Monday, February 22, 2010

How the Search for Extra Terrestrial Life Can Help Product Development

The Drake Equation was first presented in 1961 as a method of pondering the existence of extraterrestrial intelligence in the galaxy. Very quickly, the equation looks like this:

The Drake Equation

where:
  • N = the number of civilizations in our galaxy with which communication might be possible;
  • R* = the average rate of star formation per year in our galaxy
  • fp = the fraction of those stars that have planets
  • ne = the average number of planets that can potentially support life per star that has planets
  • f = the fraction of the above that actually go on to develop life at some point
  • fi = the fraction of the above that actually go on to develop intelligent life
  • fc = the fraction of civilizations that develop a technology that releases detectable signs of their existence into space
  • L = the length of time such civilizations release detectable signals into space.

    Quote from Wikipedia
The bigger N is, the more likely we should have encountered civilization. But we haven't. And what does that have to do with product management, anyway?

The problem with the Drake equation is that there are too many unknowns. How many planets support habitable systems. How many lives grow into sentient beings, and on and on. The number could be 1 (we humans) or trillions. As such, the trying to compute the equation is meaningless.

Applied to Product Development


Whether a start up or a well established company, new product development comes with a business plan and every business plan has a section that talks about how your product is going to take the world to storm. Unfortunately, it usually looks like the the Drake Equation with nearly as many unknowns.

This is a real working hypothesis I saw once upon time:

where:
  • R = The elusive revenue number
  • Cx = The masses who used email
  • fe = The percentage of people relying on e-mail for a critical tools.
  • fu = The fraction of those people that really had this problem.
  • fc = The fraction of people who would pay for a solution
  • i = The number of people who would convert from a free to a premium model.
  • pu = The retention rate of the of the software.

Making It All Up

As you can see there are lots of probabilistic variables. It is bad enough to have a single probabilistic variable in an equation, but to have the question be full of them; well, that goes well beyond bad. In fact, you could argue the equation is meaningless. My argument is that the outcome of the equation (the vaunted R value) is completely meaningless. There is too much noise going into the equation to get anything valuable out. In the Drake Equation, depending on the values you "assume", you either get a universe teaming with intelligent life or you get a fluke where no intelligent life exists and we are the sad figments of a cat's imagination. As business leaders, we really need something a little more repeatable.

Using Your Equation Instead of Solving Your Equation

On the other had, the inputs to the equation are very interesting and worth knowing. Drake originally formulated the equation to give an agenda for what needed to be talked about, not as a way to arrive at an answer. If you can discover your equation: the equation that drives your businesses, you can then identify the areas you don't understand or the changes you need to make in order to succeed. Knowing your equation isn't about knowing how big R or N values are, it is about truly know what the inputs are that drive those values and, if all goes well, knowing how to positively modify those values.