Why It Works
This technique is one of many that falls under the broad category of ethnographic research. Ethnographic research is an incredibly powerful way of understanding your customer, but it comes with a catch: it is hard to observe your customer in such a way that your observations don't change how they work. It's kind of like the Heisenberg Uncertainty Principle applied to people instead of quantum particles. That's why the name of this game emphasizes thinking of yourself as a shadow, so that you can minimize any negative interactions caused by your observations.
Time Frame of Action
Sophisticated applications of this technique are based on specially selected customers being asked to perform activities while being studied in specially constructed observation rooms. Although this can be an extraordinary way to uncover hidden requirements, the process is both expensive because of the special room charges and time consuming, and the setting tends to be artificial. Me and My Shadow works best when you can observe your customers in their native habitat (with native guides in tow).