Monday, August 21, 2006

Ron Jeffries on 80/20 Rule

Ron Jeffries presented an some food for thought at The "Eighty-Twenty" Rule. By playing around the numbers he hints that by providing 20% of high value functionality earlier it is possible to produce 4 times more of the revenue. It all started with Alan Shalloway quote:

"The easiest way to build something simpler is to not build things you don't need. 64% of our software (by the industry) is barely used. The approach of building the 20% of the system that creates the greatest value (80%?) and then re-assessing and building the next 20% has several advantages."

Sure it has. I can figure out the advantages myself, but can you guys please tell me how to guess the right 20%? Come and see my Venture Capitalists, too: they struggle with 80/20 rule as 80% of their software ventures are out of business. Tell them "the easies way to grow venture capital is not to invest to the companies that don't go bankrupt". Imagine their collective "Wow!" in excitement, their respectful stares and pats on you back. Enjoy the image.

The usefulness of functionality is a biggest unknown in software development. Who knows what's going to be useful upfront? Picture 084 Customers don't know it. They may not exist yet. The Market doesn't know it. It may not exist yet. It is all in a future.

Without the sacred knowledge, any selection of 20% functionality will fail under the same 80/20 rule thus delivering 20% of 20% = 4% of useful functionality. In fact it is depressing to learn that even if we knew the jackpot answer on "what are the right 20 to be build", the revenue would grow only 4 times. I hoped for 4000 times!

False promises and anecdotal evidences of agile efficiency is growing to be a huge problem. It is especially dangerous then the gurus as smart and respected as Ron Jeffries indulge themselves for promoting such anecdotes. Watch out.

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At 9/12/2006 12:28:00 PM , Blogger Mishkin Berteig said...


The early delivery of high value items is possible by having a useful financial model combined with vigorous customer feedback. It is not impossible to predict. It is just difficult to predict far into the future. The shorter-term one's predictions, the more likely they are to be correct. This is the benefit of using short iterations to deliver value.

That said, anyone who claims they can always get their predictions right, even on short terms, is telling lies. I like how Ken Schwaber phrases it:

Executive: I have projects that run from 12 to 24 months and at the end of them, they deliver the wrong thing!

Ken: I'll deliver what you don't want in 30 days.

The key is the feedback cycle.


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