Exploitation, Exploration, and Process Management: The Productivity Dilemma Revisited

Abstract

Organization and strategy research has stressed the need for organizations to simultaneously exploit existing capabilities while developing new ones. Yet this increasingly crucial challenge has been accompanied by an ongoing wave of managerial activity and institutional pressures for process management and control. We argue that these pressures stunt a firm's dynamic capabilities. We develop a contingency view of process management's influence on both technological innovation as well as organizational adaptation. We argue that while process management activities are beneficial for organizations in stable contexts, they are fundamentally inconsistent with all but incremental innovation and change. We argue that process management activities must be buffered from exploratory activities. As dynamic capabilities are rooted in both exploitative and exploratory activities, ambidextrous organizational forms provide the complex contexts for these inconsistent processes to co-exist. 3More than twenty years ago, Abernathy (1978) suggested that a firm's focus on productivity gains inhibited its flexibility and ability to innovate. Abernathy observed that in the automobile industry, a firm's economic decline was directly related to its efficiency and productivity efforts. He suggested that a firm's ability to compete over time may be rooted not only in simply increasing efficiency, but also in its ability to be simultaneously efficient and innovative (Abernathy, 1978: 173;Hayes & Abernathy, 1980). Strategy and organization theorists have similarly observed that dynamic capabilities are anchored in the ability to both exploit and explore (Ghemawat & Costa, 1993;March, 1991;Weick, 1969). A firm's ability to compete over time may lie in its ability both to integrate and build upon its current competencies, while simultaneously developing fundamentally new capabilities (Teece, Pisano, & Shuen, 1997).Twenty years after Abernathy's observations, the pressures for organizations to meet multiple, often inconsistent, contextual demands have escalated (e.g. Christensen, 1997;Tushman & O'Reilly, 1997). The notion of balance between exploitation and exploration, or between incremental and radical organizational change has been a consistent theme across several approaches to research in organizational adaptation (e.g. Brown & Eisenhardt, 1998;Burgelman, 1994;March, 1991;Levinthal & March, 1993;Gavetti and Levinthal, 2000; Romanelli & Tushman, 1985). Yet this need for dual organizational capabilities arises in the context of a wave of managerial activity and institutional pressures focusing on process management and control (e.g. Cole, 1998;Winter, 1994;Hackman & Wageman, 1995;Hammer & Stanton, 1999).Process management, based on a view of an organization as a system of interlinked processes, involves concerted efforts to map, improve, and adhere to organizational processes.Initially building on the seminal work of Deming (1986), Juran (1989), andIshikawa (1985), Although process management techniques were first employed in th...

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