How do you use cost of delay to prioritize and schedule agile features?

Cost planning in agile is a challenge for many project managers and stakeholders, who are used to traditional methods of estimating and budgeting. How can you align your agile delivery with your financial goals and constraints, without compromising the value and quality of your product? One way to do this is to use cost of delay, a metric that helps you prioritize and schedule features based on their economic impact. In this article, we will explain what cost of delay is, how to calculate it, and how to apply it to your agile planning process.

1 What is cost of delay?

Cost of delay (CoD) is the amount of money you lose or miss out on by delaying or not delivering a feature or a product. It reflects the opportunity cost of not delivering value to your customers or users as soon as possible. CoD can be measured in different ways, such as revenue loss, customer dissatisfaction, competitive disadvantage, or regulatory risk. The higher the CoD, the more urgent the feature or product is.

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2 How to calculate cost of delay?

To calculate CoD, you need to estimate two things: the value and the urgency of each feature or product. The value is the expected benefit or return that the feature or product will generate for your organization or customer. The urgency is the rate at which the value decreases over time, due to factors such as market demand, customer expectations, or competitive pressure. You can use various methods to estimate value and urgency, such as customer feedback, market research, business analysis, or experimentation. Once you have these estimates, you can multiply them to get the CoD for each feature or product.

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Stefan Schilling

Cost Management Consultant | Quantity Surveying | Berlin, Germany
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WIE WERDEN KOSTEN FÜR VERSPÄTUNGEN „CoD“ BERECHNET Hierzu sollte das Prinzip einer „Earned Value Analysis“ verstanden werden. Ausgangswerte einer vereinfachten EVA sind z.B. GEPLANTE Zeit und Kosten für die Bauausführung. Wird jetzt ein Nachtrag eingereicht, kann vereinfacht die Kostenerhöhung dem Kosten-Planwert addiert werden. Über das Verhältnis der GEPLANTEN Zeit- und Kostenwerte kann aus den Nachtragskosten vereinfacht ein zusätzlich benötigter Zeitwert der GEPLANTEN Zeit addiert werden. Es ergibt sich somit eine Kosten-, Termingrafik mit den Optionen aus höheren Kosten und verlängerten Terminen. Die Entscheidung zum Zielkonflikt aus Kostenerhöhung oder verlängerter Bauzeit obliegt dann dem Kunden.

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3 How to apply cost of delay to agile planning?

Using CoD, you can prioritize and schedule your features or products based on their economic value delivery (EVD), which is the ratio of CoD to duration. The duration is the estimated time it takes to deliver the feature or product, taking into account the complexity, dependencies, and resources involved. The higher the EVD, the more valuable the feature or product is. You can use a simple formula to rank your features or products by EVD:

EVD = CoD / Duration

You can also use a visual tool called a cost of delay divided by duration (CD3) matrix, which plots your features or products on a grid based on their CoD and duration. The features or products in the upper left quadrant have the highest EVD and should be delivered first, while those in the lower right quadrant have the lowest EVD and should be delivered last or eliminated.

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4 What are the benefits of using cost of delay?

Using CoD can help you achieve several benefits for your agile planning and delivery, such as aligning your priorities with business goals and customer needs, making better trade-off decisions based on economic value, reducing waste and maximizing return on investment, increasing transparency and collaboration among stakeholders, and adapting to changing market conditions and customer feedback.

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Paulo Viana

Controladoria | Gestão Financeira
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Uso o custo do atraso (CoD) para priorizar e programar recursos ágeis, focando em maximizar o valor econômico e alinhando as prioridades com os objetivos de negócios e as necessidades dos clientes. O CoD ajuda a identificar quais tarefas e projetos têm maior impacto financeiro se atrasados, permitindo tomar decisões mais informadas sobre onde alocar recursos limitados. Vejo que os benefícios de usar o CoD são numerosos - para mim. Ele facilita a melhor tomada de decisões de compensação, baseadas no valor econômico, o que ajuda a reduzir o desperdício e maximizar o retorno sobre o investimento na maioria dos casos. Ja tive casos que por outros motivos essa nao foi a realidade.

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5 What are the challenges of using cost of delay?

Using CoD can be challenging, as you may encounter difficulties such as estimating value and urgency accurately and objectively, communicating and validating assumptions and data sources, dealing with uncertainty in estimates, balancing short-term and long-term value delivery, and managing dependencies among features and products.

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Oseghale Okohue BEngr. Msc. MBA. DBA. Prince2®Practitioner

Accredited NEC4 ECC Project Manager & Snr. P6 Planner | EPICM, Offshore Engineering,Renewable Energy (HVDC & HVAC Power Cables, Wind, Solar, BESS, Grid Code Compliance (G99, G5/5, P28) & Integration, GIS/AIS Sub-Station)
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In engineering management, leveraging cost of delay aids in prioritizing agile features by quantifying the impact of postponing delivery. For an energy project like building a solar farm, features affecting energy production might have higher delay costs. Use techniques like WSJF (Weighted Shortest Job First) to rank features based on their value and urgency, ensuring optimal scheduling and resource allocation for timely project completion.

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How do you use cost of delay to prioritize and schedule agile features?

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1 What is cost of delay?

2 How to calculate cost of delay?

3 How to apply cost of delay to agile planning?

4 What are the benefits of using cost of delay?

5 What are the challenges of using cost of delay?

Cost Planning

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