Category: economics

Why? Why? Why? Why? Why? (5 of them)

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As I described this weekend on Snapchat using the example of my house, Root Cause analysis – or asking the 5 why’s – is essential to lean scalability and a thriving culture of relentless improvement. In complex systems thinking, you must see problems (lack of quality, decreasing sales) as a symptom of the system as a whole.

I bought my first home in November in a north suburb of Chicago. Naturally, that means finding little issues here and there as I go. It was originally built in the 1950’s and I knew it was in a neighborhood that had flooded a bit a few years back. I was excited from the first tour to see a fantastic dual sump pump system in the finished basement.

Unfortunately: The previous homeowner had treated the symptom, not the problem.

A house (like a software product or tool in its context) is part of a complex adaptive system. It is inserted into a biological ecosystem, and integrated with multiple networks (cable, electrical, plumbing, roads). What the previous homeowner did is a mistake many of us make when it comes to eCommerce, marketing campaigns, enterprise software, you name it – the symptom was treated in the context of a system in homeostasis without changing the ability of the system to adapt to deal with a chaotic event.

SO – my basement has flooded, just a little, three times this spring.

Enter the “5 Why’s” Analysis:

1- Why is the carpet wet in the basement?  The sump pump didn’t pump out the water quickly enough. If I were to continue to treat the symptom, I might upgrade the sump pump, which is expensive and might not work (and what we tend to do in the workplace).

2- Why didn’t the sump pump handle it?  There was too much water around the house, building up hydrostatic pressure. The second time we had flooding, I noticed that the water appeared to have come in from all sides, not from the sump pump reservoir overflowing. (i.e. without “going to the place” I might have continued to blame the sump pump)

3- Why was there too much water around the foundation? I have a negative grade, meaning my lawn on one side slopes slightly toward the house. Again, easy to blame that and spend a fortune on a re-grading (legacy system migration anyone?) but I had the joy of really, really “going to the place” and spent an 1hr flash-flood storm OUTSIDE, managing the flow of water in non-normal conditions. After all, the yard may slope slightly, but there are 4 basement egresses with drains in the bottom that run to the sump pump…

4- Why did so much water flow to the basement window wells that the drains couldn’t get the water to the sump pump quickly enough? (notice that we are finally getting somewhere in our root cause analysis!) Once I was out in the storm, it was clear that the rain on its own was not the issue: despite having cleaned out my gutters hours before the storm, the winds that blew the storm in kicked lots of new leaves onto my roof, blocked the gutter, and a waterfall of water came off the gutter onto the negative grade instead of going down the downspout system that drains the water in a safer direction. What I also noticed was that the sidewalk gradually filled with water from the downspout nicely – meaning there was a certain amount of in-yard flooding that could occur before the water would pour unchecked into my window wells. (note, I could invest in LeafGuard or something as part of a total replacement of my gutters, but have we really found the root cause?)
5- Why doesn’t the system (my house in its context) handle a the flow of water in that quantity? Now we’re down to business. The soil has a high clay content and hasn’t been aerated recently. The previous homeowner removed bushes on that side of the house but not the roots and stumps. The downspouts eject water 3 feet from the house, but into an area of the lawn that can be easily filled with water that will then flow back to the egresses.

Root cause – The system is not prepared to handle the flow of unwanted inputs under non-normal conditions.

Oops, I slipped into discussing emergent leadership in complex adaptive systems.  What I meant was, nobody had bothered to look at what happens to the flow of excess water in flash-flood conditions.  Just like I frequently see no one planning for “storms” in their agile or devops culture, their social media presence, or omnichannel efforts.

To round out the story, now that we have a ROOT CAUSE.  I can come up with a….

Solution – Create a sub-system that encourage adaptation to non-normal systemic conditions.

Sorry, I did it again.  But you really can’t tack on a new tool or process if you have underlying cultural factors that need to be addressed.  For my house, the answer is simple, add a French Drain system that will handle excess water during a flash flood.

Now, with my years in custom app development consulting, the parallel is really quite striking. Investment in a bigger pump, a total re-grading, or new and improved gutters would have been an expensive way to deal with emergent properties of the system without helping it adapt properly to non-normal stress. The french drain and dry well implementation I have started will require some hard work (i’m digging it by hand!) but potentially no cash (I already have more river stones than I know what to do with).

  • I’ve discussed how this applies to agile or DevOps transformations that don’t address cultural problems.
  • I’ve shown how bad investments in software happen due to a lack of understanding of the root cause.
  • Look for more on how this applies to eCommerce and Marketing on the way!

Are You Ready for the HaaS Economy?

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Internet of Things innovation is diving hard and fast into the hype cycle’s trough of disillusionment (Check last August’s Gartner’s Hype Cycle).  After all, we have a fridge that can stream video to my phone and…. okay not much going on really.  The real potential for IoT has been in the industrial and B2B space where big “dumb” machines could work together much better with a little “smart” tech.

The cultural quirk that has made innovation in IoT is the enormous emphasis on consumerization of new tech.  If the drone isn’t a personal flying car or the IoT can’t be purchased as a smart home upgrade, people have a tough time caring I guess.  So all the hype is focused on the B2C market while most of the potential for innovation is in the B2B space.

Enter the Hardware as a Service economy.

Having played in the IoT space with several early adopters as a consultant, this is definitely huge.  Essentially, we will see more smart hardware suppliers for both consumer and B2B markets enter.  Containers, logistics, irrigation, experience marketing all have immense potential for startups that can bear the risk of innovation and maintain the expertise of servicing and implementation.  That’s the heart of what makes this a no-brainer – “HaaS transforms an up-front capital expenditure into an ongoing operating expense, which also allows for more accurate cost/value comparisons” via TechCrunch

That’s three huge differences HaaS will make in IoT:

  • Finance is Simpler: Companies don’t need to bear all the risk of innovation in tech they don’t understand.
  • Accounting is Simpler: Companies don’t need to bear all the risk of investment in a massive purchase of tech they don’t understand.
  • Economics is Simpler: Companies can more accurately trace the value-add to their ongoing operations investment, rather than calculating a BullShit ROI for projects based on tech they don’t understand

Your ROI is Total BS

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ROI is meaningless.  GP% is meaningless.  Signups.  Clicks.  Views.  None of these tell you anything meaningful or actionable.  None of this ensures survival.  In fact, it is through sheer mass that some enterprises survive.  It is the churn of hype cycles and perceived value that keep new customers fooled.  But it is definitely not sustainable.  Big investments end with big blunders that result in mass layoffs and enormous bankruptcies.  The name is the only thing that survives. Is that the company you set out to build?  No.

Let’s assume you are a software company selling enterprise SAAS.  Your entire company is the value stream.  The ongoing operating costs are less than ongoing revenue.  Investing in the sustainability of your model of economic value creation and capture is every dollar you spend.  Those dollars, little by little, react with the market either creating or negating value creation.

The problem is that most enterprises work from the assumption that large investments equate with economies of scale.  While this may be true of investment in automated manufacturing there are no economies of scale in software development.  It is the individual knowledge workers that create innovative software.  The velocity with which you can adapt as a system combined with superior understanding of problem-solution fit in the market is the key to competitive advantage.

The question of how to invest should be quite simple when you are a large company that has revenue growing at the same rate as costs – small investments per opportunity with maximum ability to correct an incorrect investment.

That is enterprise agility.

Enterprise Agility is the speed at which an incorrect decision is recognized corrected.  The smaller the investment decision, the faster the return is known. Lean trims the excess weight, off-balance feedback, and poor technique that undermine agility.  The effective flow of information across the creative process of knowledge workers is essential.

This is where you must realize that unless you layoff staff, you’re investing the same amount continuously.  The ROI of a project is as meaningless as the ROI of a developer day.  The input of resources is relatively static, maximizing the value stream as a system is essential.

This is why the a right-place/right-time, brilliant, socially-savvy entrepreneur-engineer is the most agile and lean possibility: perfect and instantaneous knowledge-sharing internally (in the brain), distinct competitive advantage through the extremely unique skill set (s)he has grown to master.  That is the sprinter that you want your Superorganism to become.  In the right place, at the right time, with the correct knowledge and materials, with instantaneous information flow across the value stream.

So if ROI is meaningless to decisions (because we are paying for individual pursuit of knowledge-worker-creativity regardless of rate of return), how do we possibly make rational financial decisions about innovation, discovery and exploitation of economics rents?  In fact, lean manufacturing has studied this for decades.  When the rate of investment (the cost of production) is held constant, prioritization of economic value added rather than expected rate of return should be our focus.  In a zero-sum competitive game with uncertain returns and asymmetrical information, the time between investment and value capture is the only meaningful variable we can impact.  While cost of delay versus product lifetime return on investment may be more difficult to understand when looking at Toyota and the Prius, this is easy to see with Software as a Service, because the continuous addition of value in exchange for subscription-based fees creates two roughly stable lines. The only meaningful way to improve investment is to exploit information asymmetry more effectively than your competition.  Since you are investing the same amount continuously, you must minimize the cost of delay of value capture.

To put it another way: In a system with continuous investment, only the opportunity cost incurred due to delaying an investment matters. This is not first-mover advantage at the new product-market level, this most-effective exploiter of innovation as an a competitive advantage.  This requires a shift to systems thinking and investment in strength of culture. Money is not your scarcest resource. Brilliance-time (that you’re paying rent for daily) is your scarcest resource.  To maximize value capture, you must maximize the time spent in a state of market information asymmetry.  At the current pace of innovation and obsolescence, the only way to maximize value capture is to minimize cost of delay due to incorrect prioritization.

This implies three goals:

1 – Minimize the impact of an incorrect investment of system-brilliance-time by reducing size of each commitment

2 – Increase the adaptiveness of the system to maximize throughout and future adaptiveness

3 – Minimize the time it takes to receive feedback (primarily through analytics) from the market

4 – Make appropriate risk-taking and experimentation a normal part of every creative process

Enterprise Toxic Waste

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In a complex adaptive system of knowledge workers, the ability of a group to creatively adapt to an external stimulus becomes impossible once all of the organization’s energy is expended on maintenance of internal homeostasis. To the extent that leadership is an emergent property of the system – in which an individual organically focuses collective energy into new adaptation in response to an external stimulus – it can distribute the pressure to innovate across the entire organization.  When all potential energy is focused on individual self-protection, emergent leadership is stifled. The superorganism “behaves” exactly as any evolving species “behaves” – when conditions are favorable, individuals focus resources into reproduction, increasing the likelihood of variation and aggregate potential for adaptation as a species.  When conditions are unfavorable, resources are dedicated to individual self-preservation, reproduction is reduced, and the species is “culled” leaving only the adaptations that best fit the pressures of the current unfavorable context.  This ebb and flow of creativity and narrowing is seen within the organism as well: in favorable conditions, the cells work toward reproduction, maintaining the health of the system (the body) while in unfavorable conditions the individual cell maximizes its own self-preservation to the detriment of the body (cancer).

“Tech” – currently represented by software, apps, and the web, thrive on innovation and disruption.  The industry as well as organizations attempting to compete through innovation is driven by the desire to maintain a continuous state of innovation at the superorganism  level; instead, most superorganisms (companies, the enterprise) even in the software industry remain cancerous, slowed to a near-death state, presenting painful symptoms far removed from the root cause of dysfunction.

This wasted potential for innovation, sustainable competitive advantage, minimum viability, and adaptive survival is not the fault of any individual and is not strictly caused by the official mission or formal structure of the organization.  This is a cultural issue, not a policy issue.

The formal leaders of a complex system, the managers and executives who are synthetically, socio-contractually positioned to act as the official drivers of innovation (or “vision” or “strategy”) for the organization cannot bureaucratically force creativity and adaptation, as these must emerge organically from favorable conditions across the whole.  Often the formal leaders are charged with being the exclusive source of adaptive creativity despite the fact they are typically in the worst position possible far removed from the external stimulus – to be relied upon for the emergent leadership that drives innovative adaptation.  The inherent waste then is two-fold: the official manager is unlikely to consistently display emergent leadership while the presence of a formalized leader prevents others from organically emerging.  Whether the creative adaptation desired by a manager is valuable and likely to succeed or not, the manager must  force action against the system, as a toxin, a betrayal of the natural state of the system.  In response, the complex adaptive system protects itself against the likelihood of a failed adaptation through cancerous self-preservation of maladaptive patterns.

Unfortunately, if this continues in the context of increasing demand, the growth to supply it exacerbates the likelihood of failed formal leadership and the need for individual or self-preservation.  The waste only grows.  To counter the failure of fewer, more detached formal leaders, the existing formal leaders of many organizations continue to add formal layers in hopes that elevating “high-performers” to official power can mitigate the systemic failure to adapt properly.  This is problematic because the optimization of formal management further decreases the likelihood that any enmeshed individual could organically emerge to lead systems adaption – every individual is progressively more disconnected from the system as a whole.  Silos arise, stage-gate processes are crystallized, and creativity – without needing to be actively stifled – is now unlikely to impact the system as a whole.

Before we move on, promise me you understand:  lean does not mean layoffs.  Toyota’s dedication to the individual on the factory floor is central to its success.  If you try to mimic their process improvement, focus exclusively on eliminating waste, and then cut staff to save money, you’re doing it wrong.  That’s a huge leadership failure. Hacking off a portion of a complex adaptive system will direct any energy gained from increased efficiency toward self-protection.  It is never worth it.

Game Theory shows us that the best way to build sustainable competitive advantage is to invest in resources that create and maximize information asymmetry against our competitors.  On the other hand, we must also raise barriers to exit and increase switching costs for our scarcest resources, people. The more scarce, unique, and hard-to-steal your people are, the more defensible your unique value proposition and the higher your economic rents.  This requires a culture in which the individual has psychological safety in which to take prudent risks.  Trust – the kind that is earned through time in battle together – really trusting in peers, superiors, and subordinates is essential. The individual must be invested in and given the resources necessary for their pursuit of mastery, autonomy, and purpose.  Only then can teams organically self-organize around new forms of adaptation.

Inside that organization, you need the opposite conditions compared to the outward-facing competitive landscape in order to maintain margins and economic value captured.  Maximizing market information asymmetry requires close to perfect internal symmetry of knowledge – in other words, alignment.  Real alignment of understanding of the problem, the objective, and the acceptable risks in pursuit of a solution.  You need continuous throughput that maximizes value add and minimizes waste.  You need low barriers to meaning and purpose and high barriers to exit.  You need slack and creativity.  You need to encourage the tension and paradox and dissent that creates new ideas, while ensuring the organization as a whole is respect-based and disciplined about change.

In Lean we call this Minimum Viable Product. The “product” that must be minimally viable is not a product on the shelf that a consumer buys. The “product” is the sustainable business model that creates economic value that can be captured.   Whether there is one product for sale or hundreds, built by 15 people or 5,000, the minimum viable product is minimal if all consumers receive more economic value than their transaction cost at a price that is great than the cost of production; it is viable if there are enough consumers and enough demand to make the business model of production sustainable.

Seen in this way, the upgrading of any resource across the value stream to maximize minimum viable production should be considered as part of a single improvement roadmap, regardless of its handling by accounting “on the books” – whether it is an enhancement to a software product, brand recognition, acquisition of a competitor to gain market share, or training developers on a new programming language or delivery methodology.  In the end, all of these initiatives are the investment of capital for the purpose of economic value creation protected from competitive influences through creation and protection of unfair advantage.

This is critical – and why vanity metrics are so dangerous.  Even a very unhealthy, unsustainable company can create conditions of information asymmetry that protect its existence in the near-term, but touting a graph that shows increasing revenue, increasing company size, and increasing market share / number of customers does not paint a sufficient picture of the sustainability of the business model.  These numbers are a given. When they aren’t, companies love to find some other numbers that comfort them instead.

What a toxic, carcinogenic waste.

Defect Prioritization

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Defect Prioritization: Everything you ever wanted to know but were too afraid to admit that you needed to ask.

One of the biggest agile religious debates that seems to get people up in arms is backlog prioritization when planning has to balance known defects (especially in production) against new feature work.  Let’s dig in and find a sensible approach here.

First of all, realize that it isn’t a fun situation for developers: fixing a defect older than two weeks, even if you wrote the code yourself, is like looking at someone else’s work.  Especially if it is the cause of a problem, it hurts inside to look at it.  You wish you could re-write the whole thing because you’ve grown and learned and you’re a better developer than you were then!  I get it.  Naturally, it sucks that you can’t do that because you’d end up down a refactoring rabbit hole due to all the other code that depends on your code.  So you end up feeling like you’re adding duct tape to a hole in the hoover dam.  If you’re fixing a bug in code you’ve never seen before, its like your Product Owner told you to fix a hole in the Hoover dam, but said it in a language you don’t speak, while handing you a box of duct tape and shoving you in the opposite direction of where you need to go.  Support engineers – if they actually like what they do – are a very special breed and should be your best friend.  Get them a Snickers bar and a thank you card sometime.

Second, the “triage” work for identifying the importance of bugs (if that happens at all) in which a manual QA tester writes up a ticket and picks a “Criticality” level is a joke.  Even if you had an elaborate definition for each one, who cares?  A crash that impacts 70% of users is “critical” why?  The defect is critical to… what?  To who?  How many people?  How much money?

Now, the lazy moral high ground of newly trained agilists is to insist you should’ve never let the bugs out at all.  Six Sigma Quality baby!!!  That’s a nice thought, and a very valuable standard if you are starting a completely new project on the latest and greatest stacks.  You know, an iOS 9+ iPhone 6s or later mobile application from scratch.  Then, I do advise you to build less than you think you should, think harder about whether or not each feature is actually important, and ensure that no defect gets into the App Store. 

That isn’t most software and that isn’t the problem established software companies are grappling with while in the middle of an agile-at-scale transformation.  If are a Product Owner for 10% of an application older than three years, you definitely have defects and you definitely need a rule of thumb for what to do about them.  It isn’t your fault, but it is your responsibility.  Operating systems evolved underneath you.  Hardware was replaced.  Vendors changed.  SDKs stopped getting updated.  People changed.  Deprecations occurred.  Now you have a list 1,000 decisions to make.  In that scenario, the moral high ground “you shouldn’t have made any defects!” is lazy and unhelpful.  That’s not the reality and it provides no answer for what to do once you already have defects in production.  There’s really four approaches to consider.

1 – All About the Money:

On the one hand, calculating the ROI of every User Story then attempting to apply the same methods to your production or other leftover defects will require a pretty rigorous approach to finance, accounting, and statistics.  A simple example – if a LinkedIn share crashes every 100th time I cross-post to Twitter, what is the ROI of fixing it?  I’m not a paying customer nor is Twitter.  Should I just leave the crash and hope people don’t complain too much?  No, I don’t think anyone would suggest that.  That said, there definitely is a statistical algorithm for whether or not that crash is likely to impact my decision to become a Premium Member in the future.  But if the crash takes 11hrs to fix, test, and deploy while the data mining, analysis, etc takes 60hrs to gain a certainty of 75% – why on earth would anyone not fix the defect and move on?  Eric Reis popularized the saying “Metrics are people too” while Ash Maurya adapts this to say “Metrics are people first.”  That is to say, if you have crash count of 13, not a very actionable metric.  If you have a percentage of engaged users experiencing a crash in version 1.9.3 – you have an actionable metric, but that metric represents real people who are annoyed in real life about that crash!  Quantitative data needs to drive qualitative insight, not ever-more-complicated quantitative analysis.

On the other hand, there are important occasions when the money makes a difference.  If you have customers with a Service License Agreement or paid SAAS users threatening to leave or your actionable product metrics are moving in a scary direction on account of a defect or the perception of poor performance, the money should be the incentive you need to prioritize fixes over any new feature.  Once a customer is gone they are incredibly unlikely to come back.

2 – Actionable Product Metric: Oops

Oops!  We stopped talking about money and started talking about product metrics!  There is a good reason for that – if you prioritize the development effort that improves Acquisition, Activation, Retention, Referral & Revenue (AARRR!) then you are by default increasing the money.  ROI is not even the money question to solve, is it?  If you have a fixed team contributing to the revenue of a product, ROI variability or Gross Margin variability is what you actually want to track – as long as the costs per month to maintain and improve my product is outpaced by the growth of revenue from paying customers, the ROI is there and the Margins are there and everyone is happy!  The problem is that revenue, ROI, and Gross Margin are extremely lagging indicators of success.  They are a good indication of the stability of the performance of a company over time, which gives investors the confidence they need to keep the money there, but multi-year lagging indicators are very poor metrics for the decision-making of the teams that managing, maintaining, and improving the product.  Growth of total users or active users can be a great indication of possible network effects long-term.  Both of these long-term performance indicators are symptoms of competitive advantage.  NOT the cause.

Now we have the cart before the horse though.  If you have legacy production defects in your backlog and want to move to cohort-based split-testing, your defects are the NOISE in your SOUND.  In the example crash above, if you knew cross-posting to Twitter was an important proxy metric for Referral, the possibility of a crash is also the possibility that I don’t try to engage a second time.  If that defect existed before you began using cohort analysis and split-testing, your viral coefficient is already distorted.  So if your agile release train is making an exciting and important stop at the actionable metrics station, make sure to prioritize any defects that could distort the reliability of your pirate metrics and future experimentation.

3 – Fuzzy-Weighted Economic Value Algorithm: 

A core concept for how the backlog should be prioritize in a lean-agile environment is maximizing the flow of value-add and minimizing waste.  If you are continuously deploying, the scope of feature releases can take a back seat to actually committing to the long-term awesomeness of the product.  Of course, as Ash Maurya says, the product isn’t the product, the product is the sustainable business model – and that’s not a fixed-duration project, that’s a commitment to continuous improvement of your unique value proposition.  So in good lean-agile, at any given Program Increment planning session, you do not need to be certain that your ROI calculations are perfect or your developers will be fully allocated or your that your schedule is on track.  You have a fixed release cadence, only scope may vary.  You have a large backlog, selecting the best possible thing to build matters.  As we said above, if your revenue growth outpaces your cost growth, the ROI takes care of itself.

The Weighted Shortest Job First approach is very useful for exactly this.  Because everything else is a lagging indication of good decisions, the Relative Cost of Delay and the Relative Job Size are the most important factors in job sequencing.  Let me reiterate.  Sequence = prioritization.  Under the assumption that small legacy defects require small individual effort while large value-add features take multiple sprints to roll out, you’ll likely always fix your bugs FIRST.  Which is good.  No one likes a crappy product, no matter how much “SOCIAL!!” you add to it.  Burn your customers long enough and they will abandon you.  Every software product is replaceable if you make the pain of use greater than the pain of switching to an alternative.

Over time, three things will happen.  You’ll get to a point where the outstanding defects will require large-scale refactoring effort while your stakeholder (hopefully) get wise to the fact that a smaller improvement with more certain economic value add is more likely to get prioritized.  At that point, you have flow and hopefully rational planning and discussion will rule the day on deciding what to do next.  On that note….

4 – Politically-Intelligent Fuzzy-Weighted Economic Value Algorithm: 

If you aren’t entirely lean-agile, aka you are still mid-transformation, aka “the top” still works using their old plan-driven paradigm while somewhere down the line an agile-savvy person tries to smooth the flow of that work, you need to add something for portfolio-level politics that impact your program-level prioritization.  In this case, while you may not share it too publicly, adding more scores for which stakeholder you are pleasing should be considered.  You can then weight each of the relative scores, like proxy-voting for your stakeholders.

Yes, that means the old-school problems will be continued because you are giving the important people at the top some blank-check preferred stock when it comes to your backlog prioritization.   The unfortunate alternative is that you live in silly denial that their perception matters or that backlog prioritization is not a political question as much as an economic value you question and the people “at the top” or “in the business” continue to hate agile and second-guess every decision you make.  Concessions to a powerful VP today help earn you the trust you need in order to move prioritization to a more rational approach later.  Admit where you are, challenge it bit-by-bit, and work to improve it.

What does that look like in practice?  Hopefully there is an IT leader at the top too in your large-scale silo-heavy organization.  Hopefully that IT person or a Quality person up “at the top” can be one of the political variables in your weighting approach.  Don’t pit the CEO against the CTO as a Product Owner, that just makes you look like a chump who can’t make difficult decisions yourself.  Gain buy-in and provide enough visibility before planning sessions that no one gets blindsided by your decision to prioritize refactoring over that VP’s screams for “SOCIAL!” 

To reiterate – THE BACKLOG IS A POLITICAL ARTIFACT. 

Your solution is only partially economic or financial or social.  This is not a democracy.  Don’t go asking for votes.  It really isn’t a democratic republic, either.  And it is definitely isn’t just user story meritocracy.  Slapping a relative business value tag and sorting is begging for failure and distrust at your methods.  It looks lazy and it is.  You have to influence the right people to make the right decisions and that takes work.  If you’re lucky, its close to a full-time job and you have job security now.  Congratulations.  But seriously go fix those bugs.  They’re lame.

Backlog Prioritization Methods

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This week’s learning focus: develop an approach around facilitating the great “How We Prioritize the Backlog” discussion that can be used as a workshop in lean-agile scaled transformations.  
While I have my own preferences and have heard a variety of approaches recommended, it seems the “how to tailor it to your context” is a missing piece.

So if you are part of a group with multiple Product Owners, Product Managers, and other important stakeholders involved in your prioritization decisions, here are the best links on the topic so far. Full write-ups on connected topics and pragmatic recommendations will follow!

Agile 42’s Lean Canvas Method
http://www.agile42.com/en/blog/2013/04/11/lean-project-canvas/

Pragmatic Marketing’s Why ROI Won’t Work
http://pragmaticmarketing.com/resources/why-prioritizing-your-agile-backlog-for-roi-doesnt-work

SAFe WSJF



http://scaledagileframework.com/wsjf

Blog Post that Combines the thoughts above, though it’s so academic it may not be actionable to agile first-timers
https://blogs.versionone.com/agile_management/2014/10/30/agile-prioritization-a-comprehensive-and-customizable-yet-simple-and-practical-method/

How do you prioritize you backlog?
andrewthomaskeenermba@gmail.com

Photo via Rework. Read it!!

Scrum Backlog Prioritization

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“Portfolio management is the art and science of making decisions about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk against performance.” – Investopedia

How do you manage your backlog?  The strategists at the top are often accustomed to trusting their gut, while the engineers below insist on absolute scientific certainty.  Handing priorities down that game of telephone is a circus side-show of bull whip effect and sociopolitical contract theory.

Not that it doesn’t work out just fine….

Meanwhile, accountants and financial analysts, with the help of algorithms, benchmarking, and actuaries, have been tracking the present value of an asset, mid-investment, with all risks taken into account for a VERY LONG TIME.

The real question is, do you need all that certainty?  Should you be focusing on human interaction and the existential plight more?  I guess that’s a separate discussion…

I mean, at one extreme, do you care about your customers so much that you feel an ethical duty to fix every little bug no matter how much it costs you, your employees, and the families they feed?

At the other extreme, do you love churning out features so much you don’t care how many of those features aren’t wanted or how unsustainable your product has become?

No, I assume neither of those are you (I hope).  Instead, you are trying desperately to strike a sensible balance that lets you sleep at night while feeling good you pleased a small group with their favorite feature.  You’re really in the business of political and emotional backlog prioritization.

I want to let you know that I’m okay with that.  Relationships and society and worth building.  That said, when you are the bridge between the c-suite and several thousand staff member salaries, you may want to find ways to think harder about whether or not you are building the right thing, at the right time, for the right reason.

Thus, I will give you some science on backlog prioritization, but I wanted to let you know that I completely understand where you are with your current methods.

Agile is dead.

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Agile is dead.  Not the way your goldfish dies as a kid.  “Agile” is dead the way Marxism (as a socioeconomic political stance) is dead.  The dilution of the meaning of the word through excessive use, improper use, and deconstructionism, has made it not-worth-speaking-about.

Pragmatically speaking, there are really two ways people killed “agile”:

  1. As part of a movement, several institutions adopted the language of agile without changing their structure, values, or goals.  This made it necessary to explain your use of the word agile.
  2. Many of the practices that made “agile” marketable have become the normal way of developing software due to market demands, even in companies that expressly claim they will never practice “agile”

That latter disconnect is why you’ll see I’ll still write about things that sound like “agile” as a noun, the kind consultants charge money.  I’m going to be more specific about how innovate new products, encourage logic in product management decisions, and help you not destroy the team that makes you successful.  As dave Dave Thomas, one of the original authors of the agile manifesto said:

Agile is not a noun, it’s an adjective, and it must qualify something else. “Do Agile Right” is like saying “Do Orange Right.”

Having built my career around agile and scrum, the dread I began to feel roughly six months ago when someone started talking to me about agile in software development was meta-disheartening. 

Now, instead, I’m beginning to see that getting very specific about what I would improve in a company’s strategic planning, management tactics, and organizational psychology is extremely important.  After all, when was the last time that you used “agile” the noun-and-buzz-word-for-sale in the same way you used “agile” the adjective?

ag·ile

adjective

1.able to move quickly and easily.

“Ruth was as agile as a cheetah”

synonyms: nimble, lithe, supple, limber, acrobatic, fleet-footed, light-footed, light on one’s feet

Does that sound like your company?  Does it sound like your software team?  Product strategy?   Only if you are small, most likely.

If you work at a very large company, I have a hard truth for you.  The nimbleness of a body with extreme mass is internal. In a startup, you cancel a feature when it has a detrimental impact on a key metric.  Choosing one feature over another in a new product can pivot you into an entirely new competitive landscape, target market, and revenue stream.  In a very large company, you cancel the entire project.  You lay off an entire division.  You sell off everything tangible about the business process that are no longer part of your corporate strategy.

Remember how I said Marxism is dead?  Do you hear much about communism as a US social movement?  What about socialism?  Probably not.  Instead, in the ongoing internal dialogue of the USA superorganism, opposers and supporters alike rallied their opinions and held debates and made decisions using the words from the movement until the original words no longer accurately described the problem at hand.  Now socialism is part of our capitalism and capitalism is part of our socialism.  The only people who really care about the words as they were originally meaningful are the people either using them as a weapon or avoiding them out of fear of it hurting their reputation.

So when I stop fighting for “agile” don’t worry, my core values didn’t change.  I’m just targeting the problems more specifically, empathizing more with the people affected, and resolving their pain directly rather than fighting for revolution.

Here are a few things to do right now that will make your company better:

  1. Plan your business decisions (project-based investments) in smaller increments.
  2. Decompose development tasks so that they are less than a week of coding.
  3. Require continuous code integration (and pull-before-you-push, etc).
  4. Empathize more with users, and show your early adopters your work-in-progress.
  5. Ensure division of labor – “specialization” – isn’t leading to alienation.

 

Photo via davide ragusa

You Look Dumb – 5 Mobile Marketing Mistakes

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Your smart presence looks pretty dumb.

Welcome to the “smart” era – smart phones, smart cars, and smart homes are finally here! You can officially go to display rooms in your local appliance store instead of booking a trip to Orlando to see the home of “the future”.  In our smart era, a fair percentage of the population now carries supercomputers in our pockets with computing power that would have filled a warehouse even in science fiction during the baby boom.

Unfortunately, as “smart” as all this technology should be in your business, I’ve noticed your company looks pretty “dumb” because things are getting done exactly the way they were before, but now on a smaller screen!   As much as technophiles may blame late-adopters for not buying in to new devices and new apps, wake up – if you’re asking people to do the same old story, same old song and dance, but you’ve given them a more difficult form factor to do it on, they have no reason to adopt!

In that light, here are the 6 mobility mistakes you might be making RIGHT NOW that keep your mobile presence looking dumb where it ought to be smart:

 

#1 – You Encourage Channel Hopping

If your mobile marketing strategy has shifted consumers from one conversion funnel (web or brick) to another (apps) but hasn’t resulted in increased revenue, you’ve encouraged channel hopping.  This is a nightmare scenario that often pits employees of each channel against each other internally, fighting for additional budget, unable to fully justify forecasted ROI.  What happened? When you built your native app, the value created by your investment was captured 100% by your consumers!

This looks dumb to the smart consumer, because it is painfully obvious when the only difference between the native app and the responsive site is Touch ID. The choice between a link on the home screen versus a downloaded app comes down to space on the phone and speed of content loading.

The math for the mobile marketing individual is so simple that this mistake looks extra “dumb” to your boss. When traffic stays constant, but an additional channel is added, aggregate conversion across the channels must increase or else your funnels are just cannibalizing each other. That’s the ROI problem every mobile marketing initiative must overcome: when you invest $200k in mobile eCommerce and revenue stays constant, your consumers have captured all the value created. Sure, they may be happier. They might say “how convenient to have a desktop site AND an app for researching and executing my purchases!” Unfortunately, the return on your investment they capture doesn’t inherently result in more traffic, conversion, sales, or loyalty.

Admittedly, companies don’t make this mistake in a vacuum. They see traffic and sales moving from their desktop site to a new competitor’s mobile app – panic ensues – and they build an app of their own to stop the bleeding.

Remember, a bad bandage can be more dangerous than no treatment at all. The smart mobile marketing plan requires one of two approaches to respond to the threat of new entrants:

  1. Double-down on web. Yes, I make mobile apps and I’m saying its okay not to have a (native-coded) mobile app. If your plan for mobile is to reproduce a brochure, a paper form, or a website, don’t do it. Seriously, just throw your money in a pile and set it on fire like the Joker in Dark Knight.  If your site is working great but it isn’t a responsive site – start there. If it is outdated and anything is unintuitive, fix it. If you can’t create a unique relationship with consumers through your native mobile presence or capture the channel-specific value created, double-down on making your web presence best-in-class. This is Game Theory 101 – If you can’t win at both web and mobile, win big at one and forget the other.
  2. Create a unique market via app(s). If your audience is shrinking or your relationship with your consumers is suffering due to the mobile presence of a competitor and a truly unique relationship can be built through a mobile app – do it. This means your mobile presence needs to accomplish at least one of two things: augment the physical experience in ways a website can’t (to increase conversion) or create a completely new experience for a totally new audience (to increase aggregate traffic). Which path is right for you will depend on your market, products, and competitive landscape – so do your homework (and get a “tutor” as needed).

 

#2 – No Context Awareness

This is at the heart of what is so dumb about the way many companies establish a market presence on smart devices. If you have the opportunity to look “behind the curtain” you will notice this problem is not isolated, but occur on two fronts for that firm – externally in their consumer native apps and internally in their custom enterprise solutions. I’ve touched on specifics of Context Awareness several times. The differentiating power of a native app is in its intimate knowledge of where a user is, where they are going, and how they think. Segmented push messaging, one-tap deep-linking, and social API integration make the native app capable of a completely new relationship with your consumer. They are using a supercomputer that aggregates an unprecedented amount of personal information – all you have to do is offer a reward that justifies opting in.

Don’t fall prey to the opposite though – opting out should be easy, transparency on the use of private data is key, and you typically have one “strike” per consumer when it comes to keeping an app on their device. Whether it is download size, loading time, or privacy betrayal, as W.B. Yeats wrote, “Tread softly because you tread on my dreams.”

Talk to technology professionals so you don’t plan your mobile presence in a vacuum. Geofences, iBeacons, IoT hardware, Photos integration, BLE, IoT, QR, wearables, and triggered messaging are all tools of the trade for ensuring you are able to create a unique proposition in a native app. Find the biggest impediment to solving your consumer’s pain in a way they will pay money for you to solve. Do NOT invest in native mobile unless the pocket supercomputer is going to augment physical realities with digital awesomeness.

 

#3 – No Business Intelligence

Ignorance is bliss. Unless you are driving a drastic paradigmatic shift in how you engage fresh generations of consumers through a new and constantly-evolving medium. In that scenario, ignorance is death – the death of any success you could have achieved.

“No Business Intelligence” is the bad-joke-telling best friend of “No Context Awareness” who crashes the wedding reception of your otherwise-integrated-marketing strategy. Where context awareness can drive new forms of engagement by proactively anticipating needs and supplying easy answers, business intelligence is a trailing ROI that takes effort to reap.   Business Intelligence is like planting a vegetable garden, as much as the visual presence of a lovely variety of plants may have delighted you on its own, you are leaving ROI out in the field until you harvest it. The same is true in mobile marketing. Until the big data you have created is collected, curated, and learned from in order to provide better plans, more focused campaigns, and the tightest possible updates to forecasts, you are creating white noise that should have been a joyful symphony.

At a minimum, it is essential you collect enough meaningful data to justify that you have accomplished your goals. The less you can prove directly that you have created new traffic, new converted sales, or new revenue sufficient to justify your investment in mobility, the more you need business intelligence to prove the indirect benefit provided to other channels. Better yet, even when new revenue is both directly and indirectly attributable to your mobile presence, you should drive BI insights like you are starting a company that will sell its knowledge. You may start by “selling” it internally to help justify you P&L, but don’t rule out the possibility external buyers may exist.

 

#4 – No Game Plan for IoT

If you don’t have concrete plans for drone technology or self-driven cars, I forgive you.  Not every industry will need direct adoption for these new technologies.  However, if you haven’t given serious thought to what your products and services can be in a connected world – called the “Internet of Things” – you are going to find yourself left behind over the next five years.

IoT is already within reach and less cost prohibitive than you may think. Connected power indicators, pipe flow sensors, BLE chipsets for detecting and communicating almost anything – they are all out there. Today what is being “tacked on” to products by R&D will tomorrow be a seamless experience seen as the baseline for market entry. You can afford not to be the first mover to the extent Silicon Valley startups are learning the hard lessons for us all today. That said, don’t get out of touch and don’t get left behind.

The Internet of most connected Things means at least one of two potential realities your business:

  1. Some products you currently market “dumb” will be expected to connect soon – a significant event in your product strategy because the value proposition of your physical Thing will not matter as much as how it connects to the app you provide with it. Think today what that app must be in order to compete. In fact, you should probably be building that app instead of reproducing your already-responsive web site. Then, more dauntingly, think about that product and app and their ability to connect with other Things that are connected in a way that creates a meaningful brand relationship.
  2. Widespread IoT products will further segment your target market and the position of players across your competitive landscape. If your product’s three year plan does not clearly indicate whether you will focus on selling non-connected versus connected variations or both, including the business case for how each will be priced and marketed, schedule meetings right now to drive those discussions.   The threat of new entrants on both sides will be higher as major players struggle to straddle the fence strategically.

 

 

#5 – You’re Stuck in Analysis Paralysis

Speaking of sitting permanently on the strategic fence, one of the dumbest responses to the introduction of smart technology is analysis paralysis. As my strategy professor emphasized while introducing Michael Porter, refusing to make a decision is your decision. That favorite Porter quote – “Strategy is the art of making choices”. In a Zero Sum game with multiple players and finite economic resources, strategy is the art of committing not only specific resources, but also commitments as a competitive position to the long-term continued investment of resources. By holding resources – even in the most uncertain times – you’ve made a decision to wait. The key to the good life, as Aristotle would say, is that the decision to wait, if virtuous, must intrinsically be deliberately decided.

If your organization is stuck in analysis paralysis, overwhelmed by the amount of aging IT investments behind you and the mountain of new (and sometimes unproven) technology ahead of you, a lack of action may preserve some capital in the short-term, but you are racking up immense opportunity cost and learning curve disadvantage. If your company has too many ideas and no commitment to a roadmap, here is how to get smart:

  1. LESS IS MORE – Don’t try to reinvent your entire IT and Marketing infrastructure in one big push. Define Lean Startup-style MVPs that give you a “quick win” (or a few) while getting you past the rookie mistakes, first-time jitters, and growing pains that are inevitable out of the gate.
  2. SOLVE REAL PAINS – Mobile for the sake of mobile fails the stakeholder, the end user, and leaves a bad taste in the mouth of executives and investors. Look for the biggest complaint of your customers or the biggest inefficiency in your operations workflow. If the solution is mobile, do the smallest possible iteration of that solution. If it isn’t mobile, fix the pain without mobile. Rinse and repeat as needed.
  3. OFF-THE-SHELF is an OKAY START– On that note, with the thousands of tech companies out there, don’t go custom on everything. Open or paid APIs, packaged solutions, and white-label solutions, and SDKs are all alternatives to re-inventing the wheel in a vacuum. Review your options carefully (but keep the scope of your goals tight enough your review doesn’t paralyze you).

Enterprise App Strategy: The Resource-Based View

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The Resource-Based View of Corporate Strategy

In my post Porter’s Five Forces for Enterprise Mobile Solutions I reviewed the classic but powerful theory elaborated by Michael Porter, a key thought leader in what is known as the Market-Based View of strategy.  This externally-focused view of competitive strategy is predicated on analyzing the industry in which a firm competes, the position a firm takes as one of many competitors, and the economic implications of that position.  This is often easier in hindsight and can be difficult to employ for strategic planning for some businesses – because the Five Forces method focuses on the economic value captured by a firm after external pressures erode the value created, rather than why or how that value is created in to begin with, the Market-Based View can leave business leaders scratching their heads.  Moreover, even when the impact of the Five Forces is clear at the business level, it becomes extremely problematic when looking at a multi-business corporation.  When a publicly-traded corporation has a diversified portfolio of unrelated businesses, what value does the corporation create for its shareholders independent of the businesses competing in their unique markets?  How does the multi-business corporation position each business in a way that creates synergy and sustainable, long-term competitive advantage?

Collis and Montgomery have dedicated their careers to answering the difficult questions in corporate strategy as thought leaders for the Resource-Based View.  They provide valuable guidance in answering the problem of how multiple businesses can create more long-term value together rather than separately.  In this post, I will summarize key elements of the Resource-Based View and apply them to enterprise mobile app portfolio strategy.

Sustainable Competitive Advantage

Businesses exist to create economic value that can be consumed in exchange for capture of a portion of the value created.  While Porter’s Five Forces focuses on the pressures that erode the value a firm can capture, the Resource-Based View looks at how to plan competitive advantage at the corporate and business level so that the competitive positioning a firm takes has long-term sustainability.

Let’s start with the their definition of corporate strategy:

“Corporate strategy is the way a company creates value through the configuration and coordination of its multi-market activities.”

Whether the corporation manages multiple product lines within a single industry (such an automotive corporation that competes in both the low-price and luxury markets) or manages multiple businesses in disparate industries, a firm must align the core value-creation processes to maximize efficiency, effectiveness, and longevity.

While I will revisit the topics of administrative context, scope of the firm, and the role of culture and managing change in future posts;  the fundamental key to maximizing sustainable competitive advantage is understanding the resources that make your firm competitive and how to organize around them.

For a resource to be a source of sustained competitive advantage, it must be valuable, rare, inimitable, and non-substitutable:

Valuable – A resource must enable a firm to employ a value-creating strategy by either outperforming its competitors or reducing its own weaknesses. The value factor requires that the costs invested in the resource remain lower than the future rents demanded by the value-creating strategy.

Rare – To be of value, a resource must be rare by definition. In a perfectly competitive strategic factor market for a resource, the price of the resource will reflect expected future above-average returns.

Inimitable – If a valuable resource is controlled by only one firm, it can be a source of competitive advantage. This advantage can be sustained if competitors are not able to duplicate this strategic asset perfectly. Knowledge-based resources are “the essence of the resource-based perspective.”

Non-substitutable – Even if a resource is rare, potentially value-creating and imperfectly imitable, of equal importance is a lack of substitutability. If competitors are able to counter the firm’s value-creating strategy with a substitute, prices are driven down to the point that the price equals the discounted future rents, resulting in zero economic profits.

Via: Boundless Management – “The Resource-Based View.” Retrieved 27 Jul. 2015

In Porter’s Five Forces for Enterprise Mobile Solutions I showed how custom enterprise mobile solutions can be employed against each of the Five Forces by protecting the efficiency, effectiveness, and consistency of organization’s core processes.  To plan an entire roadmap of apps, it is critical to judge the resources in each core process according to their unique value, rareness in the industry, difficulty to imitate, and resistance to substitution.

Resource-Based Strategy for Enterprise App Portfolios

We have seen that multi-market corporations must organize around unique resources to create high-margin value.  This is also why I discuss “enterprise” mobile app “portfolios” – the core operational processes at the team-level must come together seamlessly at the business level, while these business-level app “suites” or must come together in at the enterprise level.  The business level may be a separate competitive market for the operations process or the unique functional group in the corporate processes.  In either case, these processes are “proprietary” and deserve protection through custom solutions only insofar as the resources in each process are valuable, rare, inimitable, and non-substitutable.

Thus, the two critical questions that must guide your enterprise app portfolio investment strategy are:

  1. How does any single app upgrade your key resources?
  2. How does each app create and capture value as part of a portfolio in excess of the value it creates as an individual tool?

Because the driving vision of an app portfolio will only be as coherent and consistent as the strategic alignment of organization that creates it, planning a roadmap needs C-Level champions and cross-functional buy-in.  That said, what does it mean to find the “right” apps?

Upgrading Resources

Let’s use two examples as we explore the idea of “upgrading” resources to increase competitive advantage, one that has a product that is primarily service-based, one that has a physical product that results from manufacturing processes.

  1. Example A: Service provider –  A national hospital corporation with several medical centers, acute care, surgical, and other facilitates that operates in multiple geographic regions.
  2. Example B:  Product manufacturer – A US-based die forging company that shapes metal parts for other manufacturers across several industries.  Through high quality standards and technological investment, the company has “locked-in” several large clients that rely on them exclusively.

First, let’s analyze what is similar about these two corporations.

  • Both corporations have three main meta-processes – Operations, Business Development (including sales, marketing, and advertising), Corporate Overhead (including corporate leadership, accounting, finance, HR, legal).
  • Both corporations have skilled laborers and a strong culture of shared values.
  • Both corporations prioritize quality as a differentiation metric and believe in maintaining unmatched transparency.  Internal and 3rd-party audits are common.
  • For the sake of this example, business development and overhead are industry-homogenous and are not a source of competitive advantage for either corporation

Next, let’s identify and evaluate the top three resources critical to the competitive strategy for our example hospital corporation.  To select the right workflow that can be improved with a custom mobile solution, we must first know what resources are scarce, demanded by the market, and difficult to appropriate so that we not only upgrade the value creation of the resource but also capture economic rents long term.  This is our path to sustained competitive advantage through investment in a custom mobile app portfolio.

Example A:  Hospital Corporation 

Skilled Labor (Doctors, Nurses, and Technicians)

  1. Valuable – Doctors, especially nationally acclaimed surgeons, are in high demand.  The skilled nurses, medical technicians that support the doctors as part of the hospital’s value stream are all well-educated, heavily trained, and uniquely qualified to create specific value-add
  2. Rare – A top surgeon must have high aptitude, a long and successful academic career, and years of residency and practice in order to gain their skill and reputation.  Because the cost and time for education and training are a major barrier to entry into the field, and medical school enrollment is tightly controlled, the surgeon is an extremely scarce resource.  While the nurses and medical technicians are less scarce and education is less of a barrier to entry, competition remains high in geographic regions that have large competitors.
  3. Inimitable – Hiring and training practices are easily copied by competitors.  Corporate leadership expresses that strategic alignment, a shared value system, and the intense focus on quality differentiates their services.  While these could also be copied, late adopters would have significant learning curve disadvantages.
  4. Non-substitutable – While direct competition from small primary care practices and geographically-near hospitals (per market) is high, substitution for acute or surgical care is extremely low.

Cutting-edge technology 

  1. Valuable – Investment in specialized equipment is not only a major barrier to entry, many advanced treatments that this hospital system provides cannot be accomplished without this equipment.  As such, announcement of a new program and its associated technological investment is a common Game Theory technique for avoiding direct competition.
  2. Rare – Because hospitals avoid direct competition for advanced treatment by limiting duplicate investments, the scarcity of supply to the market is high.
  3. Inimitable – Although hospitals avoid direct competition, the approach of announcing investments ahead of time make imitation easy.
  4. Non-substitutable – There is no risk of substitution of advanced technology for this market, because substitutes were typically ruled out or attempts prior to demand for the advanced treatment.

Reputation for Quality

  • Valuable – Investment in business intelligence, consistent transparency to investors and the medical community, and a long history of audits by multiple 3rd parties has made the Reputation for Quality a critical differentiator in the competition for market share and for human resources.
  • Rare – Due to the extensiveness of focus and investment, this corporation’s care quality metrics are unmatched.  However, not all consumers are sensitive to this as a decision.
  • Inimitable – Although this approach is at risk of imitation, the late-adopter would always be years behind in building a history of transparent, verified data.
  • Non-substitutable – The only substitute for quality is quantity.  The highest-margin specialized treatments are not at risk, while acute or emergency care is at high risk of substitution.

Distinctive Competence

While every business has core competencies, only distinctive competence – highly demand, scarce resources value streams that are difficult to appropriate – will result in competitive advantage.  For our Example Hospital Corporation, the clear resource to upgrade is the is the doctors and surgeons that provide the highest-margin specialized care.  To upgrade the specialized treatment physicians as an economic resource, the competitive strategy of the Hospital must make the doctor, as a human resource, more valuable, rare, inimitable, and/or non-substitutable.

We can see some obvious tactics for upgrading the economic value of this resource:

  • Increased value to the market – by continuing to be a first mover for providing advanced technology for research and practice, these key resources will not only be attracted, but may be monopolized.  High barrier to entry from competitors into highly specialized treatment programs will likewise create high barrier to exit for the surgeons practicing these treatments.  Monopolizing a service, in this case, will monopolize the resource pool allowing high economic rents.
  • Increased scarcity in the market – by monopolizing any given hi-tech, highly specialized services as above, the market will be in a state of information asymmetry and economic rents can be preserved long-term.
  • Reduce imitation – To whatever extent the hospital can own the rights to Intellectual Property surrounding the training and practice of specialized services, the market will not be able to copy through resource appropriation.
  • Eliminate substitutions – in this case, substitutions are not a major risk so focus should be on reducing transferability of knowledge and raising barriers to exit for the physicians.

Although we have clearly established that technological investment is the right approach to upgrading this resource (the high-profile, ultra-specialist doctor) by increasing scarcity and information asymmetry, raising barriers to transferability and imitation, and increasing the value of the information property that is created, we have not found a compelling case to add a custom mobile solution to the existing technological investment.

While a high-performance, beautifully-designed app aimed at these world-class care providers may increase the effectiveness of existing resource upgrade plans, this is a perfect example of an “obvious” app that may be perfect as part of broader app portfolio strategy but is not the best first app in the Example Hospital Corporation’s roadmap.

“Businesses are full of pain points and apps today are hitting the obvious, low impact problems. We have to understand what the business impact of the problem really is and quantify why it is worth solving.”

– Alex Bratton, Founder and “Chief Geek” of Lextech Global Services

Via  A Good App Still Needs to be the Right App 

Instead, using the Resource-Based View of strategy, we need to look for resources that do not have an effective upgrade plan in place, resulting in transferability and negative economic rents.