Gray - Exploration & Exploitation in Knowledge Management

The Structure of Concern Project compares many theoretical models from many disciplines to the Adizes PAEI model, arguing that they must all be reflecting the same underlying phenomenon. One concern structure model is described below.

Knowledge management is often based upon the strategic aims or functional goals of an organization. Given these goals, knowledge management is used to help reach them. As an alternative to this approach, Peter H. Gray offers an account of knowledge management based on problem solving instead. Knowledge management practices are understood in terms of their contribution to the problem solving process. Then, wherever problem solving processes arise in the organization, tools for knowledge management can be allocated to them. This basis for categorizing knowledge management practices is more flexible and better addresses the practical concerns of working managers.

Gray and Chan (1999[1]) review several decision making and problem solving frameworks to support a general distinction between two activity clusters: problem recognition and problem solving. They cross this axis with a second axis opposing new or unique problems with previously solved problems – another dichotomy their review showed to be widely supported (e.g. as non-routine vs. routine, productive vs. reproductive and custom vs. ready-made solution processes).

This framework groups knowledge management practices as follows (in PAEI order):

P – (2) Knowledge Creation (New or Unique Problem Solving)
Workers engage or encounter new situations, drawing upon knowledge management practices that help them generate new solutions. They are fully aware of these problems or opportunities, and work actively to resolve them. The organization challenges them to seek creative and innovative solutions, supporting their efforts with knowledge resources.

A – (3) Knowledge Acquisition (Previously Solved Problem Solving)
Knowledge access and sharing processes are activated in order to propagate preexisting knowledge about how so solve problems. Workers are fully aware of the problems or opportunities, and actively preparing to resolve them. Information storage and retrieval technology is often a key element in these practices.

E – (1) Encouraging Serendipity (New or Unique Problem Recognition)
Workers are discovering or resolving new patterns and potentials, and attracting the interest of others towards the same potentials. This requires knowledge management practices that encourage exploration by exposing employees to new experiences, information and ideas, creating conditions conducive to serendipitous discovery.

I – (4) Raising Awareness (Previously Solved Problem Recognition)
This is an alerting function, propagating information across the organization that a recognizable problem or opportunity has emerged. The information might be from the organization’s own learning history, or it may have been garnered from consultants, competitors, allies or best practices from businesses within or even beyond their industry.

In empirical studies to validate this model, knowledge management practices were not evenly scattered across all four quadrants. Rather, a strong diagonal trend appeared, stretching from serendipitous Quadrant 1 (E) activities to structured Quadrant 3 (A) activities. Managers seemed to assimilate new or unique problems to problem recognition, and pre-existing problems to problem solving. These two clusters were thus named Recognizing New Problems and Solving Recurring Problems, and related to March’s formulation of the exploration/exploitation distinction, accompanied by the following quotation:

Exploration includes things captured by terms such as search, variation, risk taking, experimentation, play, flexibility, discovery, innovation. Exploitation includes such things as refinement, choice, production, efficiency, selection, implementation, execution. Adaptive systems that engage in exploration to the exclusion of exploitation are likely to find that they suffer the costs of experimentation without gaining many of its benefits. They exhibit too many undeveloped new ideas and too little distinctive competence. Conversely, systems that engage in exploitation to the exclusion of exploration are likely to find themselves trapped in suboptimal stable equilibria. (March, 1991[2])

The two higher order constructs – exploration of new possibilities and exploitation of existing resources – help illuminate the role of knowledge management practices in organizations. Periods of change and indeterminacy call for more exploration, supported by creative knowledge management practices that enhance organizational differentiation. However, increased competitive pressures also force firms to become more focused and efficient at exploiting their existing knowledge, giving them advantages of speed and cost.

The exploration/exploitation tradeoff is a commonplace of search and optimization thinking, so there is a point of contact between this model of knowledge management and a particular branch of mathematics.

1. Gray, P. H., & Chan, Y. E. (1999). “A Typology of Knowledge Management Practices.” Proceedings of the Administrative Sciences Association of Canada, 20(4).
2. March, J. G. (1991). “Exploration and Exploitation in Organizational Learning.” Organization Science, 2.
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