1.
FOUR LAWS
OF SOFTWARE ECONOMICS
RICH MIRONOV
@richmironov

2.
@richmironov
4 Laws of Software
Economics
#1
Your development team will
never be big enough

3.
Development can
never build as fast
as we can dream

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.
#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.
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.
For Software
All of the profits
are in the nth copy

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.
Software Tiers/Bundles

10.
There’s nothing more
wasteful than brilliantly
engineering a product that
doesn’t sell.

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.
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.
Naked without
• Deep customer understanding
• Positioning, messaging, awareness
• Sales & channels
• Support, evangelism
Software Bits < Whole Product
@richmironov

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.
Most of the success /
failure of a product is
determined before we pick
our first developer or fill
out our first story card

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.
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.
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.
Kano Model
Baseline

20.
• Business value error bars >>
engineering error bars
• Bottom-up prioritization  ugly
products
• Biased trade-offs among unlike
items
Analytics < Strategy

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.
“I skate to where the puck is going
to be”
Strategy Requires Strategy
Strategy requires judgment

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.
Rich Mironov
Mironov Consulting
San Francisco, CA
rich@mironov.com
1.650.315.7394
twitter.com/richmironov
linkedin.com/in/richmironov