Prioritize a backlog like an entrepreneur

5 min readJul 9, 2018

Treat backlog prioritization with the urgency of an entrepreneur with limited time and only enough seed money to sink or swim.

The long answer

A product leader needs to evaluate all forms of risk, technical and business, and wield backlog prioritization as a powerful mitigation tool. If we treat each user story as an experiment, then your hypotheses should seek to test and burn down those risks.

Does solving this problem make someone willing to pay for the solution?
Is this the right problem to solve?
Is a solution technically feasible/financially possible?
Are we already at the finish line (the product is good enough and the value is captured… not releasing it now is costing you the time value of money or a first mover advantage)?

User stories are investments with returns you re-invest

If you are working with a limited pool of money, then every bit you invest needs to generate value or reduce risk. What if each investment needs to pay for the next investment? Entrepreneurs face this challenge every day and make decisions “with their stomachs” and an urgency others don’t experience. This discipline helps you focus on the best sources of return and where the true value resides.

The Agile Manifesto encourages us to value “Responding to change over following a plan”. In order to embrace change, best practice teaches us not to plan in detail too far ahead as what you learn from customer demos/interactions and releases will pivot your product into the right market fit and value proposition.

A focus on getting directionally correct as quickly as possible and creating value with each move means a slow, non-market responsive, methodical march to value is wasteful. Plans that don’t incorporate feedback from customers tend to optimize for efficiency of software development (reusing code, flexible and well thought out infrastructure, and planning for scalability) over creating value or reducing risk. If you build out slowly toward the wrong value, you’ve exponentially multiplied your costs: wasting money and the much greater opportunity cost of time you’ve burned going in the wrong direction.

The vision test

Getting to a prioritized backlog can be approached as optometrists used to approach vision tests: comparing each product backlog item to each other and moving them up/down the priority list accordingly. Instead of asking if you see more clearly with option “a” or “b”, you should ask if option “a” or “b” is the core driver of revenue or cost savings, thus allowing you to test each high value hypothesis and burn down business risk sooner to reduce opportunity costs.

If you’re building a retail store, what are the risks you are worried about?

Can we get inventory to sell?
Can we secure a good location to sell?
Can we sell goods above our costs?
Can we attract enough customers to make a profit?
Are we selling something people want to buy?

Which of these risks should be tackled first when starting a new business? It’s tempting to worry about getting inventory to sell first as it seems foundational and logical to have the goods to sell. Stocking inventory at the right scale and operational efficiency, however, doesn’t prove that someone is willing to buy that inventory. If it’s beginning to sound like a red herring to begin with inventory and operational efficiency, you are correct. Can you believe that Zappos began with no inventory at all!

Tony Hsieh, the current CEO of Zappos, recalls in the Harvard Business Review how Nick Swinmurn, the founder of Zappos bootstrapped the business:

“Nick talked about the progress that the website had made over the past few weeks. They were already getting $2,000 worth of orders a week, and the numbers were growing. They weren’t making any money, because anytime an order was placed, Nick would run to the local shoe store, buy the item, and then ship it out to the customer. Nick wanted to put up the website just to prove that people would actually be willing to buy shoes online.”

Scaling can’t precede demand

It should be clear by now that the top risk we identified earlier to burn down is “Are we selling something people want to buy?”. Scaling is a problem that emerges at a successful business with significant demand but solving a problem that doesn’t exist yet can doom any new business. The first order of business is to find out what the business is!

Once this risk is addressed, the next priority is “Can we sell goods above our costs?”. In fact, the Zappos story didn’t end with discovering that people were willing to buy shoes online. As the company matured and gained traction, its early model of discovering what customers wanted grew revenue but not profit. The company moved away from drop-shipping about 25% of their sales from vendors directly to customers and focused the company on stocking all inventory and fulfilling all orders. It still wasn’t a decision made from the perspective of operational efficiency:

4 years after launch, we pick up the Zappos story from a Fast Company article on this next large pivot:

“To survive, Hsieh realized, the company needed to stop selling sneakers and start selling something more valuable: a customer service experience. It couldn’t do that unless it was in control of shoppers’ orders, which meant it needed to mail the shoes itself.”

Zappos couldn’t take care of their customers the way they wanted to, their discovered key differentiator, by outsourcing inventory and most importantly, fulfillment. We see that Zappos didn’t view inventory and fulfillment as a point of operational efficiency but as a control over their customer experience! The move led to the company developing an identity in the marketplace, repeat customers, word of mouth marketing, and sales topping $2 billion per year!

Lessons learned

Operational efficiency at scale developed with the growth of the company but was never the key driver of change. 10 years after the company was founded, it sold to Amazon for approximately $1.2 billion at closing. For Zappos and everyone else approaching the prioritization of a product backlog, find the direction you need to go before scaling a solution.

Special shout out to my father and brother for inspiring this article and influencing my viewpoints in entrepreneurship!