Exploratory Capacity and the Adaptive Organization

The concept of Exploratory Capacity (EC)—the amount of slack resources an organization has (in the form of people, time and/or money), that can be devoted to simultaneous technical and market discovery—is introduced to describe how innovators can proceed under conditions of great uncertainty, specifically when technologies and markets are co-evolving. Drawing on a sample of 31 companies whose business models were tied to the Internet, the authors discuss how startup companies deal with uncertainty through experimentation in the market and morphing of the business model. Tradeoffs among people, time and money are often necessary to create EC, although the three are not fully interchangeable. It is posited that an optimal amount of EC is ideal for successful innovation, as there are risks inherent in both a scarcity and an excess.