FOUR LAWSOF SOFTWARE ECONOMICS

RICH MIRONOV@richmironov

@richmironov

4 Laws of Software Economics

#1Your development team will never be big enough

Development can never build as fast as we can dream

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.”

#1Law 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

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

For Software

All of the profits are in the nth copy

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

Software Tiers/Bundles

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

#2Law of Build Once, Sell Many• Segmentation: strategic art of choosing customers who

want the same solution

Executive’s Job• Focus on segments, not deals

4 Laws of Software Economics1. 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

Naked without• Deep customer understanding• Positioning, messaging, awareness • Sales & channels• Support, evangelism

Software Bits < Whole Product

@richmironov

Commercial Software Failure Modes*

Undifferentiated or poorly positioned

Marketing/sales/channel failures

Late deliveryPoor quality

Wrong problem, wrong solution

*In my personal experience

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

#3Law of Whole Products• Customers buy solutions (include software)• Mean-Time-To-Joy

Executive’s Job• Watch for organizational silos• Make sure incentives are aligned

4 Laws of Software Economics1. 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 productLaw of Whole Products

4. You can’t outsource your strategy

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

Kano Model

Baseline

• Business value error bars >> engineering error bars

• Bottom-up prioritization ugly products

• Biased trade-offs among unlike items

Analytics < Strategy

• Hard to rank-order unlike items• Instead, group similar requests• Cross-bucket trade-offs reflect our

biases

Prioritizing Within BucketsPrioritization within buckets

“I skate to where the puck is going to be”

Strategy Requires StrategyStrategy requires judgment

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 productLaw of Whole Products

4. You can’t outsource your strategy Law of Judgment

Rich Mironov

Mironov ConsultingSan Francisco, CArich@mironov.com1.650.315.7394

twitter.com/richmironovlinkedin.com/in/richmironov