I want to create value in the world. That’s why this blog is public, my code is open-source, my newsletter is free. This means almost none of the value I create returns to me. It’s a tradeoff — the cheaper it is, the more value the world gets, and the less money I get. That’s OK, thanks to my day job. At work, this tradeoff is made differently.
Is the purpose of a company to create value, or to make money? (Yes.)
If a company maximizes money made, then it’ll take shortcuts in engineering. This increases quarterly earnings, but bites them in the long term. They need to create value in order to make the money sustainably.
If a company maximizes value created, and then it runs out of money, no more value is created. We need to capture enough of that value to sustain operations and keep investors happy.
This is the Double Loop of Value: we have one North Star that is how this company creates value in the world, and another goal to make money off that value. When we get the alignment right, these goals are not in conflict; they need each other. They are two intertwined feedback loops.
Every company needs to make money, but the North Star of value is different for every company.
As an engineer, the loop I want to think about is: we build some stuff we think is valuable. Then we notice what real people in the world find valuable, and that helps us decide what to build next.
For instance, at Honeycomb: Our North Star is to give everyone deep visibility into how their software works. We build a new feature like Board Templates or Trace Zoom, and then Research and Product measure whether people are using it. Meanwhile, SRE is checking whether our systems will stand up to expected scale. Together we decide what to build or fortify next.
Meanwhile, we need revenue. Sales and Marketing are out there telling people about it, noticing what people will pay for, and using that information to choose future campaigns.
In Marketing at Honeycomb, the Board Templates help people observe applications in Kubernetes, so we tell that story. Interested engineering leaders work with Sales to get Honeycomb into their organization. Our RevOps people notice which topics get attention, and which lead to successful implementations.
The business is divided into departments: R&D (Engineering) creating value in the world, and GTM (Go To Market) capturing that value as revenue. Not pictured is GA (General Administration) where Finance and IT and HR let the company thrive.
These are symbiotic: Sales can only sell what Engineering creates, and Engineering can’t create anything if we don’t get paid. Those are the unavoidable interrelations. But there’s more:
The software I build is valued only if people are using it. Marketing is out there telling people it exists, and Sales is doing the detailed work of integrating our product into existing organizations. This multiplies the value of our software. Zero marketing, zero value!
created value = usefulness * actual use
To maximize value in the world, we spread our effort between making useful stuff and getting it to people who use it.
The two loops are interdependent, but they are two efforts, with different objectives. In GTM, department goals point toward revenue. Every piece of work targets some part of the revenue pipeline. We can measure the cost and (to some degree of accuracy) the impact of each ad campaign, piece of content created, and sales effort. We have some hope of direct return on investment (ROI).
Engineering work does not roll up to revenue. A team’s work is not measured in ROI.
Sure, there are some large product development efforts that we expect Sales to extract revenue from. But most engineering work provides capabilities that make the visible work possible. Engineering work rolls up (usually indirectly) to customer value. The particular value is influenced by what GTM thinks it can sell.
That influence comes from the symbiotic flows of information. It helps to build stuff that we can sell, and it helps to sell what people will get most value from. When Product and Marketing work closely together, then Marketing can tell great stories and Product can focus engineering effort on what customers value enough to pay for.
I see this information flow at Honeycomb, where Product Managers interact with Marketing storytellers, Sales Engineers, and Customer Success people. Increasing value and sustainable revenue are complimentary goals.
As a person, my values align more with Engineering. Right now I work in GTM, as Developer Relations is part of Marketing. It’s fascinating to see this side of the business, and to realize how valuable it is. I love working at a company with good alignment, where I can see the two sides working together. Bonus: I get to create value on both sides of the multiplication, when I write code & words to make it easier for people to use Honeycomb.
And then I get to use my share of the revenue (salary) to drink fancy coffee while I write this for free.