So, how can a company avoid those traps?
How can a large complex organization achieve strategic ambidexterity?
Let me walk you through
three very practical ways to balance exploration and exploitation.
The first intuitive answer is to encourage switching.
By that I mean to proactively take a team from exploitation stage to exploration stage.
Typically, a manager would do that at the end of a product adoption cycle,
and the early stages of a substitution technology.
Corning is a great example here.
Since 1960, they have been experimenting with chemically strengthened glass,
which was used for example,
in cars or in the aviation industry.
But the lack of demand led to a series of failures,
that in turn led to the company hitting their lowest share price in 2002.
They then revived experimentation to see if
their glass know-how could be leveraged in consumer electronics.
And once approached by Apple,
Corning rapidly focused on its so-called Gorilla Glass product,
now found in more than five billion mobile devices worldwide.
Switching is very hard in practice,
because it relies on getting the timing right in a very narrow window of opportunity.
A different way is to create separate units to serve separate objectives.
This usually leads to the formation of a small team of
explorers on the fringes of the organization with atypical profiles,
more digital natives, people whose background is different from the legacy business.
Their mandate is not to deliver immediate revenue target,
but to help think about alternative sources of growth in the long run.
In one of my clients,
we call them growth hackers.
Last but not least,
a company can rely on its ecosystem.
Sourcing ideas externally is a pragmatic approach for
businesses that are unable to manage ambidexterity with internal resources.
In practice, this can be executed in a variety of forms,
acquisitions, partnerships, incubation, or other more informal exchanges of ideas.
Google's acquisition of Deep Mind,
or BNP Paribas Open Innovation Fintech incubator are great examples of this approach.
In all those three variations,
orchestrations is what defines success from failure.
I will take an example to illustrate what I mean.
Let's go back to your $10 million company
that we have built in the beginning of this video.
You now know that you need to channel your resources in two different ways,
a portion will go to exploitation,
and another will go to exploration.
You can for example choose to do so through a model of separation.
Where the New Growth Hacking Team will get X percent of the budget,
and the rest is used to run the cash cow.
So, my question is this, what is X?
Defining X is a key strategic decision.
And as such, the way you should think about it will
depend on your business environment as we have described in the strategy approach video.
For example, although a classical stable environment allows you to set
your allocation for resources to let's say 10 percent for the medium long term.
In an adaptive uncertain environment,
which is most likely the case,
you need a lot more iteration.
What you will do in practice is build
a feedback loop that constantly monitors the outcomes of your allocation,
and calibrate it up or down depending on how the environment evolves.
If your growth hackers come up with a lot of disruption,
a lot of ideas,
great business potential, you might want to go from 10 percent to 12, or 15 percent.
So, that they can have bigger teams,
and develop prototypes faster.
If the prototypes fail in market testing,
then you might want to go back to 10 percent,
or even lower 8, 7 percent.
This is what I mean by orchestration,
the continuous adjustment of resource allocation to
guarantee the exploration-exploitation balance.
So, let me summarize what you should keep in mind when looking for new digital growth.
Disruption is a matter of when not if.
It will happen, and leading companies should
strive to disrupt themselves before others do.
The goal is to achieve ambidexterity,
the balance between exploitation and exploration,
avoiding both the success trap,
and the perpetual search trap.
Whether a company builds ambidexterity through the separation,
switching, or an ecosystem approach,
it needs to continuously adjust it,
allocating resources depending on the business environment, and its evolution.