7 years, 2 months ago

Exploitation Versus Exploration

Link: http://blog.cutter.com/2014/02/11/exploitation-versus-exploration/?utm_source=rss&utm_medium=rss&utm_campaign=exploitation-versus-exploration


The architecture of many enterprises is designed to perpetuate existing capabilities by maintaining the status quo. In effect, the role of the architecture team is to systematically hone and improve capabilities by exploiting and making the best use of current skills, resources, and assets or developing new capabilities by adding to those skills, resources, and assets. Typically, changes are made through carefully planned incremental steps. Such architectures may serve the current business model well, but they risk the possibility that the business model becomes obsolete or that it is supplanted by the innovative business model of a competitor that has greater contemporary relevance. The distinction is very clear if we compare traditional high-street bookshops with online booksellers — where the marketing and distribution models are very different, but more significantly, where the online booksellers take advantage of social technologies to build a community of book lovers. The traditional high-street bookstores struggle to exploit their existing enterprise architectures, which becomes a short-term, high-risk survival strategy.

Contrast this with a more explorative approach. The enterprise architecture of companies that are founded around social technologies, such as Google or Amazon, is more dynamic and inventive. They are driven more by intuition, hypotheses, and hunches about the future than by analysis or reasoning about previous practice. Here, there is risk and uncertainty in any new venture, but success usually brings high rewards. With architectures based primarily on exploitation of capabilities and assets, a lot of EA effort goes into administration and governance, while companies with an organizational focus on exploration of future options have an architectural focus on constantly building new capabilities or enabling smarter and more exciting connections. Think about your enterprise or EA practice. Is the principle focus on administration or invention — on exploitation or exploration? If you work within an exploitation strategy, then you probably need to shift the balance to include at least some exploration. And it works the other way, too; for companies based on an exploration strategy, there can be great advantage in exploiting key components of the established architecture.

The ideal is a combination of both exploration and exploitation. This balance is easier to see in the large established companies with a strong use of social technologies. Amazon and Google constantly exploit their established enterprise architecture. It is harder to see the balance in more traditional companies, but some that are worth watching include Tesco, Barclaycard, Thomson Reuters, and Lloyds Banking Group. (For further details, see the FStech Awards, which recognize excellence and innovation in the field of IT within the UK and EMEA financial services sector.) In terms of relatively new companies, eToro — which provides a “global market place for people to trade currencies, commodities, indices, and stocks online in a simple, transparent, and more enjoyable way” — is an excellent example of a company whose enterprise architecture is designed to support a social network.