The document discusses estimating the cost of delaying a project. It suggests splitting into teams to brainstorm new product ideas and estimate what delaying the project by 3 months would cost. Key considerations for developing a baseline economic model include pricing trends, market size and share determining unit sales, unit costs, development and marketing expenses. The model can then be used to develop variations considering delays, cost overruns, or sales estimates being off. Decision rules should be created to help determine if added features justify potential delays or costs. Keeping models simple and ensuring decision-makers understand and apply the rules is important.
1. Estimating Cost of
Delay
Sydney Limited WIP Society
http://www.meetup.com/The-Sydney-Limited-WIP-Society/
Jason Yip
@jchyip
j.c.yip@computer.org
http://jchyip.blogspot.com
2.
3. “Speed is not the objective,
it is a means to an end; the
objective is making money.”
11. Considerations for the
baseline model
• Pricing Trend
• Market Size x Market Share = Unit Sales
• Unit Sales x Unit Price = Dollar Sales
• Unit Cost Trend
• Project Operating Expenses: Development,
Marketing (% of Sales), General & Administration
(% of Sales)
• (Cumulative) Profit Before Tax
15. What if...
• Development expense overrun by 50%?
• Unit cost overruns by 10% for 2 years?
• Unit sales are overestimated by 10%?
• Schedule is delayed by 6 months?
28. 3 fundamental ideas
• Quantify the cost of delay
• Balance development speed against other
objectives using decision rules
• Ensure decision makers consistently use
the decision rules