1. @jonathansen
Using&Cost&of&
Delay&to&
Understand&your&
Customer’s&Real&
Priorities
Deadlines vs. Sad-lines

2. @jonathansen
About Me
Jonathan Hansen
Thumbtack Technology
NYC Kanban Meetup

3. @jonathansen
Some Project Challenges
• Delayed&Start&
• Wrong&Thing&Started&
• Premature&Op>miza>on
Problems&that&Happen&Some>mes
Root Cause:
Misunderstood Cost of Delay

4. @jonathansen
About Cost of Delay
•What&it&is&
•∩&Queues&
•Using&it

5. @jonathansen
Cupcakes!
An&Example

6. @jonathansen
Cost of Delay
An&Example

7. @jonathansen
Cost of Delay
A&New&Fad

8. @jonathansen
Cost of Delay
A&Market&Saturates

9. @jonathansen
Cupcake Market Lifecycle
An&Example
Cupcake&
Episode

10. @jonathansen
Cupcake Market Lifecycle
An&Example
Realized(Value
Poten/al(Value
Cupcake&
Episode
Compe>tor&
starts&selling

11. @jonathansen
Cupcake Market Lifecycle
An&Example
Realized(Value
Poten/al(Value
Cupcake&
Episode
Compe>tor&
starts&selling
Cost%of%Delay

12. @jonathansen
Typical Project Start
• Monthly&Release&Cycle&
• Desired&Feature&List&
• Budget:&$4000
“What&can&we&have&this&month?”

13. @jonathansen
Estimated Delivery Costs
Feature Story%Points T&M%Cost%($)
1 1 $500
2 3 $1500
3 3 $1500
4 10 $5000

14. @jonathansen
Capacity + Budget
Customer’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

15. @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

16. @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

17. @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
PotentialValue Wasted
Actual Value:
$33,880
Potential Value

18. @jonathansen
About Cost of Delay
•What&it&is&
•∩&Queues&
•Using&it

19. @jonathansen
Tracking a Feature’s Costs
CoD&for&“Feature&I”
Worth&$20,000/week&
once&released

20. @jonathansen
Tracking a Feature’s Costs
CoD&for&“Feature&I”
Worth&$20,000/week&
once&released
Dev+QA&es>mate:&$4,000
Development&Costs

21. @jonathansen
Tracking a Feature’s Costs
CoD&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
UAT
Deployed
Sing&in&
Backlog
Wai>ng&
for&UAT
Wai>ng&for&
Deployment

22. @jonathansen
Tracking a Feature’s Costs
CoD&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
UAT
Deployed
Sing&in&
Backlog
Wai>ng&
for&UAT
Wai>ng&for&
Deployment
$4,000&(development&cost)
+&$260,000&(13&weeks&Opportunity&Cost)
=&$264,000

23. @jonathansen
Tracking a Feature’s Costs
Drop&Everything&for&“Feature&I”?

24. @jonathansen
Tracking a Feature’s Costs
Drop&Everything&for&“Feature&I”?
Everything&has&a&
Different&Cost&of&Delay

25. @jonathansen
About Cost of Delay
•What&it&is&
•∩&Queues&
•Using&it

26. @jonathansen
What&feature&should&
we&work&on&first?
Prioritizing with CoD

27. @jonathansen
Value
Value&=&
Revenue&g&Cost

28. @jonathansen
1. Increase&Revenue&
2. Protect&Revenue&
3. Reduce&Costs&
4. Avoid&Costs
Ways to Increase Value

29. @jonathansen
Kinds of Cost
• Development&
• Opportunity

30. @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

31. @jonathansen
Prioritizing with Known CoD
Weighted&
Shortest&Job&
First&(WSJF)

32. @jonathansen
Weighted&Shortest&Job&First
Project DuraQon
Cost%of%
Delay
Weight%=%
CoD%/%
DuraQon
1 1 10 10
2 3 3 1
3 10 1 0.1
Prioritizing with Known CoD
Source:%%The$Principles$of$Product$Development$Flow

33. @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

34. @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

35. @jonathansen
Quantitative Estimation
What&if&nobody&
knows&Cost&of&Delay?&

36. @jonathansen
Sample Feature Value Card
Title:&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

37. @jonathansen
Qualitative Estimation
What&if&nobody&can&
es>mate&value?

38. @jonathansen
Define Work Item Types
Standard Expedite Fixed Date Intangible

39. @jonathansen
Hunting for Clues

40. @jonathansen
Qualitative Estimation
Clues&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.”

41. @jonathansen
Work Item: Standard Work
Typical&Cost&of&Delay&Graph
“It(is(becoming(
increasingly&
urgent(for(us(
to(release(an(
Android(
version”
CostofDelay($)
Time

42. @jonathansen
Work Item: Standard Work
Trigger&Words
“increasingly&
urgent”
“worth&$X&
per&year”
“recurring&
savings”
“compound&
growth”
“compe>>ve&
advantage”
“a&priority”

43. @jonathansen
Work Item: Expedite
Typical&Cost&of&Delay&Graph
“We’re(losing(
customers(—(
we(need(an(
Android(
version(now!”
CostofDelay($)
Time

44. @jonathansen
Work Item: Expedite
Trigger&Words
“right&away”
“drop&everything”
“NOW”
“we&are&
bleeding&cash”
“customers&are&screaming”

45. @jonathansen
Work Item: Fixed Date
Typical&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.”
CostofDelay($)
Time

46. @jonathansen
Work Item: Fixed Date
Trigger&Words
“on&November&15”
“next&Friday”
“Quarter&End”
“seasonal&opportunity”

47. @jonathansen
Work Item: Intangible
Typical&Cost&of&Delay&Graph
“Maybe(we(
should(think(
about(wri/ng(
an(Android(
app(
some>me.”
CostofDelay($)
Time
?

48. @jonathansen
Work Item: Intangible
Trigger&Words
“seems&important”
“need&to&refactor”
“in&my&opinion”
“probably&useful”
“would&be&nice”

49. @jonathansen
Work Item Types
Standard Expedite Fixed Date Intangible

50. @jonathansen
Use Kanban to Balance
Work&in&Progress&Limits&by&Class&of&Service
3 2 2
1 1 1
1 1 1

51. @jonathansen
Conclusion
What,&Why,&What&to&do
1.Invisible&Lost&Money&
2.Queues&Increase&it&
3.Bener&Priori>za>on

52. @jonathansen
Shameless Plug
Next NYC Lean Coffee:
Wednesday 7pm @ Spotify

53. @jonathansen
Read More
http://BlackSwanFarming.com
http://playbookhq.co/blog/