Part I: Inventory / Holding Costs are not just a problem of retailers
When I started my business degree I just got out of studying nursing science and 4 years of an engineering specialisation in high school. Full of theoretical knowledge my main aim of doing the business degree was to be able to start up my own little bar/restaurant/cafe where you can get real goods and real inventory nothing virtual, I wanted to work on something that is very tangible and what would be more tangible than interacting every day with my customers and serve them the best experience possible. With my business degree also came a vividly clear understanding of how much upfront and sunken cost my dream would involve. You have to rent a place, get furniture and most risky you have to manage your inventory. Every day you’ll have to make sure that you have the right amount of food in your little shop, if you don’t have enough and it is a peak you lose loads of valuable customer. If you have to much food is gonna rot or run out of date and you’ll have to rebuy. It is a complex little machinery that needs to be well oiled and have a deep understanding of seasonalities, daily peaks, resource constraints, acquisition channels etc.
What I realised working in Product Management is not so far off from owning my little bar and the challenges that you face by managing a customer facing company become very similar, mainly due to one principal: The customer comes always first. Getting them the best experience for their day and how you can support them on their journey is always my main focus. They are the ones that will make or break your business. I found even more similarity to owning a little coffee place that I didn’t expect and always was convinced it is just a problem with tangible goods of retailers and warehouse owners: Holding Costs. Holding costs are originally used for inventory management to keep your cost low. A little graph to explain:
You might be wondering thinking now “nice story lisa but what does that have to do with my product development if I am working on a digital product?” If you are thinking you are free of holding costs just look into your feature development, think of how many features do you have that are not ready for release yet because there is some small backend, frontend, tracking item missing. If you have at least 5 right now I am sure you know how frustrated I felt when things were so close but just not done yet.
I realised having unused code is my inventory that I have to manage on a day to day basis. If I am ordering new pieces to early my holding costs will increase tremendously. Every time I push a release and the small fracture of my code is just sitting there will ad more time for my engineers, qa, design or analytics team to make sure all the new changes fit the latest changes that I pushed out. More so they will have to switch context over and over again and by the time I am actually ready to release you I was thrown back to square one thinking about additional changes and further tweaks and the whole release process needs to start over again.
Therefore on of my big emphiphanies was that it is absolutely crucial for anyone working in software environment to consider the holding costs they are producing by not pushing features out leaving pieces around your code base will be pilling up with things you have to throw away because they are outdated, don’t function anymore and are useless.
Holding Costs within software development:
After realising this the answers to how I can overcome my low velocity problem where super straightforward. We started to change our approach as a team to:
release often and early
prioritise drastically - if you know you can only build parts of your feature, make sure you really want to bother with it right now, there is no point in having something half done just to make you feel better
make sure you I can release a feature end to end with a maximum of two releases inbetween
massive use of feature flags
work project based together not in a frontend - backend split