I read a wonderful book in 2004 named Software By Numbers by Mark Denne, Jane Cleland-Huang. It introduced the concept of "Minimum Marketable Feature" and "Incremental Funding Methodology". It radically changed how I viewed project management and continues to inspire me even today.
The main message is - by carefully choosing the way in which software components are assembled, we can create identified units of market value before the application/product is anywhere near completion.
Minimum Marketable Feature (MMF)
Typically an MMF creates the market value in following ways
- Competitive differentiation
- Revenue generation
- Cost Saving
- Brand Projection
- Enhanced loyalty
As the name suggest the features need to be marketable which means you can use them to decide price for the product, promote them and more importantly create revenue by help selling those products.
An incomplete software still has value to the user. However a car that consist of only engine and wheelbase is unlikely to be thought any useful. You need more than basic functionality. Similarly a super cool luxury car that does not move is equally useless. What you need is a balance of "cool" and "required" features. This idea is captured in a model developed by Nariaki Kano.
The model categorizes the features in a few interesting categories
- Must-Have or Basic Needs: Lack of must have features causes dis-satisfaction, but once these features are present adding more Must-Have features does not make the product attractive to the customers
- Delighter: Lack of these features does not make customer unhappy but it does make your product boring. When added these features create excitement and makes your product attractive.
- One dimensional or Performance Needs: The customer satisfaction is directly proportional to 'how much' of the feature you are providing. For cars milage is one such feature - more the better and as it goes down so does customer's dissatisfaction.
Incremental Funding Methodology
The goal of the incremental funding is to accelerate achievement of first the self funding point and then the breakeven time.
Below is the a high level of procedure to do exactly that.
- Define Dollar Value of the MMF: Once we have MMFs defined and categorized next task is to assign a dollar value to that feature. This is the incremental revenue generated by adding an MMF to the product. Obviously it is calculated based on additional buyers and price increase. For Must-Have feature the dollar value is defined by possible loss if the feature was absent.
- Estimate Cost : Next we estimate the cost of creating and maintaining/servicing this feature.
- Identify Risks : We also need to capture the uncertainties associated with the features.
- Identify the dependencies between MMFs.
- Calculate Rate of Return for each MMF. The rate of return can be calculated using various standard techniques like Net Present Value (NPV) or Internal Rate of Return (IRR)
- Sequence: Finally Sequence the delivery of the MMFs to maximize return in by delivering them in minimum amount of time
[Images: for Kano wikipedia and for incremental funding the book]