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In 2014, the London subway system partly shut down after its employees went on a couple-day strike. This resulted in chaos for London’s extensive network of commuters, who had long relied on the subway to get to and from work.
During the strike, however, five percent of the city’s regular commuters [requires registration] actually found a better and more efficient way to get to work. And they stuck with it.
“Of course, commuters could have experimented with alternative routes even without a strike,” Wendy Wood, a professor of psychology and business at the University of Southern California, writes in her book Good Habits, Bad Habits. “But in the rush of daily life, we don’t often take the time to experiment.” As Wood says, “We find something that works well enough, and we don’t consider alternatives.”
“Something as frequent and routine as the way we commute to work is a habit that helps us achieve predictable and efficient results — for example, automatically getting in your car and driving to work frees up your mind to work through more thought-intensive challenges. Similarly, businesses can also apply the latest research on habit-building to make smarter and more sustainable decisions,” says Wood.
“Although habit formation is an individual phenomenon, it also is captured in the tension you see at an organizational level — especially in the conflict that can arise between whether to exploit or explore,” says Wood.
When we rely on existing habits, we free up mental space to tackle problems that require more creativity. Initially, these actions might have required thought and effort, but over time and after many repetitions, they become second nature. We repeat actions into habits because they achieve the outcomes we want. That’s what makes them useful to exploit.
When businesses exploit their version of habits, they solidify organizational practices and create processes based on past successes. This might involve a standard process for recruiting candidates or a tried-and-tested product development timeline.
Exploitation, or relying on a set of habits, can be very effective, especially when your business environment is stable and you can predict fairly accurately how things are going to turn out.
But environments rarely do stay the same. Habits that served your business well in the past may no longer be effective in a world where external factors change so quickly. Brands like Compaq, Blockbuster, and Polaroid are all examples of companies that over-relied on exploiting their business habits without reevaluating them against the context of a rapidly changing business environment, according to Wood.
“Relying on what you’ve done in the past can be very attractive because you know how things are going to turn out,” says Wood. “But if your environment suddenly changes, those habits will no longer serve you.”
Blockbuster, for example, relied too heavily on a familiar business model that favored its brick-and-mortar stores instead of a burgeoning video-on-demand offering, ultimately ignoring competitive threats from Netflix and other streaming services. This dependence on existing practices in the context of a changing business environment eventually sped up the collapse of this video rental company.
“Exploration is innovating and doing new things. It's what allows organizations to change,” says Wood.
A balance, however, is critical. Some businesses, especially start-ups, are known to over-rely on exploration. A start-up founder’s exploratory mindset is often what motivated them to build their business in the first place. But too many startups are exploring without setting up procedures that enable them to scale innovations or succeed over time.
“This is where we tend to see startups flame out—when they are not set up sufficiently with effective processes to exploit,” says Wood. “But if they’re actually going to survive, they need the other elements, much of which are not valued in the same way, such as HR and operations.”
How do you know if your business is over-relying on exploitation or exploration? Here are three steps businesses can take on:
A business leader must first recognize habits for what they are: repeatable processes that help us achieve predictable and efficient results. Because habits are taken for granted, we don’t often recognize their role in helping us do great work. In fact, the opposite is often true: When we do recognize our habits, we see them as old, perhaps rigid patterns that can be roadblocks to creativity.
But in many ways, habits are foundational to creativity. For example, many successful writers report habits of writing a few hours every day, in the same location, at the same time. These habits are what allow them to produce consistently creative work and free up mental bandwidth for creative innovation in areas where it’s needed.
Similarly, businesses must take the time to identify their existing processes and habits and determine how those habits have supported their own work. This involves identifying the established pattern of organizational decision making, implementation, marketing strategies — all the foundational procedures your organization repeats in order to get your business done.
After identifying your business’s habits comes the difficult part of identifying which ones might no longer serve your goals, especially when the environment around you changes. Some brick and mortar stores, for example, have responded to the growing online retail environment by allowing for online purchases to be picked up immediately at a local store, often leading to additional in-person purchases.
One of the best ways to evaluate the success of business procedures is to stress them. By changing small features of your production environment, you can identify weaknesses that may make it difficult to address future challenges and allow your business to stay sufficiently flexible to adapt quickly.
That’s why Wood suggests businesses intentionally alter their environments to give new habits a chance to emerge and stick.
Perhaps this concept has never been clearer in the midst of a global pandemic. Before COVID-19, businesses had the habit of congregating their employees in the office every morning and having them work there until it was time to return home in the evening. But an unexpected shift in the external environment forced many businesses to keep their employees far away from each other. Many have even determined that they could be more productive working remotely and meet much of the same business goals.
“Sometimes these disruptions that feel like they are going to be cataclysmic actually help us find a better way forward,” says Wood.
Simply deciding that it’s time to change your habits is not enough.
Maybe you’ve realized that your product development processes are no longer serving your business. You have exploited an old way of doing business that is resulting in diminishing returns. You need change.
But expect change to be difficult, as people have to override old habits and learn new development. Be prepared for some resistance when you start to implement change.
“It’s human nature to like what’s familiar,” Wood says. “People think you can just change a habit by making a decision. It’s through repeatedly doing, not deciding, that we build new habits.”
Ultimately, businesses are an organism analogous to human beings. Businesses will thrive by identifying the habits and organizational practices that make things run smoothly while constantly reevaluating those habits in the context of our shifting business environments. We must practice these new procedures until they become second nature.
To read more content about being successful through change, check out our Leading Through Change series here.
