exploration versus exploitation mindsets in design-driven organizations
DESCRIPTION
Most larger organizations are able to scale and survive in the medium and long term by achieving operational excellence in driving out waste and exploiting their existing business model. The mindsets, mental models, and methods for achieving this success at scale make organizational systems fragile and susceptible to disruptive innovation. Even organizations that embrace the value of design to deliver better customer experiences are susceptible to epistemic failure. What are the required strategic horizons, mindsets, and methods required to balance the exploitation of existing business models in context with exploring new and potentially disruptive value propositions? How can can teams collaborate at the fuzzy front-end of exploration to generate insights and explore the complex domain using design thinking? What are the portfolio concerns for managing both exploitative and exploratory strategies for continued survival and growth? How can balanced teams start where they are and iterate towards more resilient and adaptive structures to continuously improve offerings and deliver value to customers?TRANSCRIPT
EXPLORATION versus EXPLOITATION MINDSETS
in design-driven enterprises
WILL EVANS \ PRAXISFLOW \ @SEMANTICWILL
“Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.”
- Adam Smith
“Doubt is not a pleasant condition, but certainty is fucked.” - Drunk Voltaire
DEFINITION OF DESIGN
“The intentional formation of a purposeful system” - Jabe
EXPLOITATION & EXPLORATION
DISRUPTION
“If you become wildly successful because everything you do is right, you’re doomed”,
- Clayton Christenson
FRAGILITY
DEC PDP-11
TRIUMPH OF THE BEAN COUNTERS
MEASURING THE WRONG THING
Many organizations follow the traditional product paradigm in which success of a project is determined by whether we delivered the agreed scope on time and budget. Not whether is actually created value for our customers or business. Usually Not. Mostly Not.
A DELICATE BALANCE
A DELICATE BALANCE
MINDSETS “There is nothing quite so useless, as doing with great efficiency, something that should not be done at all.” - Peter F. Drucker
Compared to returns from exploitation, returns from exploration are systemically less certain, more remote in time, and organizationally more distant
from the locus of action and adaptation.
This is why we often struggle, organizationally, with the balance.
THE PRIVILEDGE OF PROXIMITY
DEPRIVILEDGING EXPLORATION
EXPLOITATION
EXPLOITATION DEMANDS EFFICIENCY & QUALITY
THE GOAL OF EXPLOITATION IS DOMAIN DOMINANCE
CYNEFIN
DRIVING FROM COMPLEX TO SIMPLE
PLANNING DOESN’T REMOVE RISK
“No plan of operations extends with any certainty beyond the first contact with the main
hostile force.” - Moltke the Elder, 1871
“Everyone has a plan, until they get punched in
the face.” - Mike Tyson
KEYS TO MANAGING RISK
• Define Measurable Outcome (not output) • Create Economic Model of Value • Limit the WIP (Works-in-Progress) across portfolio • Reduce batch size to increase throughput • Reward teams based on reduced cycle-time to
customer value delivery
EXPLORATION
EXPLORATION VALUES
A business in exploratory mode values risk-taking, speed, experimentation, gaining validated learning. The constraints, policies, and structures which work best for exploitation, make little sense during exploration.
SITUATIONAL AWARENESS
Organizations must continually revisit the question, “What business are we in, and where should we be? But also: Who the fuck is our customer and who should our customer be?”
• Customer Exploration • Problem Exploration • Solution Exploration • Capabilities Exploration • Marketing Exploration • Scaling Exploration
TYPES OF ‘DESIGNED’ EXPLORATION(s)
IN SEARCH OF UNKNOWN UNKNOWNS
EXPLORATION IS AN ACT OF SYSTEMATIC SENSEMAKING
DESIGN SYNTHESIS IS SENSEMAKING
Design synthesis is an abductive sensemaking process of manipulating, organizing, pruning and filtering data in an effort to produce information and knowledge. This same sensemaking process is key to
understanding new market contexts, and new mindsets for exploring & designing new organizational structures.
ORGANIZATIONAL DEBT
As organizations grow, scale, and mature, they develop structures, policies, rules most appropriate for their maturity, optimizing for exploitation. To shift to explorational mindset, might we need to
‘refactor the code’ of the organization? Does our
Organizational debt decrease our capabilities?
BERRYPICKING MODEL
MODELS OF EXPLORATION
THE VISIONARY
THE GAMBLER
The problem with many projects is that you spend months and millions doing research, writing requirements, designing and building software… and fail.
The Daily. A $30 Million Fail THE EPIC FAIL
THE SKUNKWORKS
THE INNOVATION LAB
THE DESIGN THINKING PARTNER
THE ACQUISITION
A CRITIQUE
• Risk • Uncertainty • Local Optima & Capability
• Learning & Kaizen • Fragility and Resiliance
• Sustainability • Culture & Cash-out
BALANCING THE PORTFOLIO
MODELING HORIZONS
MODELING HORIZONS
MODELING HORIZONS
MODELING HORIZONS
BALANCING THE PORTFOLIO
• Design resource allocation across all three horizons (there is no magic formula)
• Create different measurements based on which horizon domain you are managing
• Provide a model for visualizing resource allocations
• Ensure senior management has a decision-making framework for choosing the right strategy for maximizing optionality
LEARNING ORGANIZATIONS
ORGANIZATIONAL DESIGN
LEARNING & VALUE STREAMS
CONTINUOUS IMPROVEMENTS
• Kaizen is strongly connected to learning organizations.
• To become a true learning organization you need to continuously improve.
• Kaizen can be applied to exploitation, but also exploration methods / measurement
• PDSA across the three horizons
CHARACTERISTICS
• Good management is balancing continuous exploration with exploitation
• Leaders as coaches/mentors who help people grow by facilitating learning
• What are we learning? How can we improve? • How are we structured? How should we be? Is
this coherent?
OBSTACLES
• Silo thinking (vertical vs horizontal/horizonal thinking) • No time for reflection (the S in PDSA) • No coherent strategic intent • Apathy (a result of Theory X management) • Problem denial (Mystery and Mastery) • Leadership values heroes • Leadership doesn’t value learning • Leadership maximizes organizational resource allocation
based on short-term thinking
TAKE-AWAYS
Thanks. Will Evans @semanticwill