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Explore or Exploit?

20 Jun

“Growth requires an exploratory mindset,” according to the linked report by Boston Consulting Group. “[O]ver successive ten-year periods, ‘explorers’—companies that struck a proper balance between exploitation and exploration—outperformed ‘exploiters’ by 3.9 percentage points on sales growth and 2.1 percentage points on total shareholder return.”

Companies that focus exclusively on organic growth, cost control and efficiency consistently underperform their competitors. Growth leaders explore new opportunities, and they reap the rewards.

Examine the beliefs that underlie these two positions. Exploiters believe that they should stick to what they do best. Success for them lies in doing the same thing, better and better. They focus on their existing markets and customers.

Explorers believe that they must learn to do new things. They keep their eyes open for new insights and new opportunities. They are focused on new markets and customers.

World-class innovators are explorers. They know that the world is changing, and that new horizons and frontiers are always opening. As BCG wrote, “The most successful innovators are investing to become faster, leaner, and more digital—and are expanding their focus beyond the core.”

Explorers are ambitious. They know that rapid growth lies in emerging and expanding spaces, while mature markets rarely deliver rapid growth. In fact, mature technologies and even mature companies are frequently disrupted and displaced by innovators with an exploratory approach.

What is your company exploring these days? Will you be content to exploit your current market, or do you aspire to earn the higher margins and speedier top-line growth that come from doing something new?

Related reading: Innovating for Global Growth

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