Monday, November 12, 2007

Real Options vs Touch It Once

I was reading an article on Real Options today (article can be found here).  In a nutshell, real options are like financial options (aka stock options aka chase the startup dream and hope they're not bathroom wallpaper!). Financial options have an expiration date and the smart user will avoid deciding whether to purchase or not until the expiration date; until they have to. Real Options are pretty much the same thing, only with non-financial decisions.

The point here is that you should avoid making a decision until the last possible second. Then, once you've made the decision, you should implement it as fast as you possibly can. Sound familiar? Your list of future decisions is your product backlog and your decision point is when an item pops off the top of the queue and into development. The trick of it is that you have to keep watching your future decisions so that you can tell when it's time to make a decision - just like you keep going over your product backlog and prioritizing it to reflect how important each item (or decision) is. It's a long article, but a good one.

Then I got to thinking.

I'm a huge fan of the school of thought that things should be touched as few times as possible. Every time you touch an item, it takes a certain amount of time. The more you touch it, the more overhead you're creating for yourself.

Take email, for example. My inbox is nearly empty. It's not that I don't get a lot of mail, because I do, but that I touch each email message once or twice at most. When it's time to handle my email I go through each message and do one of four things: (1) delete it; (2) file the information it contains into the wiki that is our engineering team's collective brain and then delete it; (3) respond to it and then delete it; or (4) mark it with a due date, put a note in my to do list, and file it into a "long responses" folder. Messages in the first three categories get handled just once. Messages in the last category get handled twice.

So, we've got one approach that says "when something comes in, touch it once" and an approach that says "keep it around in a pending state until you absolutely have to do something about it".  The former brings your decision point much earlier. The latter means you have to touch items many times.

I think the best approach is a hybrid of the two. Use the "touch it once" technique for interruptions and short items. If it's going to take less than an hour, just do it. The overhead simply isn't worth it. The same thing goes for interruptions or unusual events (these also tend to be higher priority or higher urgency, so it coincides nicely). If it's going to take more than an hour, go ahead and postpone it until you have to make a decision.

So go for it, use your Real Options and make more informed decisions. Just don't spend so much time reviewing your options that you don't get around to actually implementing something.

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