An exploratory study of organization architecture and the balance between exploration and exploitation of knowledge

Purpose ― This article aims to explore how organizational architecture (OA) for an information technology organization can balance between exploring new information technologies (IT) that promise significant but uncertain growth opportunities, and exploiting already existing IT that guarantee immediate survival. Design/methodology/approach ― The literature on organizational architecture (OA) and the balance between the exploitation and exploration of knowledge is reviewed. Data collected from in-depth case study of a global IT consulting firm highlights the importance of OA in balancing exploitation and exploration. Findings ― Four elements of OA emerged as critical in balancing exploitation and exploration: embedding autonomous exploratory units within large exploitative sectors; creating organizational roles to integrate between exploration and exploitation; developing technology solutions that support the interplay between exploitation and exploration; and establishing a reward structure that fosters the cooperation between exploring and exploitative agents. Practical implications ― Results of the study suggest that the switch between exploration and exploitation is key to emerging dynamic capabilities in IT firms. It is important for organizations to define: strategic goals that highlight the importance of both exploration and exploitation for the organization; roles that specifically focus on exploration, exploitation and the coordination between the two capabilities, technologies that support both exploration and exploitation; and reward both capabilities. These four elements of the architecture interact together to support a structure of large exploitative units with embedded small explorative units to support recombination and innovation at the project, the department, and the organization levels. Originality/value ― There is limited research on the effect of organizational design on IT development capabilities. Organizational architecture that balances between exploiting stable domain knowledge and emerging new technologies is crucial in today's global and competitive environment. In this study, a new framework emerges that provides a starting point for future quantitative research on how OA can balance conflicting organizational capabilities for firms engaging in IT development. The paper provides a foundation for future studies to test five propositions on the effect of strategy, structure, roles, technology, and reward on the dynamic capabilities of exploitation and exploration.