In business we exchange cost for value. This value is defined by the market in most cases. It can be defined by those paying if what they are buying of a purpose built piece of software.
In the for Profit world, revenue from the sale of the product or service minus the cost to produce that revenue is profit (in a general form). In the non-profit world, earnings are needed to fulfill the mission of the firm, so profit per se is not the goal of those providing the product or service in exchange for the cost to do that. I work in both profit and non-profit domains. In both domains, the cost to produce the value needs to be covered by income from some source.
In both domains, the writing of software used by the customer is our primary cost. Those customers pay us for the software, we pay the employees that produce the software. Those customers have an expectation that the software will meet their needs in terms of capabilities, performance, effectiveness, and may other ...ilities in support of their business or mission.
These expectations come with forms.
- Arrival Date - When can we expect the receive the latest fixes to the code, for the defects we identified and turned into you 3 weeks ago? In what release?
- A Capability to Do Something - Those features you spoke about at the User Conference, when do you expect we'll be able to get a look at them in Beta form, so we can see how they will impact our business process?
- The Ability to Manage Change - We just received notification that our customer (the customer of the customer) will be switching to a new security payment token system. when can you validate that your system will be complaint with that notification?
- A forecasted cost and schedule - We've just been awarded a contract to provide features that we think you can provide in your product. Do you have a product roadmap showing when the needed features in the attached RFP and contract award document will be ready for use in the system we are proposing to our new customer?
These types of questions are the norm for all businesses that convert money into products or services. Whether we're bending metal into money or typing on keyboards to produce money the core principles of converting that money into more money is the same.
These business processes require making decisions in the presence of uncertainty.
There is a discipline for this process. It is Operations Research. This is how UPS defines the routes of the trucks everyday, how the local dairy plans the production run for milk and gets it delivered as planned, how airlines plan and execute todays routing with the right crews, fuel, working hardware, how roads are built, how high rises go up, how Target gets the goods to the store, and wait for it how software and hardware are built and delivered on a planned schedule for a planned cost to meet the planned needed capabilities of those paying for those products, when all the processes to do this have probabilistic behaviors.
Those conjecturing that these decisions can be made without estimates need to provide a testable example that does not violate the principles of microeconomics of decision making and the managerial finance governance processes of their business
How would the opportunity cost decisions, Net Present Value decision (a calculation that compares the amount invested today to the present value of the future cash receipts from the investment.), Economic Value Added (is an estimate of a firm's economic profit), is an estimate of a firm's economic profit, being the value created in excess of the required return of the company's investors created in excess of the required return of the company's investors be made without an estimate of the future outcome of that decision.
Without these making those conjecture and even selling seminars on how to make decision without estimates have no way to be tested in an actual business environment. Tested by those actually paying for the work. No conjectured by those spending the money from those paying for the work.
