Skin in the Game

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Warning… this is a continuation from the last email… catch up here if you missed it: https://theaidia.com/newsletter/2024-04-22/.

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Estimates are a joke.

Building without knowing costs is also a joke.

So, how do you resolve the discrepancy here?

1. Focus on the needs of the business.
2. Focus on the needs of the end customer.

Business Needs

What does the business need?

• An accurate representation of the cost of implementing an idea.
• An evaluation of whether the potential value of the feature justifies the cost.
• An assurance that the cost will not exceed the projections.
• An assurance that the feature will be seen through to completion.

Customer Needs

What does the customer need?

• Feedback is taken seriously.
• Continuous improvements.
• Efforts are focused on how they actually use the software.

Skin in the Game

So… how do we achieve the business goals?

Easiest way is by making your development team have some skin in the game:

1. Lock the estimate down as a fixed bid.
2. The team will receive that cash upon completing the stated requirements, regardless of how long it takes.
3. The team will be held responsible for fixing any discovered bugs as part of that effort and lump sum.

This has a few interesting side effects:

• The team will be punished for introducing technical debt. Getting one project done faster now means the next 3 projects will be slower. Repeating that too much will drive velocity down.
• The team will be rewarded for investing in processes that increase both quality and velocity.
• The team will push for the projects to be smaller. The discussion revolves around, “what’s the smallest thing we can do that actually provides value”.

And, with just a few minor additions, we can support the customer goals as well:

1. Customer feedback drives the small projects taken on by the dev team.
2. The team identifies the smallest, fastest way to resolve that project in behalf of the customer.

Now, in addition to the above side effects:

• Customers feel heard and like they have a voice.
• Customers will be loyal.
• You have continuous hooks into how to improve your software.

You can’t be serious

Oh, I am.

That’s the way I’ve been running my entire business for a few years now.

But, I understand if you aren’t at the point to do that with your own team - it is a major mindset shift.

So… if you want to try it on before taking it home, reach out. Let’s do a small project together. See for yourself what the difference fixed prices can make in the strategy of running your business.