Wednesday, February 11, 2015

Netflix “House of Cards Leak”: One Way that Organizations Explore

Those who pay close attention to media (or who simply have a twitter account) know this story already. On the afternoon of February 11, episodes of “House of Cards” were made available on Netflix, before the scheduled release date. Fans delighted, started watching, and sent tweets inviting others. The joy lasted a few minutes, and then the episodes were made unavailable again.

Viewers were disappointed. Social media was in a frenzy. Soon they reached the conclusion that this had been a very clever marketing stunt, designed to make people talk about the new season just before it would be released. And wow, did it ever work well, people did talk, and those who caught a view spread the news of what they had seen to eager fellow fans. And in a way, it is correct that this was a very successful form of marketing, at least if we take seriously the idea that social media expresses interest in products (and we should take that seriously).

But there is one interesting correction. It was great marketing, but it was not a clever marketing stunt. In fact, it was an error that the episodes had been made available, and they were made unavailable because Netflix discovered the error and corrected it. But how do we understand errors like this, errors that turn out to be great in some way, like marketing in this case?

A good way is to think of organizations as exploiting what they currently know and exploring to gain new knowledge, an insight that stems from an article by James G. March (see below). It makes sense to do both, because either one alone, or as a too small proportion, will leave the organization vulnerable. But here there is a problem. When seeking high performance and good coordination among employees and units, organizations end up exploiting a lot, and exploring very little. That’s a short-term benefit for efficiency, but also a long-term problem because the organization can become obsolete. So finding out how to explore enough, or even more than nothing, is a problem in designing organizations. R&D departments are one solution, but actually they often end up exploiting a lot of current knowledge too.

Fortunately there are some solutions that happen simply because of the way organizations work. The “House of Cards” release is a good example of one. An error is a form of exploration. Netflix did not intend to release the series early, but after doing so they have learned something new and valuable about marketing. Will they do it again, on purpose, on a later series? I would be very surprised if they did not. Exploration gives new knowledge, which organizations exploit later. And it really does not matter whether the exploration was deliberate or an error; any useful knowledge can be exploited.