NormannPartners research has deepened the understanding of what drives successful long term growth in innovation systems. The processes exploration and exploitation exist simultaneously in innovation systems, not in stages or phases. But any of them may dominate the system at a point in time, as the system’s management will have its main focus on one of the processes. This is not the same as to say that a particular innovation system only is in one particular stage at the time, which theories of technology diffusion want us to assume.

An innovation system needs to balance the interplay between these two processes if it is to achieve long term sustainable growth.

Shifts or transitions between the two processes – or rather between the emphases on any of the two – seem to be particularly important.

Shifts are dynamics in themselves, fuelled by tensions – external and internal fits and misfits. These tensions act as “motors” that drive the system to keep or shift its main focus on any of the two processes of exploitation and exploration.

Thus there are four different key dynamics that drive development and growth – sustainable long term value creation – in innovation systems:

1. Exploitation process dominates and increases efficiency of system structure
2. Transition from focus on exploitation to focus on exploration
3. Exploration process dominates and transforms system structure
4. Transition from focus on exploration to focus on exploitation    

Interplay between exploitation and exploration. © R Normann Partners AB, 2005

Each of the four dynamics has its own contextual prerequisites and drivers. What stimulates one, may hamper another, so it’s important to understand what drives each one of them – and what can be affected by innovation system managers or policy makers. For global companies acting in complex value constellations, and for national and regional policy makers, understanding these dynamics between exploitation and exploration is key to prosperous innovation and growth.