exploitation, exploration, or continuous improvement
DESCRIPTION
My colleagues\' and my presentation from the 2010 Continuous Innovation Network Conference, Zürich.TRANSCRIPT
Exploitation, Exploration or Continuous Innovation?
Strategy Focus, Fit and Performance
in Different Business Environments
Andreas Größler Bjørge Timenes Laugen Harry Boer
Astrid Heidemann Lassen
Radboud University
Nijmegen
University of Stavanger Aalborg University
Exploitation, Exploration or Continuous Innovation?
Grö
ßer
et
al.,
2010
Organisations adapt to their environment, but
they also shape it.
Organisation Environment
Organisations as “co-producers” of their environment
Organisation adapts to environment
1. Instability
2. Complexity
3. Diversity
4. Hostility
(Mintzberg, 1979)
Exploitation, Exploration or Continuous Innovation?
Grö
ßer
et
al.,
2010
Research questions and propositions
RQ1. Do firms pursuing a continuous innovation strategy exist?
RQ2. To what extent does the business environment affect the
choice of competitive strategy?
RQ3. How successful, in terms of performance, are these
strategies?
P1. Most exploitative firms exist in low uncertainty business environments,
while explorative firms will probably dominate high uncertainty
environments .
P2. Exploitation-only firms are more successful in low uncertainty business
environments than explorative and continuous innovation firms.
P3. Exploration-only firms are more successful in high uncertainty business
environments than exploitative and continuous innovation firms.
Exploitation, Exploration or Continuous Innovation?
Grö
ßer
et
al.,
2010
Data and operationalisation (i)
• International Manufacturing Strategy Survey, 5th round,
2009
• 19 countries, 677 plants
• ISIC 28-35: machinery, tools, electrical, electronic and
optical devices, measurement devices, and transportation
equipment
• Director of Manufacturing, estimates and perceptions,
mostly 5-point Likert scales
• Market dynamics proxy for stability (transformed), market
span for complexity, geographical focus for diversity, and
competition intensity for hostility
Exploitation, Exploration or Continuous Innovation?
Grö
ßer
et
al.,
2010
Operationalisation (ii)
• Strategy operationalised using order winners (single-variate
measurement)
– Quality
– Time exploitation
– Cost continuous innovation
– Flexibility
– Innovativeness
• (Operational) performance: three factors regarding
time/cost, quality, and flexibility
exploration
Exploitation, Exploration or Continuous Innovation?
Grö
ßer
et
al.,
2010
Procedure and analysis
1. Split the sample (cluster analysis) based on characteristics
of environment (Mintzberg’s four factors).
2. Classify the firms in the data set according to their strategy
in exploitation-only, exploration-only, and continuous
innovation firms based on their order-winners.
3. Using cross tabulation, investigate the representation of
different firm types (exploitative, explorative and
continuous innovation) in different environmental clusters.
4. Using ANOVA, investigate the relationships between
different firm types and operational performance in the
different environmental clusters.
Exploitation, Exploration or Continuous Innovation?
Grö
ßer
et
al.,
2010
Step 1: Clustering the sample wrt. environment
Three clusters appeared to be most interpretable:
1. A low uncertainty business environment: low complexity,
low dynamics, low hostility and low diversity.
2. A medium uncertainty business environment: high
diversity, medium hostility, medium complexity and low
dynamics.
3. A high uncertainty business environment: high complexity,
high dynamics, high hostility and high diversity.
661 firms clustered: 147 firms in the low uncertainty cluster
and 257 firms in each of the two other clusters
Exploitation, Exploration or Continuous Innovation?
Grö
ßer
et
al.,
2010
Step 2: Classifying firms wrt. strategy
441 firms from the sample classified: 160 firms are
exploitation-only, 47 exploration-only, and 234 firms pursue a
continuous innovation strategy
RQ1: continuous innovation firms do exist!
Exploitation, Exploration or Continuous Innovation?
Grö
ßer
et
al.,
2010
Step 3: Cross tabulation
Strategy
Cluster
Exploitation
-only
Exploration-
only
Continuous
innovation
Total
(%)
Total
(N)
Low
uncertainty
34.8%
19.4%
15.7%
29.8%
49.4%
18.8%
20.2% 89
Medium
uncertainty
35.1%
37.5%
11.1%
40.4%
53.8%
39.3%38.8%
171
High
uncertainty
38.1%
43.1%
7.7%
29.8%
54.1%
41.9%41.0%
181
Total (%)36.3% 10.7% 53.1%
100.0
%
Total (N) 160 47 234 441
RQ2: no link between the strategy pursued and characteristics of
environment. Proposition P1 is not supported by data.
Exploitation, Exploration or Continuous Innovation?
Grö
ßer
et
al.,
2010
Step 4: Strategy and performance
• Low-uncertainty business environment:
– a strategy focused on exploitation does not lead to competitive
advantage over the other strategic foci
– P2 is rejected
• Medium-uncertainty business environment:
– continuous innovation firms perform significantly better than
exploiters
• High-uncertainty business environment:
– firms pursuing an explorative or continuous innovation strategy
perform significantly better than focused exploiters
– P3 partially supported
Exploitation, Exploration or Continuous Innovation?
Grö
ßer
et
al.,
2010
Discussion and implications
• Continuous innovation firms do exist
• … even in a very high number: fashion, artefact, necessity,
or natural development?
• No clear link between strategy and environment; in
particular: why exist so many exploitation-only firms in high-
uncertainty environments?
• Continuous innovation (i.e. multi-focus) firms are at least as
successful as the other types; advantage of focus?
• Strategy based on order winners – actual behaviour/
structure?
• Operational performance vs. business/financial
performance