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. 3 More 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