Cost of Delay framework

We're building a comprehensive knowledge library about product development as part of our mission. The library is for anyone looking to make better decisions — primarily decisions about how to further develop a product. Whether you're an inventor, a product manager, or a Chief Product Officer, using a structured decision-making method increases your chances of building the right things for the right audience (build the right thing for the right audience). Today we'll introduce the Cost of Delay framework.

Framework name: Cost of Delay.

Inventor: Don Reinertsen.

Year of first use: 1997.

Link to the author's original research:

1. The book Managing the Design Factory (1997),

2. The book Developing Products in Half the Time,

3. The book The Principles of Product Development Flow (2009).

Key figures in the framework's development:

1. Dean Leffingwell.

Key milestones in the framework's development:

1. Added to the Cost of Delay Divided by Duration framework,

2. Added to WSJF,

3. Added to SAFe and adopted by larger organizations.

History of First Use

Cost of Delay is a method for estimating how much it costs us to speed up the development of a product or feature. Throughout his consulting career, its inventor Don Reinertsen was constantly asked to speed up product development, because his clients had read in a magazine that it was a good idea. His answer to them was: "Why do you want to speed it up? That's a hard task. Do you know how much you'll earn by speeding up development?" The clients didn't know, so he came up with the Cost of Delay method to show them.

Basic Prioritization Principles

CoD, or Cost of Delay, expresses how much money we lose for every unit of time that a product or feature has not yet been delivered. It's a prioritization method based on the monetary value of time.

• Size = the number of months to complete the feature/product.

• Monetary loss = the estimated financial loss per unit of time that a feature or product isn't being used by customers because it hasn't been built yet.

The highest values represent the greatest loss, and therefore the highest-priority products and features. This alone can be used as a simple rule for prioritization.

However, the Cost of Delay Divided by Duration (CD3) method is used more often.

Prioritization Example

Estimates must be made in monetary and time units so they can be compared.

Size

• For example, 5 months, 6 weeks, or 8 person-days.

Monetary loss

• For example, CZK 50,000 or EUR 400,000.