EXPLORATION versus EXPLOITATION MINDSETS in DESIGN-DRIVEN ORGANIZATIONS

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