@jonathansen

Using&Cost&of&

Delay&to&

Understand&your&

Customer’s&Real&

Priorities

Deadlines vs. Sad-lines

@jonathansen

About Me

Jonathan Hansen

Thumbtack Technology

NYC Kanban Meetup

@jonathansen

Some Project Challenges

• Delayed&Start&

• Wrong&Thing&Started&

• Premature&Op>miza>on

Problems&that&Happen&Some>mes

Root Cause: Misunderstood Cost of Delay

@jonathansen

About Cost of Delay

•What&it&is&

•∩&Queues&

•Using&it

@jonathansen

Cupcakes!An&Example

@jonathansen

Cost of DelayAn&Example

@jonathansen

Cost of DelayA&New&Fad

@jonathansen

Cost of DelayA&Market&Saturates

@jonathansen

Cupcake Market LifecycleAn&Example

Cupcake&Episode

@jonathansen

Cupcake Market LifecycleAn&Example

Realized(Value

Poten/al(Value

Cupcake&Episode

Compe>tor&starts&selling

@jonathansen

Cupcake Market LifecycleAn&Example

Realized(Value

Poten/al(Value

Cupcake&Episode

Compe>tor&starts&selling

Cost%of%Delay

@jonathansen

Typical Project Start

• Monthly&Release&Cycle&

• Desired&Feature&List&

• Budget:&$4000

“What&can&we&have&this&month?”

@jonathansen

Estimated Delivery Costs

Feature Story%Points T&M%Cost%($)

1 1 $500

2 3 $1500

3 3 $1500

4 10 $5000

@jonathansen

Capacity + BudgetCustomer’s&Backlog

Feature Story%Points T&M%Cost%($)

1 1 $500

2 3 $1500

3 3 $1500

4 10 $5000

Capacity: ≤8 points

Below Budget: $3500

@jonathansen

What About Cost of Delay?Customer’s&Backlog

Feature Story%Points T&M%Cost%($)

Added%Revenue%per%

month%($)

Value%aGer%6%months%($)

1 1 $500 $800 $4,300

2 3 $1500 $500 $1,500

3 3 $1500 $5,000 $28,500

4 10 $5000 $60,000 $355,000

@jonathansen

Customer’s&Backlog

Feature Story%Points T&M%Cost%($)

Added%Revenue%per%

month%($)

Value%aGer%6%months%($)

1 1 $500 $800 $4,300

2 3 $1500 $500 $1,500

3 3 $1500 $5,000 $28,500

4 10 $5000 $60,000 $355,000

What About Cost of Delay?Actual Value:

$33,880

@jonathansen

Customer’s&Backlog

Feature Story%Points T&M%Cost%($)

Added%Revenue%per%

month%($)

Value%aGer%6%months%($)

1 1 $500 $800 $4,300

2 3 $1500 $500 $1,500

3 3 $1500 $5,000 $28,500

4 10 $5000 $60,000 $355,000

Potential Value WastedActual Value:

$33,880

Potential Value

@jonathansen

About Cost of Delay

•What&it&is&

•∩&Queues&

•Using&it

@jonathansen

Tracking a Feature’s CostsCoD&for&“Feature&I”

Worth&$20,000/week&once&released

@jonathansen

Tracking a Feature’s CostsCoD&for&“Feature&I”

Worth&$20,000/week&once&released

Dev+QA&es>mate:&$4,000

Development&Costs

@jonathansen

Tracking a Feature’s CostsCoD&for&“Feature&I”

Week 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Value%Added

Wait

Idea&Captured

Dev&&&QA

UATDeployed

Si\ng&in&Backlog

Wai>ng&for&UAT

Wai>ng&for&Deployment

@jonathansen

Tracking a Feature’s CostsCoD&for&“Feature&I”

Week 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Value%Added

Wait

Idea&Captured

Dev&&&QA

UATDeployed

Si\ng&in&Backlog

Wai>ng&for&UAT

Wai>ng&for&Deployment

$4,000&(development&cost)+&$260,000&(13&weeks&Opportunity&Cost)=&$264,000

@jonathansen

Tracking a Feature’s CostsDrop&Everything&for&“Feature&I”?

@jonathansen

Tracking a Feature’s CostsDrop&Everything&for&“Feature&I”?

Everything&has&a&

Different&Cost&of&Delay

@jonathansen

About Cost of Delay

•What&it&is&

•∩&Queues&

•Using&it

@jonathansen

What&feature&should&we&work&on&first?

Prioritizing with CoD

@jonathansen

Value

Value&=&Revenue&g&Cost

@jonathansen

1. Increase&Revenue&2. Protect&Revenue&3. Reduce&Costs&4. Avoid&Costs

Ways to Increase Value

@jonathansen

Kinds of Cost

• Development&

• Opportunity

@jonathansen

Prioritizing with CoD

1. CoD&already&known&2. Quan>ta>ve&Es>ma>on&3. Qualita>ve&Es>ma>on

Depends&on&What&You&Have&to&Work&With

@jonathansen

Prioritizing with Known CoD

Weighted&Shortest&Job&First&(WSJF)

@jonathansen

Weighted&Shortest&Job&First

Project DuraQon Cost%of%Delay

Weight%=%CoD%/%

DuraQon1 1 10 102 3 3 13 10 1 0.1

Prioritizing with Known CoD

Source:%%The$Principles$of$Product$Development$Flow

@jonathansen

Cost(of(Delay(($)

Time

High&Weight&First

Project DuraQon Cost%of%Delay

Weight%=%CoD%/%

DuraQon

1 1 10 10

2 3 3 1

3 10 1 0.11

2

3

Weighted Shortest Job First

Source:%%The$Principles$of$Product$Development$Flow

@jonathansen

Low&Weight&First

Cost(of(Delay(($)

Time

1

2

3

Project DuraQon Cost%of%Delay

Weight%=%CoD%/%

DuraQon

1 1 10 10

2 3 3 1

3 10 1 0.1

By contrast, this is horrible

Source:%%The$Principles$of$Product$Development$Flow

@jonathansen

Quantitative Estimation

What&if&nobody&knows&Cost&of&Delay?&

@jonathansen

Sample Feature Value CardTitle:&Replace(Sign>Up(Process(with(Google(Accounts(Integra/on

What&kind(s)&of&value&is&this&feature&adding?

☑Add(Revenue&

☐Protect(Revenue

☑Lower(Costs(

☐Avoid(Costs

About&how&much&value&do&you&think&this&will&add/month?

☐<($500(

☒$500(>($999(

☐$1,000(>($9,999

☐$10,000(>($49,999(

☐$50,000(>($99,999(

☐>($100,000

How&will&it&add&those&kinds&of&Value?

The$current$sign-up$system$is$slow$and$10%$of$poten:al$users$abandon$the$process$3$pages$into$it.$Signing$up$with$Google$Accounts$will$take$fewer$than$3$clicks$and$is$projected$to$reduce$abandonment$by$40%.$Also,$we$will$no$longer$need$to$maintain$the$old$sign-up$module.

Complexity: 5$points

Weight: 150

WSJF&again

@jonathansen

Qualitative Estimation

What&if&nobody&can&es>mate&value?

@jonathansen

Define Work Item Types

Standard Expedite Fixed Date Intangible

@jonathansen

Hunting for Clues

@jonathansen

Qualitative EstimationClues&in&the&Language

A.“It(is(becoming(increasingly&urgent(for(us(to(release(an(Android(

version”(

B.“We’re(losing(customers(—(we(need(an(Android(version(now!”(

C.“The(founda/onal(API(for(our(Android(app(will(be(shut&down&

on&March&15(so(we(need(to(replace(it(by(then.”(

D.“Maybe(we(should(think(about(wri/ng(an(Android(app(

some>me.”

@jonathansen

Work Item: Standard WorkTypical&Cost&of&Delay&Graph

“It(is(becoming(

increasingly&urgent(for(us(to(release(an(

Android(

version”

Cos

t of

Del

ay (

$)

Time

@jonathansen

Work Item: Standard WorkTrigger&Words

“increasingly&urgent”

“worth&$X&per&year”

“recurring&savings”

“compound&growth”

“compe>>ve&advantage”

“a&priority”

@jonathansen

Work Item: ExpediteTypical&Cost&of&Delay&Graph

“We’re(losing(

customers(—(

we(need(an(

Android(

version(now!”

Cos

t of

Del

ay (

$)

Time

@jonathansen

Work Item: ExpediteTrigger&Words

“right&away”

“drop&everything”

“NOW”

“we&are&bleeding&cash”

“customers&are&screaming”

@jonathansen

Work Item: Fixed DateTypical&Cost&of&Delay&Graph

“The(founda/onal(

API(for(our(

Android(app(will(

be(shut&down&on&March&15(so(we(need(to(replace(it(

by(then.”

Cos

t of

Del

ay (

$)

Time

@jonathansen

Work Item: Fixed DateTrigger&Words

“on&November&15”“next&Friday”

“Quarter&End” “seasonal&opportunity”

@jonathansen

Work Item: IntangibleTypical&Cost&of&Delay&Graph

“Maybe(we(

should(think(

about(wri/ng(

an(Android(

app(

some>me.”

Cos

t of

Del

ay (

$)

Time

?

@jonathansen

Work Item: IntangibleTrigger&Words

“seems&important”

“need&to&refactor”

“in&my&opinion” “probably&useful”

“would&be&nice”

@jonathansen

Work Item Types

Standard Expedite Fixed Date Intangible

@jonathansen

Use Kanban to BalanceWork&in&Progress&Limits&by&Class&of&Service

3 2 2

1 1 1

1 1 1

@jonathansen

ConclusionWhat,&Why,&What&to&do

1.Invisible&Lost&Money&2.Queues&Increase&it&3.Bener&Priori>za>on

@jonathansen

Shameless Plug

Next NYC Lean Coffee: Wednesday 7pm @ Spotify

@jonathansen

Read More

http://BlackSwanFarming.com

http://playbookhq.co/blog/