Search for quotes about debt and you will find this from American businessman and author, Robert Kiyosaki, “10% of the borrowers in the world use debt to get richer - 90% use debt to get poorer.” The glaring takeaway here, avoid debt at all cost. But wait a second. Can debt make you richer? Can debt be a good thing?
2020 has turned the world upside down. Small business owners are among the hardest hit. The pandemic and resulting economic disruption have challenged SMBs, undercutting established business plans and negating processes leaders have developed and relied on for the health of their businesses. Managing technology, where SMBs are typically at a disadvantage to large enterprises with greater resources, needs to be reevaluated. When disruption resets the score in competitive markets and everyone is, more-or-less starting over, there can be opportunity in reassessing strategies and assumptions.
Technical debt is a concept in technology management that is similar to financial debt. It is the backlog of work and support needed to correct errors and shortcomings in a product built by cutting corners and with other expedient measures to speed release to market. In effect the developers borrow time that would be spent on complete, error free design and development to get product to market early. The interest on that borrowed time is the added effort to work down the backlog that could be directed at new projects. The difference between technical debt and financial debt is that the interest is not paid to a bank or outside entity but is paid with the internal resources of the business.
Technical debt (Tech Debt 2.0) can be unintentional (poor practices, inexperience), evolutionary (aged infrastructure, obsolescence) or intentional, a deliberate choice to borrow time for competitive advantage.
The disruption in today’s environment, given new customer needs and desires, the constraints on customers and providers brought on by the pandemic have created new market opportunities that will be lasting and lucrative. Timing is essential and the new market’s requirements are emerging and not clearly defined. An SMB could benefit with the assistance of a design and developer partner with an insider’s perspective.
In my research on Tech Debt, I interviewed a consultant who worked with a firm developing a mobile application for retail sales in the floral sector. The product had good prospects and the enthusiastic backing of investors. The development team however, were reluctant to release anything but a product complete with the full functionality they envisioned and superior performance and reliability. Projected deadlines were established and repeatedly missed as the team added feature upon feature and subjected each version to rigorous regression testing. Weeks turned to months as investors lost patience and interest and similar products began to surface in the market. Perfect had clearly become victor over good and an opportunity had wilted away.
Our interview then led to exploration of intentionally incurring Tech Debt via a design strategy known as Minimal Viable Product (MVP). An MVP strategy invites technical debt by borrowing the attention of the potential customer base to act as a partner in the design and development of the application. Careful and deliberate priority is given to the customer who is presented with an application pilot containing valuable but minimal features. The internal developers formalize a hypothesis about the value the pilot contains for the customer. The customer benefits from that initial valuable functionality and provides feedback as to how the pilot should evolve to provide the next incremental value.
From here on, developers follow the customer’s lead modifying the hypothesis, effectively testing the stream of high-fidelity feedback from the user community as the product evolves. It is important throughout this process that the developers concentrate on the needs of the customer and are not distracted by the underlying technology or changes in the technology environment. That focus on the customer is now the “interest” being paid to service the tech debt. If you pay down this debt and the application becomes a success in the market you will have successfully incurred tech debt and gained a return greater than if you had remained debt free. Likewise, if the potential customer base fragments or the requirements diffuse beyond capabilities to the point where your return on investment diminishes, you will have early warning and can disengage and apply resources to other projects and initiatives.
This example demonstrates how a business can use tech debt to their benefit. This is especially so in an unsettled environment where there is opportunity to strike out on new ground and leverage new factors in the marketplace. Similar to financial debt however, intentionally incurred Tech Debt needs to be carefully monitored and managed.
Here are some pointers to help when using intentional Tech Debt as a strategy for product development.
· With the customer driving product development, you will build a significant backlog of work that needs to be completed. That means you need to carefully scan and monitor the customer base and market.
· Formally identify the size of the initial opportunity you envision. Document the size and timing of the revenue opportunity.
· Track the participation and input of your development partners. Be aware of fragmentation or of one or more segments developing the need for specialization not shared by the general population. (Adobe Inc. encountered this as high-end commercial customers developed sophisticated graphic requirements not shared by desk-top-publishing consumers).
· Even though the customer is driving development, be wary of scope creep that could lead to requirements outside the bounds of the target opportunity.
· Monitor your Tech Debt backlog and make sure it is in proper balance with the market growth opportunity. Make sure your potential upside is worth more than your debt obligation.
· Avoid the temptation to capture the last marginal dollar. Obsolescence and advances in technology will add to the Tech Debt backlog and block new opportunities.
Michael C. Fillios is the founder and CEO of the IT Ally Institute, a nonprofit organization providing small and medium-sized businesses (SMBs) access to knowledge, research, and practical tools to improve their tech bottom line. A senior global business and technology executive with more than 25 years of experience in IT, finance, operations management, and change leadership, he lives in Mason, Ohio. Learn more at www.itallyinstitute.org.