In Figure 1, the shape is a similar story to an earlier blog. This scenario is representative of start-ups with no external (nor internal) funding, and is executed by a few friends (the Product Owners) outside of their normal working situation. This is probably the best and cheapest way to validate an idea and its technical and business feasibility.
- The shaded areas in both figures lie wholly in the out-of-money region. This is the accumulation period, where the effort by the Product Owners accumulates at a rate of (“commitment” + “enthusiasm”). If any components of the rate of accumulation drops then the shaded area increases in size and either the idea is abandoned or t1 further away from 0 along the x-axis. There is a maximum distance between 0 and t1 beyond which there really is no point in progressing.
- If the idea provides one of those “must have” solutions for business problems, it is quite possible the as soon as the product hits the market (at t1) it may gain some customers and the payoff period starts, as in Figure 1.
- In other cases the situation is more like that in Figure 2, where the product has come to the market but customer take up is slow. If the delay (that is the duration from t1 to t2) is extended too much the product will fail in the market. The same situation may be faced by the story in Figure 1, although there are a few early customers the wait duration t2 to t3 weigh heavily on the Product Owners ability to sustain the product.
- Beyond t2 (in Figure 2) and t3 (in Figure 1) the product begins to acquire ever more clients and we are now truly in the money. Of course this will never be a smooth line as depicted but much more up-and-down with many troughs and many peaks.