Prioritize the present when planning your product. Neglecting the future is almost as bad as over-emphasizing it. The key is to incorporate your plans for the future correctly by making them play second fiddle to the present needs of your market. Serve both today and tomorrow – but prioritize today.
In The Long-Run, We Are All Dead
If you’ve had any macro-economics courses, you’ve heard the phrase “…in the long run” a million times. Supply and demand balance out in the long run. Monopolies are not profit-maximizers in the long run. The yield curve is an accurate predictor of…
You get the picture.
Long run is a misleading guide to current affairs. In the long run we are all dead.
You can make financial investment decisions based on the eventual outcome that is theoretically predicted. Keynes’ point is that practically speaking, the long run is too long.
The same holds true when making product management investment decisions.
Focus On The Now
Jeff Lash wrote a really good article on my birthday about the need to plan for the present [needs] and the likely future [needs] – and to not over-emphasis the future.
Understanding the long-term implications of decisions is important, though possibilities well into the future should not overshadow more pressing short-term decisions.
Plan for the present and likely future, Jeff Lash
Jeff talks about the need to make sure you address the current market demands. Jeff warns against the risk of rejecting “good enough for now” solutions when they fail the litmus test of meeting improbably future needs.
Planning for too far into the future often happens because people are in search of the “perfect” solution. (Surprise — there is never one!) A “good enough” solution might perform well for several months or years; unfortunately, those looking for the “perfect” answer will reject what is “good enough” and insist on a solution that is usually more complicated, more complex, and more expensive.
Plan…, Jeff Lash
Plan For Tomorrow Too
Jeff raises one of the major concerns with planning for tomorrow:
Another danger in planning ahead too much is that the farther into the future you try to look, the more likely you are that your predictions will be wrong.
The right way to deal with this is not to ignore tomorrow (because it is inherently risky), but to account for that risk.
Prioritization is inherently the making of investment decisions. You prioritize the present needs of your market ahead of the future needs. On the average, that’s how it works out. But you shouldn’t arbitrarily delay future needs. How do you compare the potential value of something way out on the horizon with something more immediate? We can look to economics (and management accounting) for techniques to do this.
In accounting, you use the notion of net present value to create equivalent measures of the value of two different investment choices. This allows you to maximize your return on investment. You do the same thing when making product management decisions.
In product management, we prioritize based on ROI. More specifically, you maximize the overall value by prioritizing deliverables by value per unit of cost. This maximization strategy front-loads the value into your development schedule. In layman’s term, you’re getting the fastest high-value returns by working first on the use cases that have the highest value-to-effort ratio. Not the use cases that have the highest value.
This is exactly the same as financial ROI maximization. The hard part for product managers is in determining the right numbers to use. Once you have numbers, the rest is easy.
Discounting For Risk
To get the right numbers, you have to estimate or assess the value of any particular capability. We deliver most effectively when we plan each release at the use-case level. You also have to estimate the cost of delivering each use case. Depending on how you run your projects, you may want to flesh out the use cases and then develop detailed work breakdown structures and cost estimates. However, you can move more quickly by using use case points to estimate the level of effort (and therefore cost). Since your estimates of value are likely to be imprecise, you can make decisions “of the same quality” using use case points as you could with detailed cost estimates.
All of this math results in approximations, so you should always use your best judgment and “sniff test” the numbers. If the numbers are telling you something that you didn’t expect, either you don’t understand your market, or you made bad assumptions about value or cost.
This approach works for comparing “everything today” features or functionality. To properly incorporate tomorrow’s use case into the prioritization, you need to discount for the risk that your value-estimate is wrong. You do that by calculating the expected value of the use case. If you estimate a 10% chance that your use case is worth $100,000, then the expected value of that use case is $10,000. The expected value is the risk adjusted value. You use that risk-adjusted value in your prioritization.
In the real world, Jeff’s advice is almost always right: focus on the present, not the improbable future.
With the approaches outlined above, you can make a financial argument that will usually lead you to the same conclusions. But when it doesn’t, you’ll have the data to back it up. There are times when a long-term investment (for future use) is justified, even at the expense of delivering some immediate term value. If you completely neglect long-term investments, you’ll never be a visionary leader of your market.
If you over-emphasize long-term value, your product will be dead before your market is ready to benefit from it.