To be the CEO of an emerging business—a company that our firm helps get past No Man’s Land so it can grow to scale and create wealth for you—is to grapple every day with many issues that clamor for your attention. Finding and selling to new customers; keeping existing customers in the fold; dealing with investors and vendors; overseeing finances.
To cope with responsibilities that may seem endless, CEOs are often told to strike a balance in the time and attention they give to:
- Internal operations--versus outward-facing issues like changing customer needs and new competitors.
- “Hard” technical issues related to your products, processes and technology--versus “soft” people and culture issues that are critical to building a successful organization.
- Short term priorities that impact this month’s revenue and profit--versus what will drive next month’s or next year’s results.
Here’s another way for CEOs to map their priorities: balance activities that go to exploit the existing business—versus those that explore the company’s next frontier.
Exploiting refers to activities that rationalize and improve the existing business model--by streamlining operations, focusing resources on what differentiates you and makes you competitive, producing more value with fewer, less costly inputs. Exploring has to do with finding better ways to do business, maybe even ripping up and replacing parts of your current model.
Mindset
When a CEO seeks to exploit, the goal is to make production more efficient, improving on what has made the company successful in the past, doing “more better.” On the other hand, to explore requires thinking about “creative destruction” of the norms of your business and its industry—even if this means dismantling some of what has made you successful. Exploiting seeks predictability and stability; exploring requires a tolerance for ambiguity, pursuing a hunch without hard data to back it up.
Thinking about customers
Exploiting calls for considering how to enhance the satisfaction and loyalty of your current customers. Exploring requires thinking about how to create an entire new value proposition for current customers—and for new classes of customers.
Organizational slack
Exploiting looks to exert tighter control over your organization and eliminate slack capacity, especially employee time that is available in excess of the demands and deadlines of current work. Exploring means tolerating or even increasing slack, to free up resources to invent and experiment with new ways of creating value.
While the above highlights their differences, both kinds of activities involve innovation. When you exploit you are looking for ways to innovate by solving problems that you know you have. When you explore, you are looking to innovate around untapped opportunities. Exploiting involves feedback, using data from your past experience, what you already know. Exploring requires feeding forward, finding new sources of knowledge and acting on them.
A CEO should ask....
What are my plans for today, next month and next year? Include activities that exploit what you have already built: fixing a production problem, mollifying an unhappy customer, automating processes; lowering your costs. But also include exploring new options for the business: branding your products in new ways; building new marketing channels and alliances; investigating new models like product licensing or bundling services with products.
Only by finding the right balance between exploiting and exploring can you have it all: protect the business you have built--while providing a foundation for your next generation of growth.
About the Author
Mark Rosenman, Newport's Chief Knowledge Officer, has deep experience developing processes, systems and content to create value from intellectual capital.
Click here to learn more about Mark Rosenman or contact him.
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