Explore v. Exploit

Earnest Shackleton was an explorer. Shackleton was a principal player in the quest to explore the continent of Antarctica during the early 1900s. He was one of several who were trying to be the first to reach the South Pole. His teams made great progress over several missions only to be outdone by Roald Amundsen in 1911. Undeterred, he lost interest in trying to pursue that which had been done and looked to the next adventure. Still fascinated by Antarctica, Shackleton strove to travel the continent via sea. The challenge was in navigating what is less a land mass and more a bunch of ice blocks. His legend was born in the adventures of his ship, The Endurance. Shackleton and crew morphed from explorers to survivalists.

He like other explorers was consumed with foraging into frontiers where others had yet to go. Explorers are comfortable with the unknown. They aren’t interested in learning more about where we already are. They want to step outside the boundaries of the known and pave new paths. Explorers breathe air of which the rest of us aren’t even aware. Explorers are rare precisely because each aspect of their approach involves risk. It’s difficult to be different. It’s easier to try to work within the confines and constraints of existing systems. It’s easier to try to climb to the top of a ladder that is known and can be seen and touched. It’s tough to go it alone. The explorers of the business world are entrepreneurs. Elon Musk is one of the kings of this game. He is completely committed to exploring. He is doing so in several different areas. From Tesla to Space X he’s exploring new ways to travel on earth and between planets. Even this isn’t enough so he’s also exploring various forms of transportation underground with Hyperloop. He’s also exploring the world of A.I. and areas most of us can’t even begin to understand with businesses like Neuralink. His efforts are relentless and he seems to be interested in anything but the status quo. Musk and those like him explore air the rest of us don’t even realize is there. We can’t see, feel, or let alone understand the fields on which he plays.

People like Musk stand out not because of their wild success but more because of their bold ambitions. Their ability to look into an unknown future and willingly work to making something happen is rare. Explorers reflect the mindset Peter Thiel refers to as definite optimists detailed in an article a few weeks ago, My Actions Matter Always. The more typical approach is to take one’s chances at an existing game. The masses meander along the well worn path. In business it’s the world of franchises. It’s trying to do more within an existing industry. It’s about milking cash cow while you can or harvesting one more egg from the Golden Goose of an established business. Trying to wring one last drop of dollar out of the profits of an existing business is the typical tactic. The massive chains like Walmart, Costco, Starbucks, GM are examples of businesses that are pursuing this path. Industries are built around pursuing efficiencies within an existing system. People prefer to pursue programs that are established and reliable. Becoming a bookkeeper, a doctor, a dentist are known ways to work within a system. The opportunity is there and there are ways to do reasonably well without sticking one’s neck out. Can you sense the scent of cents being squeezed from the last pulp of profit in the dying newspaper businesses for example?

Microsoft became a powerhouse of computer operating systems by pursuing a bit of a hybrid approach between exploring and exploiting. As Windows crept in and established itself as a dominant operating system, Microsoft continued to iterate. Windows 1 became 2, then 3, then Windows 95, 98, XP, 7, 8, and continuing to 10 and beyond. Each version sought to accomplish two goals. First, it was an effort to exploit the existing customer base. Those that had familiarity and affinity for the operating system were keen to stay current and work with the next generation. Existing customers continued to move forward and offer recurring revenue to Microsoft. However, each version of Windows also explored new capabilities. It expanded what the software could do and, in so doing, created interest from new prospective customers. It was a great marriage between exploiting and exploring which squeezed recurring revenues from current customers while expanding new ones.

In some business programs the approach to strategy is delineated between those that explore and those that exploit. Explore versus exploit. It’s a straightforward framework for spelling out the two principal directions of strategy available to a business. It is a sound structure from which to focus one’s business strategy. In an ideal world, a business is able to adopt both approaches. Efforts can be allocated to exploiting the industry in which one finds oneself. A core focus of trying to get better where one finds themselves is worthwhile. However, some resources should be reserved for exploring. How can we find a new sandbox in which to play? What options exist outside of where we are? The Googles of the world have found a way to play on both fields. They are exploiting areas in which they have become an established platform like search engines and maps. However, they afford their team members an opportunity to spend a certain amount of time each week on exploring new areas of interest. They allow free experimentation for staff with hopes that this is where breakthroughs emerge which may be unrelated to existing business initiatives. To exploit is to adapt to existing conditions. The end goal of “winning” the exploit is to be the best at fitting in.

Can exploration be taught? Entrepreneurial education programs have expanded in recent decades across North America. Is there objective evidence that suggests a disproportionate number of successful enterprises have been created in novel fields as a result of these educational programs? As someone who wants to believe deeply that everything is a skill that can be learned, my bias is to hope that these programs are worthwhile. However, a part of me on this front accepts Mark Twain’s suggestion that “Those who can, do. Those who can’t, teach.” It may be that we simply haven’t yet successfully distilled those attributes that characterize explorers. Maybe we can teach survival skills. Here’s how to spend a night or a few days in the wilderness. Here’s how to determine the cash requirements for your business. But we can’t yet teach the disposition to become an explorer or entrepreneur.

Traditional education is built around exploiting. It’s about teaching things the way they are. We teach what we know. Most education is a lagging indicator of progress. We’re teaching to fit in. Engineer, Richard Hamming writes in The Art of Doing Science and Engineering, “Teachers should prepare the student for the student’s future, not for the teacher’s past.” Teachers are taught what to teach and how to teach based on information collected in the past. Teaching technical skills is something we can do. These are things that may have been useful in the past and may help those fit in to the way the world is. Hamming attempts to point out that the skill set of teachers and approach may not be best to equip students for an uncertain future. Teaching to exploit is typical. Teaching to explore seems elusive. How does one learn to explore uncharted water? How do we stay ahead of trends and not become obsolete? At it’s heart, the difference between exploiters and explorers is the difference between followers and leaders.

Some time ago we introduced the idea of the Evolution of Excellence involving a four step cycle of look, learn, leap, and lead. It is an approach that has been replicated repeatedly across varied environments. It can be applied to a business strategy of either explore or exploit. Those that adopt an explore approach to business strategy are embracing the leap portion of the Evolution of Excellence cycle. Only those that are consciously crafting a course away from where everyone else is headed have the opportunity to deeply differentiate themselves. Yes, the bet could be wrong and they could end up worse off. This is a real downside to the approach. However, if the leap or exploration results in landing in a new field, then the opportunity to reap the rewards of this leap by being a leader results. When exploring one is letting go of what is known and reaching for something that is elusive and just outside one’s grasp. Exploring may involve a physical leap or a mental one into the new.

Whether one takes an explore or exploit perspective will shape how we approach the phases of the Evolution of Excellence cycle. If we’re in the exploit mindset we will look internally at our operations or compare with others in our existing industry. We compare and contrast against known benchmarks and KPIs. These drive our decisions as we seek to maximize our efforts in existing arenas. Explorers, on the other hand, look outside of themselves and their industries. They are looking at what seem to be unrelated areas. They see things the rest of us don’t. More importantly, they see things that aren’t yet there. Explorers exemplify what Robert Kennedy expressed when saying, “Some men see things as they are, and ask why. I dream of things that never were, and ask why not.” The perspectives of the two approaches are diametrically opposed. Exploiters are looking at what’s known and explorers are looking at what is unknown. Explorers and exploiters are looking in very different places. As a result, what they learn will differ as well. Explorers will be open to learning what’s not yet seen by others. Exploiters will be more likely to seek tried and true approaches. They are keen to copy what others have done.

These differences continue to present between Explorers and Exploiters when faced with a decision to leap. To exploiters, a leap is where they are seeking to copy an approach done by others. It is a known process just not something they are doing presently. Exploiters still tread gingerly toward the change, but do so with a reasonable picture in their mind of what success will look like. They are taking steps to exploit an avenue that has been used with success by others. When explorers approach a leap, they are jumping into a void. Their landing point isn’t known. They hope for the best. They act with positive intent. However, for explorers the outcome isn’t assured. For explorers the destination is in the dark. If it’s popular, it’s unlikely to be a differentiator. To stand out one must stick out. It’s not easy. The leap into the unknown is not for the faint of heart. A boldness or blindness is needed. David Perell in an article The Go For It Window offers, “You will need a blend of James Bond confidence and a willingness to ignore the taunts of the crowd. Otherwise, you’ll drown in the sweat of criticism.”

Explorers and exploiters approach the lead phase of the Evolution of Excellence cycle differently as well. Exploiters lead by trying to eke out every last ounce of energy from the current system. They are trying to bleed the current well dry. In the business world, exploiters are those that seek to vertically integrate their operations. Control of a distribution network expands into controlling production which then grows into controlling the entire supply chain for components. The lead is sustained for as long as it can be while pursuing a complete commitment to the current system and environment. Explorers recognize their time at the top is limited. Explorers realize that being out front and in the lead is simply an invitation for others to join the party. Explorers in business accept that to sustain success they must explore and step outside of the current field. It’s just a matter of time until others successfully copy and pull themselves up to the leader or drag the leader down. Explorers don’t try to hold on to the lead. They are comfortable looking, learning, and planning the next leap or several leaps while they are still leading. They are proactively pursuing change and not doing it from the perspective of immediate survival.

What’s your tendency? Are you an explorer or an exploiter? How does your perspective shape your willingness to take risks or how you view opportunity? Are there areas of your personal or professional lives where you prefer to be an explorer and others where you opt to exploit? If you have a preference to pursue one direction, is there an area where you could consider trying to embrace the other perspective as an experiment?