To convey managerial direction, the notions of exploitation or exploration

A clever and useful distinction for managers uses the terms exploration and exploitation as a way to describes search modes. These concepts for how to find new ideas and improvements make sense for general counsel. General counsel need to push for efficiency, which corresponds to exploiting available resources in step-by-step improvement, while at the same time they need to push for innovation, in the sense of exploring new ways of working outside the typical boxes. Another way, think about the distinction as local search (exploitation) compared to distant search (exploration).

The terminology and conceptual differences come from Admin. Sci. Quarterly, Dec. 2002 at 676 et seq., which explains research that found some diminishment of innovation where TQM, Six Sigma, ISO 9000 and other process management disciplines had taken hold (See my post of Jan. 27, 2007: process management tools may stifle innovation.). Structured ways to analyze processes – maps, streamlining, measurement – deter in-house counsel from trying out something new. They stay with incremental exploitation rather than more radical exploration.

The article puts the point well. “More generally, work in learning and evolution has suggested that increased routinization and coordination in an organization’s activities may speed responsiveness in stable environments but also contributes to resistance to change, competency traps, and inadequate or inappropriate response in changing environments.” Local search (exploitation), as found with a focus on incremental, kaizen fine tuning, has an important role; distant search (exploration) has higher risks, higher access costs, but potentially higher octane improvements.

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