Time is an Asset, Delay is a Cost: Applying qualitative and quantitative analysis for competitive advantage   abstract In competitive product development, time often trumps cost and value. While cost of delay is now a part of our vocabulary, how to use it is less understood. Hear the historical context of time-agility strategies, have equations and qualitative approaches demystified - make more effective decisions.   description While cost of delay has become a fashionable topic for Agile practitioners, agreement as to the correct way to apply it has been harder to find. This presentation will look to the historical use of time and agility to create winning strategies. It examines proposals to quantify cost of delay in product management contexts, and explains the justifications for the resulting formulae and archetypes - where appropriate giving the limitation of their applicability and when to apply different approaches. Finally the presentation looks to the synthesis of these ideas to use quantitative calculations and qualitative analysis in formulating product investment and development strategies.

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Time is and Asset
Delay is a Cost
Applying qualitative and quantitative analysis
for competitive advantage
Andy Carmichael PHD FBCS
@andycarmich ac@openxprocess.com
Twitter: #lascot16
@andycarmich

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Who is
going
to win?
• Tempo from the
Italian for time
• An essential
element of
strategy in chess

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Who is
going to
win the
dogfight?
• Max speed? (level-climb-dive)
• Max altitude?
• Manoeuvrability? (agility)
• Pilot training
• Cockpit visibility
• Power-steering
References: Wikipedia, www.warbirddepot.com, Chet Richards, “Certain to Win”, OODA diagram drawn by Patrick Edwin Moran
John Boyd

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Time is key to strategy in…
• Chess
• Warfare (Sun Tsu, Clauswitz,
Von Moltke, John Boyd)
– See Chet Richards, Stephen Bungay
•Business
We borrow
time…
We buy
time…
We invest
time…
We save
time…
We waste
time…
We spend
time…
Time “is” Money?

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Time “is” Money?
Time (t) influences Value (V)
𝐷𝑒𝑙𝑎𝑦 𝐶𝑜𝑠𝑡 = −
𝜕𝑉
𝜕𝑡
Δ𝑡
“Cost of Delay” (CoD)
A Cost –
e.g. measured in
dollars
A rate of change
in value
e.g. measured in
dollars per week
or “Urgency”

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Essential Kanban Condensed: The Glossary

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Cost of Delay is a decision-aid
• Context:
• choosing the next “feature” / “experiment” to implement
(Product)?
• Choosing which product to fund / postpone (Portfolio)?
• Why?
• to maximise realised business benefit
• How?
• By estimating (forecasting) future cash (or value) flows and the
time delay before the benefits will occur

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Context:
Portfolio level is where
decisions are made about
investing/disinvesting in
different products
Product level is where
decisions are made about
how to maximize the
value delivered by that
product
Portfolio
Product
Team
Personal
WEEKS/
DAYS
DAYS/
HOURS
MONTHS/
WEEKS
YEARS/
QUARTERS
Products - Goals
Strategic Direction
Options - Value
Product Management
Stories - Delivery
Day to day Leadership
Tasks - Focus
Individual Professionalism

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How to approach Cost of Delay?
quantitatively? qualitatively?or

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Value flow from a new development – “adoption”
Cost of
development
Increasing then
decreasing
profits/savings

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The “Last Responsible Moment”

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-100.0
0.0
100.0
200.0
300.0
400.0
500.0
600.0
0 20 40 60 80 100
CumulativeValue$(K)
Time in weeks
No delay
10-week delay
20-week delay
Cost of 10 week delay
Linear benefits profile (e.g. Staff-Saving feature)

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0510
0
100
200
300
400
500
0 20 40 60 80 100
Urgency$(K)perweek
DelayCost$(K)
Length of Delay (weeks)
Approximately
linear Delay Cost
Approximately
constant “Urgency”
Linear benefits: Delay Cost & Urgency Profiles

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DelayCost($)
Urgency($perweek)
Delay Cost and Urgency Profiles
General Delay Cost and Urgency Profiles
Low delay
impact before
this point
Low delay
impact after
this point
Roughly constant
urgency over this
period

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WSJF with constant urgency (apply the formula)
prioritise highest urgency/duration
• Value realised by implementing
item 1 then item 2:
𝑉1 + 𝑉2 − 𝑈1 𝐷1 − 𝑈2(𝐷1 + 𝐷2)
• Difference in value by doing item 1 first,
compared to doing item 2 first
𝑈1
𝐷1
−
𝑈2
𝐷2
𝐷1 𝐷2
WSJF: Favours
urgent short jobs
12 wks
4 wks
$8pw
$3pw
D2
Urgency(CoD)
Time (weeks)
$96
$48
D1
U2
U1
D2
Urgency(CoD)
Time (weeks)
$112
$12
D1
U2
U1
Total Delay
Cost=$144
Total Delay
Cost=$140
Total Delay Cost
“wisjif”
or “CD3”

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What is “Duration” in the WSJF formula
• Customer Lead Time?
• System Lead Time?
• Touch Time?
• Lead Time does not represent how long the team is “blocked” by a
different item
• In some circumstances* Touch Time (for which an estimate of effort is
a reasonable proxy) should be used
* where items are released on completion, rather than waiting for batch releases

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How to approach Cost of Delay?
quantitatively? qualitatively?or

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Value isn’t just increased profit…
• Protecting loss of profits
• Increased turnover
• Increased learning
• Reduced risk
• Cost saving
• New market option
• Cover competitors’ moves
• Staff retention
• Process improvement
• etc…
How would you put
a monetary value
on each of these?

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Qualitative Approaches
to ordering work by Cost of Delay
1. Gut feel / HIPPO
2. SAFe
3. Delay Cost Profiles
4. Category Radar Plots
5. Hybrid approaches and combination with probabilistic forecasting

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The SAFe formula for WSJF
• All quantities estimated on a 1-20 (sic) “Fibonacci” scale
• This is a qualitative rather than quantitative method
• The danger of this approach is the use of spurious numbers!
• As a qualitative method it may help people talk to each other about value…
Couldn’t they do that without playing cards?
𝑊𝑆𝐽𝐹 =
𝐶𝑜𝑠𝑡 𝑜𝑓 𝐷𝑒𝑙𝑎𝑦
𝑆𝑡𝑜𝑟𝑦 𝑃𝑜𝑖𝑛𝑡𝑠
No.
It doesn’t!
𝐶𝑜𝑠𝑡 𝑜𝑓 𝐷𝑒𝑙𝑎𝑦 = (𝑇𝑎𝑛𝑔𝑖𝑏𝑙𝑒 𝐵𝑒𝑛𝑒𝑓𝑖𝑡 + 𝑇𝑖𝑚𝑒 𝐶𝑟𝑖𝑡𝑖𝑐𝑎𝑙𝑖𝑡𝑦 + 𝐼𝑛𝑡𝑎𝑛𝑔𝑖𝑏𝑙𝑒 𝐵𝑒𝑛𝑒𝑓𝑖𝑡)
No.
It doesn’t!

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Delay Cost Profiles
• Expedite: Very high urgency – no end point in sight
• Fixed Date: One off impact on fixed date
• Standard: Medium urgency; tails off (or cuts off) as value is lost
• Intangible: Low urgency, may be followed by high urgency
DelayCost($)
Delay (time)
Intangible
DelayCost($)
Delay (time)
Standard
DelayCost($)
Delay (time)
Fixed Date
DelayCost($)
Delay (time)
Expedite
We can define different
“Classes of Service” for
these archetypes

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Category Radar Plots
• Context specific dimensions of
risk and value
• Dimensions…
• must be Ordinal
• not necessarily Interval/Ratio
• and not just Nominal
Source: David J Anderson http://www.slideshare.net/ScrumTrek/david-anderson-enterprise-service-planning-kanban

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How urgent is it to start this item?
• the ordering of work items (WSJF: Urgency / LT)
• Choosing the class of service that is appropriate
for the work item
• Policies for more value, less risk
• Ensuring some intangible items are
always in play (interruptible if unexpected /
irrefutable demand)
• Pay attention to the “last responsible
moment” for starting a work item
(say, 85% probability point)
Source: @lki_dja

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Know the context…
• Chaotic (high risk, uncertain)
domains are not susceptible to
quantitative analysis
• Obvious domains don’t require it
• Complicated domains are most
suitable to quantitative analysis
• Complex domains may benefit
from a qualitative or hybrid
approach
By Snowded (Own work) [CC BY-SA 3.0 (http://creativecommons.org/
licenses/by-sa/3.0)], via Wikimedia Commons

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32Visit leankanban.com/guide for free download.

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Questions and
Discussion