In this presentation, I talk of Donald Reinstern's original idea of quantifying using Money units per time unit. However, the Agile world has been comprised a bit by using Fibonacci series or a scale of 1 to 10. Are we compromising the original intent of the author?

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Cost of delay – An economic framework
for decision making

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

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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)

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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.

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

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

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

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Factors in prioritization
• Risk

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Cost of delay

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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

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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

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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

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CoD – Urgency profile
Impact of an external deadline

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

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Should I wait 12 months for the last three%?

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

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

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What is the Cost of delay?

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What is the Cost of delay?

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

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Project economic framework

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Cost of Delay

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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

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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

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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

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WSJF

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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

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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

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Both effort and CoD vary

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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

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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