Economies of ( scope | scale | flow ) for Software Development

I was posed this question over email with regards to my recent Intro to Lean Software Development talk:

I like the slides a lot. I did have a few questions. I was wondering if you could say a bit more about what you mean by “economies of scope”. I recall reading Mary Poppendieck’s “Leading Lean Sw Dev” book and the part where she spoke of economies of *flow* over economies of scale, but I hadnt seen the term economies of “scope” and wanted to know more about what it means and the difference between economy of flow and economy of scope, especially as it relates to managing software complexity and reducing the economic impact of variability.

I typed out a long reply to this person and figured it would make a good post, since others might have the same question. Here’s my abbreviated email response:

When Mary was talking about scale vs flow, she was referring to the push vs. pull mindset for actual production development & task distribution. So instead of throwing 100 tasks at your team, regardless of capacity, economies of flow says to ‘pull’ tasks as capacity frees up.

When I was referring to scale vs. scope, I was referring to the concept of product development and the differences between traditional manufacturing and knowledge based product creation like software development. Economics of scale is when the total cost per-product (TCPP) is driven down the more of something you produce. For example, the more screws I can produce, the cheaper each screw gets to produce via various bulk discounts. In this regard, you want to reduce variability, since variability will probably result in scrapped work ( screws too long, not cut right, etc… ) or delays. It’s in my best interest to produce as much as a I can to get those benefits.

Economies of scope occurs when you can drive down the TCPP the more types of products you can produce. This would come from the modularity supported by the products. Think of a car manufacturer relying on a single chassis as the base for several product lines. This is really evident in software, where a single entity can either be reused or configured to create a new product or as the basis of a new product ( i.e. a framework, library, etc… ).

As you can imagine, harnessing economies of scope for software teams has a huge upside. There’s a lot of value ( monetary & otherwise ) in the variability that can be supported inherently by software.

That’s where lean software development diverges from other traditional lean based product development & manufacturing. You can’t just eliminate complexity and variability, because frequently, that’s where a lot of the value comes from. You want to manage that complexity and make sure that the economic impact derived from developing, supporting and maintaining it is justified.

The essence of 'Success'

Thus no single human being is intrinsically any more successful than another human being. Success exists only in the judgments that one or more humans make about another; no one can acquire success except by performing to a criteria set by the judgments of others. If the true definition(s) of success did indeed exist solely in the minds of each person, then we would all be able to claim to be successful, and therefore success would be null and void in the absence of any “unsuccessful” people.


"How will Quora monetize?"

From Business Insiders interview with Adam D’Angelo, former CTO of Facebook and Founder of Quora:

Q: How will Quora monetize?
A: Right now we’re just focused on making Quora really good and getting a lot of knowledge onto Quora. We’re really confident that if we can do that, we can find some way to fund the business in the long run.

Uhh…..Seriously? ( Checks calendar to make sure I’m not in fall of 2000 )

Chicago Bootstrappers Breakfast

I’m proud to announce that the popular Bootstrappers Breakfast will be starting up a chapter here in Chicago with yours truly as the first moderator. The BB aims to be unlike other startup or entrepreneurial groups. It’s a moderated group that focuses on helping you solve actual tough problems within your company. We’re meeting on the 4th Wednesday of every month at Cafe 300 in the River North area of Chicago. Please join the meetup group and RSVP if you can make it.

We’re hoping to bring together a much more collaborative and serious discussion about the day-to-day problems of running a bootstrapped startup here in Chicago. We’ll talk about growing a business based on internal cash flow and organic profit. This is not for entrepreneurs who want to meet VCs, this is for founders who are actively bootstrapping a startup.

Comments / Feedback about the group, such as to the date of the meetings or the location of the meetings, is especially welcome. Please contact me with any questions or comments.

Also, space is limited, so if you’re coming, please RSVP ASAP.

"…showed a cumulative loss of $5.6 billion to $9 billion"

More from the realm of “the boy who cried economic impact” by the LA Times:

Organizers for the 1994 World Cup claimed that the U.S. would see a positive impact of $4 billion, yet a post-Cup analysis by economists Robert Baade and Victor Matheson showed a cumulative loss of $5.6 billion to $9 billion. They arrived at this by comparing the gross domestic product in the host region during the World Cup with standard figures in non-Cup periods for the same regions. The average host city lost $712 million, but their estimates indicate that the metropolitan Los Angeles/Long Beach area lost the most of any host city in 1994. Of course, while the population of Los Angeles and the U.S. more generally was losing billions, FIFA and the U.S. Organizing Committee were taking in record profits.

One more example of socializing debt and privatizing profit.