Principal Engineer (Delivery) | Engineering Delivery Manager | Technical Programme Manager | Delivery Lead
The Cost of Delay (CoD) is a crucial concept in Lean Product Development - it helps quantify the economic impact of delaying a project or task. It measures the negative economic impact of not completing something at the optimal time. Here's a breakdown of its significance: Understanding Cost of Delay 💡 💰 Economic Value: CoD represents the money lost by not delivering a product or feature on time. For example, if a feature could generate £100,000 per month, a three-month delay would result in a £300,000 loss. 💯 Prioritization: It helps prioritize tasks based on their economic value over time. Tasks with higher CoD should be completed sooner to maximize economic return. 🎯 Decision-Making: CoD provides a financial basis for decision-making, helping teams choose which work-items to tackle first. Benefits of Using Cost of Delay😍 🤼 Improved Resource Allocation: By understanding the economic impact of delays, teams can allocate resources more effectively to high-value tasks. 📈 Enhanced Productivity: Prioritizing tasks based on CoD ensures that the most valuable work is completed first, leading to better productivity and faster delivery. 💸 Better Financial Outcomes: By focusing on tasks with the highest economic value, organizations can improve their financial performance and return on investment. (On a side note : predicting future economic value (an aspect of detailed CoD calculation) can be challenging - yet, it is the basis of all business, and investment - and is likely a core use case for machine learning and predictive analytics.) Don Reinertsen, a pioneer in Lean Product Development, has shared several insightful nuggets of wisdom about the Cost of Delay (CoD). Here are a few key points: 👊 Quantify the Impact: Reinertsen emphasizes the importance of quantifying the economic impact of delays. He states, "Cost of Delay is the one thing to quantify". By understanding the financial consequences of delays, teams can make better decisions about prioritizing tasks. 🙀 Surprising Numbers: He often highlights that people are usually surprised by how large the CoD numbers are when they first calculate them. This realization helps teams appreciate the urgency of addressing delays. 🤝 Consensus Building: Reinertsen notes that calculating CoD can help build consensus among team members. When people see the actual numbers, they often reach a better understanding and agreement on priorities 💰 Economic Decision-Making: He advocates for using CoD to make economic decisions in product development. This includes evaluating the cost of queues, the value of excess capacity, the benefit of smaller batch sizes, and the value of variability. 🏛 Communication with Management: Reinertsen stresses the importance of communicating with senior managers in economic terms. By presenting CoD in financial terms, it becomes easier to get their support and alignment. Recommend reading: Principles of Product Development Flow,Donald G. Reinertsen
