Christian Sepulveda

Most of software development can be considered from one of two perspectives: Is it innovative or can it be considered a commodity?

Starting with the latter case, these software projects are a re-implementation of software that has already been written numerous times. It is even possible to buy existing applications and integrate with other components or implement minor customizations. An example of commoditized software are shopping carts. Years ago, in the early Internet, merchant websites and shopping cart integration was expensive and required significant development; today I can pay an extra $20 a month in web hosting for the same functionality.

For a commoditized software project, it makes sense to look at low cost development options. These frequently employ overseas developers, thousands of miles away in other time zones. With commodity software, the requirements are well understood and many exemplary models exist. Communicating project requirements and expectations is easier, so the risks are far lower.

Innovators don't have such ease; requirements change often and are foggy at best. Building from existing components is either unfeasible or requires too much customization (the dreaded "integration tax"). This poses a great challenge for an entrepreneur, as being first mover may be more of a risk than an advantage. Large amounts of time and money can be expended while the entrepreneur searches for her actual market opportunity or the proper way to seize it.

Incremental and iterative development can help mitigate these risks for the innovator. With each iteration, the innovator has feedback that allows her to tune and adapt requirements, converging on essential functionality and de-emphasizing tangential functionality. For an entrepreneur with a limited budget, efficient use of development resources is critical.

While iterative development can keep you focused, it is not enough. Close collaboration and interaction with developers is also key. Building a rapport between product visionaries and those executing this vision not only creates a common sense of ownership, which leverages "collective brain power", but it forces the entrepreneur to clearly communicate her vision. Too often innovators have a muddy understanding of their own ideas. (A technique called "high concept" is another good tool for entrepreneurs and will be the subject of a future post.)

Unfortunately, many entrepreneurs treat their venture as commodity software, as they attempt to outsource development to low cost programming body shops. While I have a particular bias in this case, the real question for an entrepreneur is: If it is so easy to outsource your innovation, is your idea actually novel? Are there any barriers to market entry for a competitor? These questions are important to address before any development investment is made, regardless if the software is being treated like a commodity or an innovation.