‘Opportunity cost’ is a powerful idea in the product-thinking toolkit.

The simplest way to define this is: say you are faced with a decision. You have three options to choose from. The moment you pick one, you forego the consequences of the other two choices. The opportunity cost is the ‘loss’ you nominally incur by not choosing the next-best alternative.

If you choose the best option, your opportunity costs are lower. But if you end up choosing an inferior option, the opportunity costs are far higher.

‘Opportunity cost’ is a useful tool in prioritization, road mapping and product strategy.

For any project, opportunity cost grows over time. Earlier decisions you make set you on a path that and may need costly ‘pivots’ if things don’t work out.

Therefore, it makes sense to focus strongly on getting basic assumptions right at the beginning of the project.

This is also why I strongly recommend projects start with a discovery phase where you can ideate multiple options, test these quickly and throw away those that don’t work. Traditional metrics of velocity and utilization do not work in this phase. The idea of this phase is to reduce opportunity costs.

Post this, it’s easier getting into a delivery phase with a focus on relevant metrics.