The Technical Innovation Debt

The other day I noticed something which is pretty obvious in retrospect: there seems to be some kind of relationship between the degree of innovation and technical debt in products and services.

Technical debt is a term which was coined by Ward Cunningam, who explained it thus:

Shipping first time code is like going into debt. A little debt speeds development so long as it is paid back promptly with a rewrite… The danger occurs when the debt is not repaid. Every minute spent on not-quite-right code counts as interest on that debt. Entire engineering organizations can be brought to a stand-still under the debt load of an unconsolidated implementation, object-oriented or otherwise

My observation is that the more unprecedented something is the greater the technical debt that’s inherently taken on.

This has nothing to do with speed to market, technical incompetence, or all the other things that make technical debts occur in more traditional scenarios.

For innovators, technical debt is inherent because noone has a detailed understanding of the problem space in the first place.

In other words, if you are an innovator, and you go after a first-mover advantage in the market, there’s this huge tax you’ll have to pay from then on.

I have personal experience of this.

At the turn of the century, I was involved in a startup that made internet banking software. We deployed the first systems in the southern hemisphere, and rode pretty high for a while.

We had to build everything. And there was noone we could hire who knew the space. So we just made stuff up as we went along.

The very definition of a startup in an innovative field, I suppose.

The thing is, other companies came along soon after who had learned from our experience. Their products had much less technical debt than ours as a result.

2 years later, and all our customers were eyeing these new entrants with some envy. Their operating costs, after all would be much less if they switched.

They all did, over the next few years after.

The lesson I learnt then is one I am relearning every day since: the economics of doing something genuinely new are very challenging indeed.

Firstly, you have to pay to discover new stuff.

Then, you have to pay to commericalise it.

Then, you have to pay to support a technical debt forever.

Or, you have to pay to take out all the technical debt. And the longer you leave that, the worse the expense.

All very expensive, and probably only worth it if there’s something you can do to stop competitors coming along.

I’m increasingly of the view that genuine, breakthrough innovation is really not something that most companies should pursue strategically if they want to maximise shareholder returns.

This is a theme which I explore in detail in my new book Sidestep and Twist, which went to the publisher last week.

The book microsite is here.

3 Responses to“The Technical Innovation Debt”

  1. Andrew Ferrier
    August 26, 2011 at 10:55 am #

    James,

    As a sometime developer, I completely understand the notion of technical debt, and the pressure it creates when fixing bugs vs enhancing the product compete for expensive devlopment time. I like your extrapolation of the concept into innovation.

    On the economics of soing something genuinely new you said: “All very expensive, and probably only worth it if there’s something you can do to stop competitors coming along.”

    Isn’t that why companies use patents? I know your views on patents and the limiting effect thay have on innovation. I wondered what you had in mind instead or do patents actually support innovation albeit in a restrictive way?

    Regards Andrew

    • James Gardner
      August 26, 2011 at 12:06 pm #

      Andrew, hello.

      The “instead” for me, is building something that gets better the more it is used by customers. In that way, the product itself becomes the defensive barrier against competitors. Actually, this is the subject of my next book – and of course the situation I’m referring to is the oft-mentioned network effect. The book expands the concept by defining network effects beyond those that are directly dependent on product function…

  2. Steven Olson
    March 21, 2013 at 4:24 pm #

    Someone else is trying to redefine innovation debt. I agree with your definition, but the “new” definition (which is wrong) is that innovation debt is the debt you pay for innovating. What he is describing is the debt you pay for not keeping up with technology.

    See this: http://blog.pbell.com/2013/03/19/innovation-debt/#comment-124

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