Slides from the talk given by Rich Mironov at the Product Management Auckland Meetup on 18 July 2017

1. FOUR LAWS
OF TECH PRODUCTECONOMICS
Rich Mironov
Product Management Auckland
18 July 2017

3. @richmironov
4 Laws of Tech
Product Economics
Fact #1
Your development team will
never be big enough

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

5. 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.”

6. #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

7. 4 Laws of Tech Product Economics
1. Your development team will never be big enough
Law of Ruthless Prioritization
2. All of the profits are in the nth copy/unit/user

8. For Software (and Hardware)
Fact #2: All of the
profits are in the
nth copy, unit or
subscriber

9. Revenue Implications
Goal is not to minimize costs
but to maximize revenue
• Your development team of 6-8 costs…
• Implied revenue commitment…
• Incremental cost per user/unit…
$1M/year
$6M/year
< 3% (SW)
< 20% (HW)

10. Software Tiers/Bundles

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

12. • Professional Services rewarded for more hours, more
customization. Priced for effort.
• Product rewarded for large numbers of frictionless,
self-onboarding subscribers. Priced for value.
Conflicting Metrics & Models
12
GrossProfit

13. Custom Development
Key Metric Staff Utilization (busy developers)
Business Model Mark-up on staff hours
We track... Projects/programs
Essential skills Sales, business development
Innovation
ownership & risk
Client owns IP: we hope they pay and
send more projects our way
Graded first on... On time, on budget, on spec
Customer wants a
one-off?
Plan to productize
platforms?
Always sacrificed when paid projects
run late
Custom Development Repeatable Revenue Products
Key Metric Staff Utilization (busy developers) Users (subscribers, licenses, units)
Business Model Mark-up on staff hours Re-use of identical tech bits
We track... Projects/programs Products/releases
Essential skills Sales, business development Segmentation, validation
Innovation
ownership & risk
Client owns IP: we hope they pay and
send more projects our way
We own IP: we hope target segment
pays handsomely for perceived value
Graded first on... On time, on budget, on spec Market winner vs. competition
Customer wants a
one-off?
"Great! Here's a change order"
Plan to productize
platforms?
Always sacrificed when paid projects
run late
Essential part of product line planning
"Let me put that (deep) into the
backlog."
Opposing Management Models
“Great, here’s a change order!”

14. Art courtesy of Arne Olav Gurvin Fredriksen

15. #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
(or become a professional services firm)

16. 4 Laws of Tech Product Economics
1. Your development team will never be big enough
Law of Ruthless Prioritization
2. All of the profits are in the nth copy/unit/user
Law of Build Once, Sell Many
3. Technology bits are not the product

17. Naked without…
• Deep customer understanding
• Positioning, messaging, awareness
• Sales & channels
• Support, evangelism
Tech Bits < Whole Product

18. Jobs To Be Done

19. Commercial Product Failure Modes*
Undifferentiated
or poorly
positioned
Marketing/sales
/ channel
failures
Late delivery
Poor quality
Wrong
problem,
wrong solution
*In my personal experience, mostly SW

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

21. #3
Law of Whole Products
• Customers buy solutions (which may include
software/hardware)
• Mean-Time-To-Joy
Executive’s Job
• Focus on end customer satisfaction
• Watch for organizational silos

22. 4 Laws of Tech Product Economics
1. Your development team will never be big enough
Law of Ruthless Prioritization
2. All of the profits are in the nth copy/unit/user
Law of Build Once, Sell Many
3. Technology bits are not the product
Law of Whole Products
4. You can’t outsource strategy or discovery

23. Decisions > Input
• Voice of Customer/CAB
• Showcase customers
• Surveys
• Crowdsourced feature
ranking
• Industry analysts
• Competitor data sheets
• Smartest customers
• Smartest developers
• Executive Survey-of-
One
• Investment banker
• Your mother-in-law
• Inflight magazine

24. • Business value error bars >>
engineering error bars
• Bottom-up prioritization à
ugly products
• “We’re one feature away from
competitive parity”
Strategy > Analytics

25. • Markets are complex, surprising
• Your best ideas are half wrong
• Need 16 (or 22 or 35) in-depth
interviews to see patterns, outliers
• Be there yourself to spot details,
emotions, connections, subtlety
Discovery (Validation)

26. Kano Model
Baseline

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

28. Look at the water
to tell you where
the wind will be
coming from…

29. 4 Laws of Tech Product Economics
1. Your development team will never be big enough
Law of Ruthless Prioritization
2. All of the profits are in the nth copy/unit/user
Law of Build Once, Sell Many
3. Technology bits are not the product
Law of Whole Products
4. You can’t outsource strategy or discovery
Law of Judgment

30. Rich Mironov
Mironov Consulting
San Francisco, CA, USA
www.mironov.com
+1-650-315-7394
rich@mironov.com
@richmironov