My comments today are relevant to what an investor has to do to ensure their funds are optimized in the hands of a high tech entrepreneur. However, much of this discussion also applies to the valuation of companies..
Most technical people are so focused on their favourite technology that they have little time for or interest in marketing! This is probably one of the two biggest reasons that so many start ups fail in this sector. The other is that they often lose control of the burn rate for their venture capital, because their expertise is not in budgeting either.
So, that’s where people like me come in, Since I started out as just another programming geek, my initial involvement with business expertise came from on the job training as a middle manager. The experience gained progressively from roles such as team leader, project manager, system architect and director of development gradually taught me how to focus on the needs of clients and correlate that with corporate strategy.
A key factor here is the ability to absorb the relevant technical information and then translate it into terms that clients (and their customers in turn) can easily understand. Another very important factor in the success of software teams is to motivate the developers so that they feel engaged in the client’s objectives (i.e. how will they learn new skills and advance their own careers by addressing the client’s needs?).
In my case, by returning to school to do an MBA, I was able to significantly adjust my perspective on these issues. My exposure to risk management, finance, marketing and accounting principles taught me that high tech companies are often putting their efforts in the wrong place. In particular, their corporate strategy tends to focus on a shotgun approach to please everybody, rather than identifying and zeroing in on specific niche markets. Thus the companies that manage to do the latter tend to be more successful.
What does that mean in terms of Agile Development? The key here, which was really not emphasized much last night, is that the Agile methodology emphasizes an iterative approach to software development. In other words, the product is developed a little bit at a time, with constant feedback from the client, as opposed to delivering huge chunks at long intervals.
Thus the deliverables for major projects are produced every 2 to 4 weeks, instead of every 6 months. This means that proofs of concept are tested out and prototypes are developed early, which diminishes the risk tremendously. The idea is to address all unknowns as early as possible in the product life cycle and adjust the plans accordingly, so that the project then can proceed without any major surprises. From a risk management perspective, this is a huge improvement over the previous paradigms, such as the infamous waterfall model, among others.
