ScrumDay Chile - Value Estimation and Prioritization using Cost of Delay
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This is the presentation used during my lecture on the ScrumDay Chile 2015. How can we prioritize better and improve our trade-off decisions? Use Cost of Delay! 4 topics covered: 1.- Why other methods fail 2.- How to determine the Cost of Delay 3.- How value changes over time (Urgency Profiles) 4.- Use CD3 to improve your prioritization
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ScrumDay Chile - Value Estimation and Prioritization using Cost of Delay
- 1. VALUE estimation and prioritization using Cost of Delay (CoD) Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 2. http://homebodyandsoulblog.com/wp-content/uploads/2014/05/yashow-4.jpg Disclaimer! This is an original copy! A LOT of the content comes from Joshua Arnold and César Idrovo’s materials Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 3. Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 4. 1 The DON Hello, my name is If you only quantify one thing, quantify the cost of delay Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 5. 2 Value is rare and extreme $0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000 $2,000,000 $2,200,000 $2,400,000 $2,600,000 $2,800,000 0 10 20 30 40 50 60 70 80 A small number of features have a very high Cost of Delay CostofDelay/week Requirements sorted by Cost of Delay Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 6. Top vs bottom quartile: 1,000x $230,000/wk $220/wk Bottom 25% Top 25% of RQs $18,600/wk Next 25% $5,200/wk Next 25% Average $ Benefits Per Requirement Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 7. Without information about VALUEthe system optimizes for other things 3 Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 8. 4 examples that you will have to be able to explain… Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 9. h"ps://leopardsolu.ons.files.wordpress.com/2015/04/group-‐decision-‐making-‐in-‐communi.es-‐peytonbolin5.jpg #1Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 10. MoSCoW Must Have Should Have Could Have Won’t Have ROI Relative Cost of Delay Class of Service Benefit-to-cost ratio 4:1 Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 11. Let’s prioritize! Feature A B C Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 12. Let’s prioritize! Feature MoSCoW A Must have B Must have C Must have Which one should we do first? Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 13. Let’s prioritize! Feature MoSCoW ROI A Must have 10% B Must have 15% C Must have 8% How about now? Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 14. Let’s prioritize! Feature MoSCoW ROI Relative CoD A Must have 10% 10 B Must have 15% 4 C Must have 8% 7 And now? Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 15. Let’s prioritize! Feature MoSCoW ROI Relative CoD Revenue /week A Must have 10% 10 $100k B Must have 15% 4 $15k C Must have 8% 7 $800k Are you sure? Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 16. h"p://collegian.tccd.edu/wp-‐content/uploads/2013/10/poli.cal-‐incivility-‐color.jpg Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 17. Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 18. h"p://vehicletrackingscotland.co.uk/wp-‐content/uploads/2015/01/laptop_PNG5893.png #2Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 19. Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 20. Productivity -15pp Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 21. What other key parameters do you need to know? Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 22. Help us speed up the purchasing process! Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 23. ~$2,330,000 Irrecoverable, lost VALUE: Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 24. Time $ /week work work work Total Delay Cost Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 25. ~$40k/week Benefit Time work work work Total Delay Cost $ /week Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 26. ~$40k/week Benefit Time work work work Total Delay Cost $ /week Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 27. Productivity -15pp Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 28. Weekly cost of a developer $800 + $120 Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 29. Weekly net value delivered per developer $32,533 Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 30. Cost of Delay per developer $32,653 /week 5 teams, 6 developers each: $979,600 /weekPrepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 31. ~$2,330,000 Irrecoverable, lost VALUE: Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 32. 15,985 monitors By now we could have bought Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 33. <<< 1 day Time to break even Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 34. Put a price-tag on time $ Business value of the feature Cost of Delay Information Discovery Value How that value varies over time Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 35. A framework for thinking about value Increase Revenue Increasing sales to new or existing customers. Delighting or Disrupting to increase market share and size Protect Revenue Improvements and incremental innovation to sustain current market share and revenue figures Reduce Costs Costs that we are currently incurring, that can be reduced. More efficient, improved margin or contribution Avoid Costs Improvements to sustain current cost base. Costs we are not currently incurring but may do in the future Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 36. Example: Cost of not having Monitors for Pair Programming Start generating revenue without delay Avoid paying 15% more to achieve the same outcome Estimate the value of the effects of the change1 A couple of tactics for getting to $ Avoid Costs Reduce Costs Protect Revenue Increase Revenue $120$32,533 Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 37. Make the value equal to cost of alternatives Example: Automating a process Avoid Costs Reduce Costs Protect Revenue Increase Revenue Cost of human error Current manual cost A couple of tactics for getting to $ 2 Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 38. h"p://.p.gatech.edu/sites/default/files/Resolución%20en%20cajas%20(Medium).JPG #3Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 39. Automating a Process Automating a process to satisfy new regulation: • Reduce the additional manual processing resource which is estimated to cost about 20 FTEs at $20k (p.a.) per FTE • Due to the current manual process, there is a 10% probability of an error • Once a month there’s an inspection. If an error is found, the company has to pay a $5,000,000 fine What is the cost of delaying this automation? Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 40. Reduce Cost: 20 FTEs at $20k each per year = $400,000 /year ~ $8,000 /week Avoid Cost: $5,000,000 in fines per month * 10% Probability of finding an error = Expected Value = $500,000 /month ~ $125,000 /week Cost of Delay: ~ $133,000 /week Automating a Process Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 41. Put a price-tag on time $ Business value of the feature Cost of Delay Information Discovery Value How that value varies over time Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 42. Willingness to pay for the info? Quantifying the value of information Cost to obtain info first-hand? Information Discovery Value What is it worth to avoid taking the wrong path? Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 43. Put a price-tag on time $ Business value of the feature Cost of Delay Information Discovery Value How that value varies over time Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 44. Urgency Profiles Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 45. For ideas with a very long-life, with peak unaffected by delay Time Cost of Delay $Benefits/week Long-life, unaffected peak1 Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 46. For ideas with a very long-life, with peak unaffected by delay TimeLate Entry Cost of Delay $Benefits/week Long-life, unaffected peak1 Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 47. For ideas with a very long-life, with peak unaffected by delay TimeLate Entry Cost of Delay $Benefits/week Delay Cost Long-life, unaffected peak1 Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 48. For ideas with a very long-life, with peak unaffected by delay TimeLate Entry Cost of Delay $Benefits/week Delay Cost Long-life, unaffected peak1 Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 49. Short benefits horizon, and reduced peak due to late delivery TimeLate Entry Reduced Peak Delay Cost $Benefits/week Short-life, affected peak2 Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 50. For ideas with a very long-life, with reduced peak due to later delivery TimeLate Entry Reduced Peak Delay Cost $Benefits/week Long-life, affected peak3 Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 51. TimeLate Entry Delay Cost $Benefits/week Seasonal/date-driven4 Last Responsible MomentPrepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 52. Automating a Process Automating a process to satisfy new regulation: • Reduce the additional manual processing resource which is estimated to cost about 20 FTEs at $20k (p.a.) per FTE • Due to the current manual process, there is a 10% probability of an error • Once a month there’s an inspection. If an error is found then the company has to pay a $5,000,000 fine • The new regulation will be effective starting 1st May 2016 • The duration of the implementation is estimated to be 13 weeks What is the total delay cost by December 17th? Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 53. Automating a Process Automating a process to satisfy new regulation: • Reduce the additional manual processing resource which is estimated to cost about 20 FTEs at $20k (p.a.) per FTE • Due to the current manual process, there is a 10% probability of an error • Once a month there’s an inspection. If an error is found then the company has to pay a $5,000,000 fine • The new regulation will be effective starting 1st May 2016 • The duration of the implementation is estimated to be 13 weeks What is the total delay cost by December 17th? *Hint: ~19 weeks away Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 54. Urgency Profiles Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 55. https://dereklieu.files.wordpress.com/2011/01/tetris-marathon-tetris.jpg #4Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 56. Feature Cost of Delay X $133,000/week Y $80,000/week Z $1,000,000/week Which one would you do first? If these take the same amount of time to deliver: Scheduling decisions Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 57. Cost of Delay Simulation Feature Duration (weeks) Cost of Delay (m) A 5 $1 B 1 $4 C 2 $5 (BlackSwanFarming.com) Which one should we do first? Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 58. Cost of Delay Simulation Time ValuePotential Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 59. Cost of Delay Simulation A Time ValuePotential 5431 2 Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 60. Cost of Delay Simulation $A Time ValuePotential 5431 2 6 Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 61. B Cost of Delay Simulation $A Time ValuePotential 5431 2 6 Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 62. B Cost of Delay Simulation $ $ $ $ $ A Time ValuePotential $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 5431 2 6 Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 63. B Cost of Delay Simulation $ $ $ $ $ A C Time ValuePotential $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 5431 2 6 Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 64. B Cost of Delay Simulation $ $ $ $ $ $ $ $ $ $ A C Time ValuePotential $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 5431 2 6 Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 65. A Time CostofDelay First-In-First-Out Scheduling Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 66. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ B A Time CostofDelay First-In-First-Out Scheduling Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 67. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ C B A Time CostofDelay First-In-First-Out Scheduling Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 68. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ C B A Time CostofDelay First-In-First-Out Scheduling Total Delay Cost = $50 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $50 Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 69. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $50 C B A Time CostofDelay First-In-First-Out Scheduling Time CostofDelay B A C Cost of Delay (CD3) Scheduling Total Delay Cost = $50 Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 70. $$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ C B A Time CostofDelay First-In-First-Out Scheduling Time CostofDelay B A C Cost of Delay (CD3) Scheduling Total Delay Cost = $8Total Delay Cost = $50 $50 $8 Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 71. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $$ $ $ $ $ $ $ C B A Time CostofDelay First-In-First-Out Scheduling Time CostofDelay B A C Cost of Delay (CD3) Scheduling 84% reduction in delay cost vs FIFO In this simple example: Total Delay Cost = $8Total Delay Cost = $50 $50 $8 (BlackSwanFarming.com) Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 72. When time to deliver varies, use Cost of Delay Divided by Duration Cost of Delay Duration CD3 $ Business value of the feature Information Discovery Value How that value varies over time Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 73. Cost of Delay Simulation Feature Duration (weeks) Cost of Delay (m) CD3 A 5 $1 0.2 B 1 $4 4 C 2 $5 2.5 (BlackSwanFarming.com) So again, which one should we do first? Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 74. CD3Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 75. In CD3, why divide by Duration… and not Cost? Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 76. Money? You can beg, borrow or steal… Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 77. Time? Can’t be replaced. Can’t be reversed! Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 78. Knowing how long the pipeline is blocked is more valuable information Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 79. Takeaways Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 80. Cost of Delay Improves prioritisation Enables better trade-off decisions Changes the focus of the conversation Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 81. #1 #2 #3 #4 Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 82. People make decisions Not the data, or an algorithm Organisational strategy Technology strategy Start with CD3 ‘initial triage’ Adjust CoD to reflect strategy State reasons for adjustment Additional levers? In the real world… Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015
- 83. 1. Contact: cletelier@gmail.com 2. Thanks cesar@labzero.com & emergn.com 3. Experience report and more detail: BlackSwanFarming.com by Joshua Arnold and Özlem Yüce Prepared by Carlos Letelier & César Idrovo ScrumDay Chile 2015