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Four Laws of Software Economics

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Talk for Business of Software 2015 (Boston) laying out some laws of gravity for the software business. Also serialized as 4 long posts on www.mironov.com

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Four Laws of Software Economics

  1. 1. FOUR LAWS OF SOFTWARE ECONOMICS RICH MIRONOV @richmironov
  2. 2. @richmironov 4 Laws of Software Economics #1 Your development team will never be big enough
  3. 3. Development can never build as fast as we can dream
  4. 4. Magical Thinking “CEO says it’s really important.” “We already promised it to a big prospect.” “How hard could it be? Probably only 10 lines of code.” “We’ve been talking about this for months.” “We’ve gone agile, which gives us infinite capacity...” “My neighbor’s kid could do this in an hour.”
  5. 5. #1 Law of Ruthless Prioritization • AND requests but EXCLUSIVE-OR decisions • We succeed by finishing a few critical things Executive’s Job • Make hard trade-offs • Battle magical thinking and one-offs
  6. 6. 4 Laws of Software Economics 1. Your development team will never be big enough Law of Ruthless Prioritization 2. All of the profits are in the nth copy
  7. 7. For Software All of the profits are in the nth copy
  8. 8. Revenue Implications Goal is not to minimize costs but to maximize revenue • Your development team of 6 costs… • Implied revenue commitment… • Incremental cost per user? $1M/year $6M/year
  9. 9. Software Tiers/Bundles
  10. 10. There’s nothing more wasteful than brilliantly engineering a product that doesn’t sell.
  11. 11. #2 Law of Build Once, Sell Many • Segmentation: strategic art of choosing customers who want the same solution Executive’s Job • Focus on segments, not deals
  12. 12. 4 Laws of Software Economics 1. Your development team will never be big enough Law of Ruthless Prioritization 2. All of the profits are in the nth copy Law of Build Once, Sell Many 3. Software bits are not the product
  13. 13. Naked without • Deep customer understanding • Positioning, messaging, awareness • Sales & channels • Support, evangelism Software Bits < Whole Product @richmironov
  14. 14. Commercial Software Failure Modes* Undifferentiated or poorly positioned Marketing/sales/ channel failures Late delivery Poor quality Wrong problem, wrong solution *In my personal experience
  15. 15. Most of the success / failure of a product is determined before we pick our first developer or fill out our first story card
  16. 16. #3 Law of Whole Products • Customers buy solutions (include software) • Mean-Time-To-Joy Executive’s Job • Watch for organizational silos • Make sure incentives are aligned
  17. 17. 4 Laws of Software Economics 1. Your development team will never be big enough Law of Ruthless Prioritization 2. All of the profits are in the nth copy Law of Build Once, Sell Many 3. Software bits are not the product Law of Whole Products 4. You can’t outsource your strategy
  18. 18. Input < Decisions • Voice of the Customer • Surveys • Crowdsourced feature ranking • Showcase customers • Industry analysts • Competitor data sheets • Smartest customers • Smartest developers • Executive Survey-of-One • Investment banker • Your mother-in-law • Inflight magazine @richmironov
  19. 19. Kano Model Baseline
  20. 20. • Business value error bars >> engineering error bars • Bottom-up prioritization  ugly products • Biased trade-offs among unlike items Analytics < Strategy
  21. 21. • Hard to rank-order unlike items • Instead, group similar requests • Cross-bucket trade-offs reflect our biases Prioritizing Within Buckets Prioritization within buckets
  22. 22. “I skate to where the puck is going to be” Strategy Requires Strategy Strategy requires judgment
  23. 23. 4 Laws of Software Economics 1. Your development team will never be big enough Law of Ruthless Prioritization 2. All of the profits are in the nth copy Law of Build Once, Sell Many 3. Software bits are not the product Law of Whole Products 4. You can’t outsource your strategy Law of Judgment
  24. 24. Rich Mironov Mironov Consulting San Francisco, CA rich@mironov.com 1.650.315.7394 twitter.com/richmironov linkedin.com/in/richmironov

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