Corporations need to both perform in the short and the long term. They need to explore for new possibilities to prepare for the future and they need to exploit the existing certainties to generate the funds to survive today. Unfortunately, balancing the refinement of an existing technology and the exploration for a new one represents a constant challenge. Exploring new alternatives reduces the time and resources available to improve existing skills and vice versa. So is there a choice? Not really, but there is a priority. Outstanding companies excel in exploiting existing resources, but they are not necessarily technology leaders:

Glaxo’s success in recent decades started with the development of Zantac, an ulcer medication. Zantac was a triumph not of research but of marketing, not of exploration but exploitation. When Zantac was ready to be launched, the market was already dominated by SmithKline’s Tagamet. According to conventional wisdom “me-too products” would never gain more than 50% market share in the pharmaceutical industry. Glaxo did two things: 1) they set a higher price for Zantac than Tagamet and pretended that they had a much better product and 2) they unleashed a world class sales force, going the extra mile in the US by partnering with Roche’s sales force. They were rewarded handsomely. Zantac became the best selling drug ever, transforming the medium-sized Glaxo into a leading pharmaceutical firm. Glaxo’s comparison company, Wellcome, had a different approach. Often referred to as the only “quoted University” in Britain they were heavily focused on research. Their exploration success unfortunately took them into many small markets such as tropical medicine. Eventually Wellcome was swallowed by the then mighty Glaxo. Glaxo increased sales on exiting Wellcome drugs immediately.