How Do Companies Decide Whether to Build a Feature

When a company decides to develop a new feature, several factors come into play. This decision-making process is crucial to ensure that every resource is utilized efficiently and effectively. Let's explore the key considerations a company must take into account when deciding whether to build a feature.

Demand

The first and foremost consideration is the demand for the feature. If there is no demand, there is no point in building the feature. It would be a waste of company resources, as no one would use it. Companies need to conduct thorough market research to understand the potential users and their needs. A feature that does not meet market demand is likely to fail. Therefore, before deciding to build a feature, companies must ensure that there is a clear and compelling demand from the target audience.

Resources Available - Initial Start

Even if there is a demand, companies need to evaluate whether they have the necessary resources to kick off the project. This includes both human resources and financial resources. If the initial development requires 1000 man-hours and costs $100,000, the company must determine whether it has the manpower and financial capacity to invest in this project. A significant resource requirement can be a red flag, as it may indicate potential challenges in executing the project successfully.

Resources Available - Continual Maintenance

Once the feature is built, the company must also consider the ongoing maintenance costs. Even if the initial development investment is under control, maintaining the feature in the long term can be costly. The costs can include ongoing development, bug fixes, and updates. If the company has to pay $10,000 every month to keep the feature functioning, it is essential to evaluate whether this ongoing expense is justifiable. Companies must ensure that the long-term cost of maintenance aligns with the expected return on investment.

Profitability - Direct and Indirect

A balanced approach is required when evaluating the profitability of a feature. Direct profitability refers to the immediate financial gain derived from the user base. For example, an e-commerce platform might introduce a feature that enhances the shopping experience, leading to increased sales and higher customer satisfaction. Indirect profitability might include longer-term benefits such as user engagement, brand loyalty, and the potential for upselling and cross-selling.

Companies must perform a comprehensive cost-benefit analysis, considering both direct and indirect revenue streams. A feature that does not generate significant revenue in the short term might still provide valuable long-term benefits such as enhanced brand reputation, user retention, and expanded market reach. Therefore, companies should weigh the immediate cost against the potential long-term benefits before deciding to proceed with feature development.

Additionally, companies should consider indirect revenue streams such as advertising, premium subscriptions, and data-driven insights. Enhancing user experience through a well-crafted feature can lead to higher conversion rates, which can be monetized through these additional revenue channels. Effective cost-benefit analysis is crucial to ensure that the company's investment in feature development yields a positive return.

Conclusion

Deciding whether to build a feature is a multifaceted process that requires a deep understanding of market demand, available resources, and potential profitability. Companies need to carefully evaluate each of these aspects before making a decision. By doing so, they can ensure that their resources are allocated efficiently, and the return on investment is maximized.

In summary, companies should start by identifying a clear demand, then assess whether they have the necessary resources to initiate the project. Next, they must consider the long-term maintenance costs. Finally, a thorough cost-benefit analysis can help determine if the feature is ultimately worth developing, taking into account short-term and long-term profitability. These steps can guide companies in making informed decisions that align with their overall strategic goals.