Chalk Talk: Where is your team in the explore exploit continuum?

Where is your team in the explore exploit continuum? Are you in explore or exploit mode? If you are operating in a new area with high uncertainty then explore mode is the best posture. As you gain clarity you will typically transition to exploit mode.

Chalk Talk: Where is your team in the explore exploit continuum?

Introduction: This chalk talk is a basic overview of the concept of the explore exploit continuum of choices that early-stage startups face. It makes many simplifying assumptions, in particular, that there is a simple trade-off between exploring new possibilities and exploiting old certainties. It also assumes that you transition from exploration to exploitation–which is true enough for startups–but is definitely not the case for larger and more mature businesses who must explore and exploit in different parts of their organization in parallel. The more mathematical analyses of the concept refer to it as the “multi-armed bandit” problem.

Two Modes: Explore Exploit

Businesses typically operate in one of two modes. When teams, product teams, and companies are operating in new areas they must be in exploration mode because they’re trying to manage a high level of uncertainty. And then, as their level of uncertainty comes down, as they gain clarity and understand how things work, they move into an exploit posture.

Explore Mode

The explore end of the explore exploit continuum is like walking in fog with intermittent illuminationIn explore mode, you’re trying to figure out who your real customer is and what their problem is. What message are you going to use to reach them? What’s the value that you’re offering them? The Explore mode is your posture towards the unknown. You are looking for possibilities and the opportunity to create new knowledge and new insights. You may start with theories or hypotheses and learn they are not valid. They don’t work. You realize that you have to restart, incorporating what you have learned. Sometimes you get stuck and don’t know what questions to ask so you have to take a step back and look more broadly.

One good rule of thumb is when you’re exploring to keep a log. You can’t always trust your memory for accurate detail on everything you have tried, observed, or heard. When things go badly wrong, we remember that instance versus the number of times it worked. You are actively organizing and structuring your understanding of the situation as you continue to explore through observation, conversation, experimentation, and prototyping.

At some point, you start to be able to predict what’s going to happen. Of course, you’ve been making guesses all along–that’s what a theory or hypothesis is–but now your guesses start to come true with increasing frequency and accuracy. This accuracy flows from clarity on what your customers need and will value.

Exploit Mode

At the exploit end of the explore exploit continuum you are setting clear targetsNow you can shift into exploit mode. Instead of trying to figure out why something works 10% of the time to get more success, you focus on the 10% of the time that something failed–so you can get even less of that. So you transition from embracing a small amount of positive variation to trying to minimize or suppress what is hopefully a small amount of negative variation.

You abandon the engineering or laboratory mindset of looking for upside and shift to the manufacturing or production mindset of minimizing errors and waste. This mindset is often called “Six Sigma” or DMAIC if you want to be buzzword compliant. In exploit mode, you have an intense curiosity about errors but not much interest when you get above-average results. In fact, you may have to reject results that are too good because they no longer meet the specification defined for the product or process.

You are trying to shift from hunting for possibilities and new knowledge to leveraging what you know to manage using established probabilities and pattern recognition.

So, where are you operating in a continuum that spans high uncertainty to high clarity? When operating under high uncertainty, you’ve got to adopt an explorer posture. As your situation becomes clear, you must shift to focused execution and embrace exploit mode.


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