Reviving Cost Awareness in Product Engineering

Reviving Cost Awareness in Product Engineering

Co-founder & CTO

Do you know what the investment of your top roadmap items is, in euros?

In the realm of software product engineering, a startling reality prevails: many organizations kick off projects without a predefined budget, leading to a significant blind spot in cost awareness.

In periods where all goes well, not talking about costs hides problems with prioritisation, because “all returns will be positive”. In periods of decline, not talking about costs might lead into strategic and financial pitfalls that aren’t evident until they-re too late to avoid.

Keep on reading - or experience it yourself by jumping to the end of the article and try the challenge.

The Backstory

In my early career days, as a teen fixing computers and building websites, being able to provide time and cost estimates, even for highly uncertain tasks, was simply expected. Clients inquiring you to build them a website or their web app's first version always anticipated at least a rough cost estimate.

Ballpark figures set the stage for initial discussions. If customers expect a project for €20k and your estimate is €100k, it signals a disconnect in understanding, potentially halting further talks.

During my studies in the early 2000s, we were taught various prediction methods, like function point analysis, the use of Gantt charts, and waterfall planning - they were considered an essential part of the curriculum.

But with the rise of the Agile Manifesto in the early 2000s, 'cost prediction' and  planning began to be frowned upon. Discussing budgets and schedules sometimes felt like taboo - as if bringing up Waterfall in the church of Agile.

The industry's approach had shifted dramatically.

Instead of refining communication about estimates and embracing uncertainty, organizations moved towards a "work hard and see" mentality, with the mindset of "it will cost what it costs" and "(in theory) you can stop investing anytime since value is delivered every sprint. (Right? Right?!)”

More recently, I'm glad to see a resurgence in the art of cost awareness. Speaking the language of money, rather than relying on story points, t-shirt sizes, and sprint cycles, can bring a lot of clarity and benefits.

The Art Reimagined: Addressing Uncertainty

In product engineering, discussing budgets isn't about accounting; it's about effective communication. It's about ensuring you're on the same page, with aligned expectations. It's about making everyone aware of the stakes and responsibilities involved - the investments and the returns.

Soon, you'll realize the real discussion is about uncertainty, not money.

Money acts as a proxy.

It's the canary in the coal mine.

When teams are uncertain, they inflate their estimates, driving up costs and making business cases challenging. So, if an investment isn't aligning with expectations, start by asking: "What are you most uncertain about?" Follow up with: "How can we reduce this uncertainty with a minimal initial investment?"

The straightforwardness of the answers may surprise you.

The Challenge

Here’s a challenge - 8 x 15minutes - value every step along the way - truly agile and focussed around euro value. I promise you that it’s worth your time. And with a bit of luck, it blends into conversations you anyway have during your workday.

a) (15 minutes): Take a look at your product roadmap. Assign an investment value to each initiative using the formula: Expected number of sprints * €20,000. (Assumed 2-week sprints and teams of 5-7 people).

b) (3x15 minutes): Select the 3 most expensive projects and spend 15 minutes per project in conversation with the business side (sales, customer success, marketing). Present the roadmap item and investment figures and inquire about their sales plans and expected returns in the first 12 months post-delivery of the roadmap item.

c) (3x15 minutes): For the same projects, meet with your product & engineering team(s). Show them the euro investment value and ask two questions:

> What uncertainties are you facing?

> How can we minimize these uncertainties with a minor investment?

Final 15 minutes: Compile your notes. Reflect on what you've learned. How did introducing actual euro figures change the dynamics of your discussions compared to previous ones based on sprints, story points, and t-shirt sizes?

It would be great if you share your experience with us in the comments or by reaching out directly.

How ProductHub Is Pioneering the Change

At ProductHub, we're rekindling the skill of discussing cost and impact in product engineering using euros and weeks instead of story points and burn down rates. Steering clear of past pitfalls. Get back the good parts, and leave the bad parts behind.

We're assisting management and product management teams in establishing an ROI-driven product investment strategy; which guides Product Managers and Product Owners in conducting business-focused conversations with their teams and the broader business.

About the Author

Wilco van Duinkerken, a seasoned entrepreneur and leader in software development and big data analysis, co-founded Scale Force and ProductHub. With 2 decades of experience, he has established himself as an expert in transforming conceptual ideas into reality. At trivago, he led software engineering teams in Amsterdam and Düsseldorf, focusing on innovation and product retention. Wilco excels in driving ROI-driven product strategies and operational execution, making significant contributions to the SaaS industry through his expertise in SaaS Due Diligence & Acceleration.

ABOUT

Do you know what the investment of your top roadmap items is, in euros?In the realm of software product engineering, a startling reality prevails: many organizations kick off projects without a predefined budget, leading to a significant blind spot in cost awareness.In periods where all goes well, not talking about costs hides problems with prioritisation, because “all returns will be positive”. In periods of decline, not talking about costs might lead into strategic and financial pitfalls that aren’t evident unt

TAGS

Engineering

PUBLISHED ON

Jan 13, 2024

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