In the business world, the concept of exploitation vs. exploration is important for long-term success, but deciding which direction to go is never easy.
Exploitation refers to leveraging existing resources, knowledge and competencies to maximize short-term gains. Businesses that focus on exploitation are trying to extract maximum value from established products and markets. This approach can lead to steady and predictable performance, but there can and will be a time when you’ve exploited everything you can from your proverbial hill, and your business stagnates.
Exploration, on the other hand, involves pursuing new opportunities and venturing into uncharted territories (new hills). While exploration is inherently riskier and can lead to uncertainty, it is crucial for long-term growth and adaptability.
We saw this play out with the Los Angeles Lakers’ pursuit of UConn Coach Dan Hurley. Fresh off of winning back-to-back national championships, Hurley was offered a chance to move up to the NBA and coach the storied franchise, but he ultimately turned down the opportunity.
The decision he faced was: should he stay and continue to build on what he has started at UConn, including going for a third straight national championship (exploitation), or should he accept the Lakers’ offer and take on the challenges and rewards (e.g., six-year, $70 million contract offer) of coaching in the NBA (exploration).
In my experience, I have found that most individuals and organizations tend to continue exploitation instead of focusing on exploration mainly because it’s easier to maintain the status quo. So while the rewards certainly could be bigger if you explore, the risks also are greater, and most people are very risk-averse.
I imagine that Hurley feels that he probably could have a greater chance for success at UConn right now than he could at the Lakers. Plus, if he has just a couple of bad or mediocre seasons, he could be fired (such is the volatility of coaching a professional franchise), while at UConn, his leeway is probably larger.
If you are facing exploitation vs. exploration, one thing I caution you on is trying to do both. To have one foot in both segments can work on a short-term basis but not in the long run.
By definition, once you’ve completely exploited your hill, then there’s no room to grow and it’s time to explore new lands, but you can never explore new lands if you’re still anchored back to where you started. At some point, you need to go all in on the exploration phase.
That time may come someday for Dan Hurley—say, he wins several more national championships at UConn and is ready for another challenge—but that time is not today.