Lessons from the Celltech Case: Balancing Knowledge Exploration and Exploitation in Organizational Renewal

Abstract

This article applies the lens of the knowledge exploration/exploitation dilemma to the renewal of Celltech Plc. From a theoretical perspective it has often been argued that as a firm matures, exploitation of current organizational knowledge drives out exploration of new ideas, and that this increases the likelihood of firm failure. This same literature gives few clues as to how balance can be maintained, or decline reversed. Our case study documents the decline of Celltech, its rejuvenation from near bankruptcy in 1990, and its subsequent ability to prosper to become the eighth largest biotech firm in the EU in terms of market capitalization. Through the Celltech case we show empirically that renewal based on exploration is possible even in a firm where exploitation has come to dominate. This case also illustrates how a balance between exploration and exploitation can be maintained for over half a decade, despite the theoretical tendency stated in the literature for exploitation to dominate. We offer insights into the process of maintaining a balance, including reorganization to release internal diversity to stimulate exploration, creation of a common language, and building systems to institutionalize the maintenance of a balance between exploration and exploitation.

Achieving strategic renewal: the multi-level influences of top and middle managers’ boundary-spanning

“…This paper focuses on strategic renewal as a form of CE (cf. Dess et al 2003) and aims to explain variation in units' exploratory innovation as the key underlying activity of strategic renewal (McNamara and Baden-Fuller 1999;Ren and Guo 2011). Exploratory innovation is defined as experimenting with new product-market combinations and requires building new skills and capabilities (Belderbos et al 2010;Benner and Tushman 2003).…”

Exploration and exploitation within and across intra-organisational domains and their reactions to firm-level failure

“…Case study research has demonstrated that performance shocks can have the effect of overcoming inertial forces resistant to exploration activities and can stimulate organisational renewal. This can occur either via exploration induced rejuvenation, or in some circumstances a rebalancing of exploration and exploitation activities in the technological and market domain resulting in long term rejuvenation (McNamara and Baden-Fuller 1999).…”

To Continue Prospecting: Performance Implications of Combinative Capabilities and Explorative Learning

“…A greater variety of specialists provides a more diversified knowledge base and increases cross-fertilisation of ideas, both of which results in more innovation (Kimberly and Evanisko, 1981). Higher participation of cross-functional teams that bring together different sources of expertise will also lead to effective product development ideas (Imai, Ikujiro and Takeuchi, 1985;McNamara and Fuller, 1999). Explorative firms need flow of collaborative ideas across the organisations to encourage creative ideas (Amabile, Conti, Coon, Lazenby and Heron, 1996).…”