Cost of delay and prioritization techniques

Confidential C
Cost of delay – An economic framework
for decision making

Confidential C
MoSCoW
• Must-have
• Should have
• Could have
• Won’t have for now

Confidential C
Achieving differential value - Kano model
• Must-have features (bed,
bathroom, desk, clean)
• Linear features (the more the
better)
• Exciters and delighters (Customers
do not know until they see)

Confidential C
Rules for differential features
• Invest in MMFs, but never overinvest in a
feature that is already commoditized.
• Drive innovation by having the courage to
invest in exciters.
• If resources do not allow you to compete on
the current playing field, change the playing
field.

Confidential C
Factors in prioritization
• Value – NPV, IRR
• Cost
• New knowledge gained
• Risk

Confidential C
Value and Cost
Increase revenue Decrease costs
Protect revenue
Avoid costs / Avoid
penalties via
Compliance
Revenue Cost

Confidential C
Product discovery
• Are we building the right thing? - Pharma
• New knowledge gained – means uncertainty
and end uncertainty

Confidential C
Factors in prioritization
• Risk

Confidential C
Cost of delay
If you only quantify one thing, quantify the Cost of
Delay —Don Reinertsen
Time is money
Change in time ~= change in money

Confidential C
Cost of Delay
Project A if delivered
on time
5 million Euros
Project A is delayed by
two months
3 million Euros
Project Revenue
1 million Euros
/ month

Confidential C
What is Cost of delay?
• Cost of Delay is a way of communicating the impact
of time on the outcomes we hope to achieve
• To make decisions, we need to understand not just how
valuable something is, but how urgent it is

Confidential C
CoD – Urgency profile
Impact of an external deadline

Confidential C
Short benefits horizon – reduced peak
Apple with its touch features and using only 2G and connected wires
Zara fashion clothing

Confidential C
Should I wait 12 months for the last three%?

Confidential C
Long-life products – peak “affected”
Unfair competitive advantage or other network effect
Facebook and SnapChat, or Cola brands and PC market

Confidential C
Long life cycle, peak value “unaffected” by delay
Established organizations – Automating a process,
improving efficiency, reducing cost of time.

Confidential C
What is the Cost of delay?

Confidential C
Project economic framework
• Value
• Cost
• New knowledge gained
• Risk

Confidential C
Project economic framework

Confidential C
User-Business Value
The potential value in
the eyes of the user
What is the revenue
impact on our
business?
Do our users prefer
this over that?
Potential penalty

Confidential C
Time criticality
How does the
business value decay
over time?
Will they wait for us
or move to another
solution?
Is there a fixed
deadline?
Effect on customer
satisfaction

Confidential C
Risk reduction / Opportunity enablement
What else does this
do for our business?
Is there value in the
information we will
receive? - Security
Does it decrease
future risk of delivery?
Will this feature
enable new business
opportunities - Rating

Confidential C
3
10
6
A
B C
Feature Duration Cost of
Delay
WSJF
A 1 10 10
B 1 3 3
C 1 1 1
(1 + 1) * 1 = 2
C
B
A
(1 + 1) * 3 = 6
Effort is constant but CoD varies
Cost of
delay
Time
Cost of
delay
Time

Confidential C
1
10
13
A
B C
Feature Duration Cost of
Delay
WSJF
A 1 1 1
B 3 1 0.33
C 10 1 0.1
(1 + 1) * 3 = 6
C
B
A
(10 + 3) * 1 = 13
CoD is constant and effort varies
Cost of
delay
Time
Cost of
delay
Time

Confidential C
Both effort and CoD vary

Confidential C
WSJF
WSJF = CD3 = Cost of delay divided by duration
Weighted Shortest Job First (WSJF) is a prioritization model used to
sequence Features, Capabilities and Epics to produce maximum
economic benefit

Confidential C
Cost of delay – Life-cycle profit impact
• Life-cycle profit impact - make decisions quickly, correctly,
and with logic that everyone can understand
• We need a method to express all changes, in all variables,
in the same unit of measure

Cost of delay and prioritization techniques

More Related Content

What's hot (20)

Similar to Cost of delay and prioritization techniques (20)

Recently uploaded (20)

Cost of delay and prioritization techniques