Looking for New Options Without Ever Adequately Exploiting Them

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Historical Case

Leif Eriksson

Why Isn't America Called Vinland?

Around AD 1000, Leif Eriksson embarked from Greenland and reached the North American coast, which he called Vinland. After his return home, occasional trade occurred between Greenland and Vinland, but no settlements were established; rather, Vikings continued to explore and raid European coastlines. Eriksson’s discovery was soon forgotten. Not until 500 years later, when Christopher Columbus told of the wonders of the New World at the Spanish court, did the colonization of North America begin.

“One does not discover new lands without consenting to lose sight of the shore for a very long time.”

— Andre Gide

Business Case

Research for the Sake of It: Xerox’s Missed Opportunity

Opened 3,000 miles from headquarters and close to Stanford University, the Xerox PARC lab had ideal research conditions that resulted in very innovative work, including iconic inventions such as the computer mouse and the graphical user interface. However, Xerox’s management failed to balance the potential of these inventions with a matching drive to exploit them. Instead, the technology was shared in campus tours with other players in the industry. It was later commercialized by the likes of Apple and Microsoft, which now have market capitalizations exceeding $300 billion, versus Xerox’s approximately $12 billion.

Exploration and Exploitation Must Be Balanced Even in Dynamic Environments


Warning Signs to Heed

  • Seductively low costs of exploration
  • Low total returns on R&D spending, in spite of a large number of explored options
  • Competitors taking the lead in exploiting resulting technologies and products
  • Maximization of R&D efforts and output (such as number of patents generated) without an equal focus on commercialization and R&D’s contribution to the bottom line


Beacons to Navigate By

  • Tight feedback mechanisms among market research, product development, and sales
  • An "ambidextrous" culture with mixed incentives, rewarding both exploitation and exploration
  • Disciplined tracking of R&D’s contribution to profitability through metrics such as new-product profits as a percentage of total profits