The Explore-Exploit Framework

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So this week my Gumroad account crossed $5000 in revenue, I started this account earlier this year to test out a bunch of product ideas I had in my mind. I kicked off the account with a writing course, got some success from it.

But what really moved the needle was the crazy 25in25 challenge that I've been doing since June. I'm launching 1 micro product every week for 25 weeks in a row - from June to December 2022.

More about the challenge here.

25in25 is a branding play, and the public accountability helps me actually ship stuff every week.

But at the core, it's an Explore-Exploit challenge.

You explore a bunch of things, and then double down on the stuff that works.

Simple as that.

First you explore

I've failed enough times with my side projects and business ideas to internalize the fact that I don't know shit about what the market wants.

But that doesn't mean I'm a failure.

It's not a competence problem, it's an information problem.

If only I had more info on what the market wants, I would take action on it, improve my products and provide more value (and make more money!)

Right?

So what do you do to get more info?

You explore.

You go wide, test out a bunch of things to see what works. You embrace your shiny object syndrome.

You put more buy buttons on the internet. (context)

Why buy buttons?

Because that is the only real way to test a business idea.

Ask for feedback and you get supportive comments from friends.

Ask for money and you get real feedback on whether your idea is any good or not.

A swiped credit card and a happy customer is the only sign that your idea has any weight.

So yes, when you're exploring -

Make a landing page.

Explain your idea.

Put a buy button under it

Then go out and share the landing page with the people who you think are your ideal users.

Treat it as a tiny experiment.

Of course 90+% of the experiments will fail, but 5-10% will succeed.

You will have valuable insights on what works and what doesn't.

And once something works, you double down on it.

Then you exploit

Every subsequent experiment improves in accuracy because you apply the lessons of the previous one. You do more of what succeeds.

For example -

The first project under my 25in25 challenge was a mastermind program for solopreneurs and indie hackers.

I did the process - landing page, buy button, announcement and outreach. I made 12 sales.

But the idea wasn't validated yet.

12 credit cards were swiped, but I had 0 happy customers.

By the time the program ended 4 weeks later, I had a bunch of happy customers.

That give me hope to double down on this idea. So I ran the program again next month, and the next and so on...

I kept improving it based on user feedback and the lessons I was learning.

It's been fairly successful so far.

But I've launched a bunch of other projects since then. Most have failed miserably.

For example -

I launched "The User Interviews Playbook" back in July.

Hypothesis - Entrepreneurs need to learn how to interview users and improve their products.

I'm a product manager, I've done hundreds of user interviews, I've read every book out there about user interviews. So I thought I could make an actionable guide to user interviews, and people will love it, it will be a great product.

I was right - it turned out to be a great product.

But I was also wrong - nobody loved it, they didn't need it.

Or at least, not so badly that they would swipe their credit card for it.

A failed experiment, but not a complete failure.

It did get some sales, made $100+ dollars, but only when I promoted in Product Management communities. I realized that Product Managers are more interested in learning how to do user interviews than solopreneurs and indie hackers.

But PMs aren't my primary audience. Not at this time at least.

So I stopped promoting the user interviews playbook, I didn't "exploit" it.

This brings me to my last point today - how to decide if you should exploit or abandoned an idea?

How do you decide?

Every experiment or business idea is a mix of 3 elements - audience, offers, channels. (context)

And you run the explore-exploit framework at every level.

So the user interviews playbook had a great offer and it worked through certain channels, but that was not the audience I was after.

When you're exploring you learn that in some cases the audience is the perfect fit, in some cases the offer is great and in some cases the channel is great.

Business wise, an experiment succeeds when it works at all these 3 levels.

So to exploit - you double down on the audience that has worked for you, the offers they have found useful and the channels that are working.

But there are more factors that can help you determine if an experiment is worth exploiting or not.

For me it's basically 3 things -

Revenue

Reach (followers, subscribers etc.)

Creative Satisfaction

Every experiment has to tick at least 2 boxes in that list for me to go and exploit it.

I don't want to do stuff only for money, or only for followers, or only for creative satisfaction.

2/3 is the sweet spot, 3/3 is GOLD!

1/3 I abandon.

In terms of numbers - Something has to make $100 or get 50 followers/subs in 7 days for me to start "exploiting" it.

You set your own numbers. But do set them!

Homework

So, quick homework for you today -

1. Make a list of all the ideas you want to try out. 2. Design an experiment to validate each idea (how will you know it has worked? how will you decide if you should exploit it or abandon it?) 3. Set a deadline for each idea (it doesn't have to be a week, but there has to be a deadline, at least 1 week, at most 12 weeks) 4. And then get started - pick 1 idea, explore it, if it works exploit it, if not then abandon it and move on.

If you're starting from 0, these can be product ideas, but if you already have a business then these would be more tactical ideas in terms of testing out new audience, offers or channels.

Whether you make $500, $5000 or $50,000 at every step you will find the explore-exploit framework.

Hope you found this useful, just hit reply and let me know :)

Cheers!

Ayush

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