Cost of Delay in your fridge

I wrote a post the other day about Covid19’s impact on food shopping habits as a useful analogy for teaching batch size optimisation.

There’s an interesting spin-off from this lesson around Cost of Delay (or at least 1 version of it) & you can find it in your fridge…

This post isn’t a deep dive into Cost of Delay – I’d recommend you check out Don Reinertsen’s book “The Principles of Product Development Flow” and also the great work from Joshua J. Arnold (AKA Black Swan Farming).

Hopefully by the end of this post you’ll know that there is more than Cost of Delay profile & a fun dive into one of those profiles.

Cost of Delay defined

On his site, Joshua Arnold defines Cost of Delay as

“…a way of communicating the impact of time on the outcomes we hope to achieve. More formally, it is the partial derivative of the total expected value with respect to time.

Cost of Delay combines urgency and value – two things that humans are not very good at distinguishing between. To make decisions, we need to understand not just how valuable something is, but how urgent it is.”

Cost of Delay urgency profiles

Joshua identifies 4 different CoD urgency profiles. This post is about profile #1  – short affected

Short horizon reduced peak profile – image from Joshua Arnold, Black Swan Farming

Cost of Delay in your fridge

We all have foodstuffs in our cupboards & fridges. During this Covid lockdown we likely have more than would during pre-Covid times.

These foodstuffs have best before & use-by dates which let us know when we need to have consumed the food by. If we don’t eat the food before those dates, we’re likely getting a less than desirable outcome. Maybe the flavour has gone, the health benefits decrease over time, or possibly we may die if we eat the out of date foodstuff.

Either way, the foodstuffs have a window of value & that value decreases after the best before & use-by dates.

Meal planning

As there is a window of available value from the foodstuffs, we plan our meals around their expiry dates. Have you ever had one of those “we need to eat up the food” dinners? Yep, you’ve prioritised by expiry date!

We (should) eat the food that expires soonest / earliest otherwise we may have to throw it away.

Ever had to throw unopened food away? Galling isn’t it. More importantly than your money you’ve literally just thrown in the bin, what about if that wasted food was once alive…

Cost of Delay in product development

This urgency profile is seen in product development with time-sensitive goods. Examples include

  • A games studio misses the October launch date of a new title (game). There’s a potential they’ll miss the Christmas rush & profits that come with it
  • Or Video on Demand providers with a football world cup contract not getting their infrastructure & apps prepared for the increased load. Customers might not be able to watch the match.
  • Online gaming companies preparing their automated odds generators & bet settlement engines for Grand National to ensure they can get the new customers & then pay out when the results come in.
  • Ecommerce sites not performant for Black Friday or Christmas results in shoppers going elsewhere
  • New regulations go live on a set date, with fines for those not adhering to the new regulations (think GDPR)
    • admittedly this is an example of avoiding costs, but the profile is the same, just the inverse (as long as you are planning to comply with the regulations & not continually pay the fine).

If the organisation misses the window, they miss out on a massive chunk of value. This is their cost of delay.

Prioritising for Cost of Delay

Obviously, there are more things we can prioritise for other than Cost of Delay, but I’m not covering those here.

As with the food in the fridge,  we can prioritise our product development to reduce the risk of Cost of Delay:

  • The games studio develops releases a smaller version of the title (e.g. shorter solo missions) on the release date which they can iterate on & improve in the run-up to Christmas
  • On the run-up to the calendar event, VOD providers, online gaming & e-commerce sites only develop features & infrastructure for that event, whilst limiting the development of other features that may risk them missing the event altogether (for example a release that breaks the site)
  • All companies scramble to work out how they can conform to the new regulations to avoid the fine.

Summary

Cost of Delay is a fabulous tool to cut through politicking & guessing.

  • How “deadly” are those deadlines?
  • What’s the impact of a missed delivery?
  • What can we deploy now to release value & reduce the risk of not being able to deliver before the window of value?
  • What shouldn’t we be working on right now?

A sidenote on bugs

Cost of Delay can help with your bug advocacy. It can help you determine if this is the bug you actually want stake your reputation or not.

For example, if the risk of this bug is not greater than incurring the fine & damaged reputation that goes with it, if you were the no/go decision maker, would you choose to fix it over deploying?

Learn more about Cost of Delay

Deep Dive – (1:23:00) Cost of Delay: Theory & Practice with Donald Reinertsen (Adventures with Agile video)

Cost of Delay: better prioritisation, trade-offs, conversations (Joshua Arnold, Øredev 2017)

Black Swan Farming (Joshua Arnold)

Cost of Delay – a key economic metric (ontheagilepath.net post – a digest of Joshua Arnold’s thinking + a free tool for calculating CoD)