Efficiency Frontier

During the past two weeks, we have discussed best practices out on twitter. Best practices are thought to be good, because it moves an adopting business unit closer to the the efficiency frontier. The closer you are to the efficiency frontier the lower the cost of the process involved.

A marketer doesn’t see it that way. Instead, best practices commoditizes the process involved. If that process is a differentiator, it won’t be once a best practice is adopted. Yes, costs go down, margin increases, but that is assuming that price-based competition won’t kick in driving the price and margins further down without regards to the efficiency frontier.

A product provides value when it breaks a constraint or dampens its impact on a process, so that the users of that product move their processes closer to the efficiency frontier. When the product is an application, the business unit first installs it, then learns how to use it, and as a result of that learning moves the business unit closer to the efficiency frontier. The time involved ends up in a metric that Gartner calls the Time To Return (TTR).

Making that move closer to the efficiency frontier depends on the how much has to be learned.

The application bridges the past and the future relative to the efficiency frontier. I use the Triangle Model to represent any realization, aka man-made thing like software, hardware, services, pencils, lumps of coal, or lunch boxes. The Triangle Model represents all the decisions made towards realization that were actually shipped, so you end up with a decision tree.

The efficiency frontier passes through the Triangle Model at the Time-to-Return point on the customer’s timeline. Given that the vendor of the software intends to retain this customer, additional work with the and learning will improve performance well into the future beyond the Time to Return. All that learning translates into behavior change. That behavior change gates future behavior change.

So here is the figure.

Learning required to achieve movement towards the efficiency frontier

Delivered Functionality and the Efficency Frontier.

The red line represents the efficiency frontier. The base of the triangle is shown as a series of rectangles. Each rectangle represents a single minimal marketable feature (MMF). The size of the rectangle represents the cognitive load that must be overcome before that feature can be exploited to move the customer closer to their efficiency frontier. Learning here has been serialized. That may not be the case in a customer’s organization.

At the Time To Return, we move from meeting our ROI commitments (Past) to serving more aspirational needs where a practice could become a differentiator for some period of time (Future). These customers would push the efficiency frontier for a time. ISO 9000 was committed to by manufacturers in a given value chain. Eventually all manufacturers got certified, so the differentiator disappeared. It’s not just software that is duplicated by fast followers. Duplication is the point of best practices.

When a customer buys software, they first must learn about it. Content marketing can teach the stakeholders in a purchase. Learning can be allocated. Some companies buy training before they will buy the application. That training might teach them that they do not want the application. WebMonkey taught web developers a wide range of technologies back at the dawn of the web. It did this through a permission campaign that delivered web-based tutorials via an email newsletter. This can move the Time to Return sooner.

Before the customer gained awareness of the category or company or product, they had knowledge of the problem solved or the jobs to be done by the product.

The Triangle Model extends beyond the functionality to tool tasks, user tasks, work design, and further out to meta-management considerations like orchestration. All of which move one or more efficiency frontiers.

Minimal marketable functionality, a feature-driven-design based approach, quickly delivers value. In doing so, each chunk of functionality will present a subset of the cognitive model that the users must learn. With less learning, the Time To Return is achieved sooner.

A final point about efficiency frontiers that must be pointed out here, it is not about observing what is being done now. It is about how things will be done in the future. If the underlying technology is disruptive the efficiency frontier may still be years away. A vendor facing such an efficiency frontier doesn’t have to worry about the future. Getting their market made would be the issue, as would living through the HypeCycle, since the promise is still far off.

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