploration, once again, is a modern name for “hunting”. In sales, “hunters” eschew relationship-building, etc, for cold-calling, and other tools required for opening new accounts and even markets. “Hunters” usually have no interest in becoming “farmers”, nor are they encouraged to make the switch, neither by their managers, nor by their compensation plans. “Hunters” make great “explorers”.
O’Reilly and Tushman do not present their ideas as anything new. Makes sense since back in the late 1990s, Dow Jones (with the print and then new online version of the Wall Street Journal), Time Warner (with Pathfinder), and Conde Nast (with print and its launch of online publications) each tried to follow the same model.
I identified, recruited and placed the webmaster for Pathfinder. I also fielded requirements for similar positions for Dow Jones and for Conde Nast.
None of these business demonstrated the “ambidexterity” O’Reilly and Tushman depict in their book. Since Dow Jones and Conde Nast were both in the print publishing business, the “farming” silos within each organization weren’t willing to agree to publishing, online, the precious print ads bringing in substantial revenue both for the farmers “raising the crop” and for the overall business. As to Time Warner, the hunters at Pathfinder found themselves butting up against the print publications for much the same reason. Senior management simply couldn’t see “the end coming” and failed to do with their right hand what they were very good at doing with their left. Needless to say growth of the online businesses each tried to launch was stunted.
The real disruption (which Scott Galloway depicts in his book “The Four“) for all three of these businesses came in the form of Google publishing the print content cranked out by each of these publishers online with no respect for boundaries. Of the three, the Wall Street Journal has done the best job of evolving to defend itself against this onslaught. Conde nast is still trying to find its path through the wreakage.