Managing the Innovation Paradox of Exploitation andExploration in R&D : Is measurement of innovation the key to promoteexploration?

Abstract: Managing the paradox of exploitation and exploration symbolises the simultaneous pursuit devoting enough resources to exploitation to ensure short-term profits and, at the same time, enough resources to exploration to ensure future organisational viability. Previous researchadvocates that sustained organisational performance and success highly depends on the interaction of exploitation and exploration or in other words, the balancing act between change and continuity. To strategically balance these contradictory requirements is a challenging task for most organisations since exploitation and exploration require fundamentally different organisational structures, processes, strategies and capabilities. Organisations that possess the ability to balance these contradictory requirements are referred to as ambidextrous organisations, what is evident is however that different ambidextrous strategies bring several distinctive challenges that organisations explicitly must deal with. Past literature advocates that management constitute an important part in creating organisational ambidexterity, but has nevertheless due to differentiations in organisational contexts resulted in ambiguous guidance in how to practically solve the tensions between exploitation and exploration. Scania the initiator of this thesis project, one of the world´s leading manufacturers within trucksand buses for heavy transport applications is sensing uncertainty in what undoubtedly used to be a relatively stable environment. Continues improvements has been a fundamental strategy in R&D for decades but in the face of a potentially disruptive technological shift, Scania senses urgency to leverage the innovation capability they possess, to reclaim the exploration space in order to act and seize upon these uncertainties. The purpose of this thesis is to explore how management can support and sustain the exploration space in a mature R&D department. This study builds upon a qualitative case study limited to a specific R&D department, Truck Chassis Development. To draw parallels and provide a deepened understanding of how the specific context of the organisation affect section managers at Truck Chassis Development in supporting and enabling exploration, interview data from several departments at R&D and sales & marketing is analysed. Results from this research show that there is an overall pressure for exploitation in R&D in general, and that section management encounter several challenges in supporting and sustaining the exploration space. An overall pressure for delivery precision crowds out time for exploration and present performance measurements are found to further add to this challenge since they are, to a large extent designed to measure and follow-up the relatively more certain and superior benefits from exploitation, implying that they tend to induce and support exploitative activities. The research findings provide managerial implications in terms of directing attention towards exploration through measurements of exploration.