Explore or exploit?

March 23, 2017      Kevin Schulman, Founder, DonorVoice and DVCanvass

Here, in order, are the top grossing movies of 2016:

  1. Sequel in an extended movie universe
  2. Prequel in an extended movie universe
  3. Sequel
  4. Animation with cute animals
  5. Remake
  6. Animation with cute animals
  7. Sequel of a remake in an extended movie universe
  8. Extension of a movie universe
  9. Extension of a movie universe
  10. Extension of a movie universe

In fact, the last movie to grace the year’s top ten list that wasn’t animated, sequel, prequel, or a remake was The Martian.  Even that, because of its theme of “saving Matt Damon,” could be considered a remake of Courage under Fire, Saving Private Ryan, Titan AE, Syriana, Green Zone, Elysium, or Interstellar.

Why, you may ask, am I bringing this up in a nonprofit marketing blog?  It’s because of the eternal struggle of explore or exploit (you can find the math-heavy version of this problem here).  We’ve faced it since we debated whether to stay at this hunting spot or more on to the next in hopes of greater game or fears of overhunting.

And now we face it in marketing.  Is this control package or “best practice” so good that we should exploit it for another year?  Or should we risk a test and, if so, how much?

One way to think of this like a pharmaceutical or consumer goods company.  What percentage of your budget are you going to set aside for your R&D budget?  One thing we have done with clients is to set up a pilot program with a small portion of their file, so most of their effort can be focused on exploiting what they have while our skunk works aim to overthrown the control.

The answer is to the explore versus exploit spectrum is: it depends.  And it depends on where you are in the lifecycle of your nonprofit.

If you are looking to create an enterprise that will stand for a thousand more years, you should bias toward exploring and experimentation.  After all, the faster you can get to the best strategies, the more of your thousand years you will have to exploit them.  On the flip side, if you are looking to finish your endeavor soon, it makes no sense to test significantly but rather to exploit everything you’ve already learned.

So the answer to why Hollywood is rife with recapitulation is that they are in exploit mode.  They know what works.  And they know they don’t have long left.  Between CGI actors, AI editors, theater attendance at a two-decade low, inefficiencies in labor contracts, threats from streaming services, piracy, a new generation of non-movie-goers, and competition from international culture makers, Hollywood is being disrupted and it knows it.  Hence, today we drink, for tomorrow we die.  Why risk John Carter when you can make Bond 25, Bourne 6, Harry Potter 9, Star Wars 9, Furious 8, or Marvel whatever-number-we’re-on-and-how-many-Hulk-movies-do-we-count-exactly?

The better question is why are many nonprofits functioning the same way?  After all, for many, the need is great – perhaps more than ever for many.

I’d argue is it because of a conflict between the best interests of the nonprofit and those of its partners.  Agencies are often on three-year contracts and even the managers of marketing program have a short half-life in a bottom-line driven enterprise.  It’s unlikely that they will be pushing for increased experimentation in their perceived final year.

Or, as fictional-Art-Howe said of his timid managing resulting from a one-year contract in Moneyball “I’m playing my team in a way that I can explain in job interviews next winter.” If he was to mess up, it would be in a way that conservatively comported with conventional wisdom, not on something his future employers would view as a mistake.

So as responsible managers of marketing programs, we must look at the people and the institutions involved in our programs and ask whether their incentives are to be with us for the long haul. From their actions, you should be able to see whether they are interested in doing the exploring necessary to find the next strategy, offer, channel, technique, etc.  And if you are interested in surviving long-term, you should see that they do.