Cost-of-Delay (CoD) is an important tool for prioritising work. But it is no silver bullet and just like any other tool it can be misused. This is a brief discussion how I’ve found CoD works in practice.
All too frequently, traditional measures such as Return-on-Investment (ROI) or Net-Present-Value (NPV) don’t take into account delay effects. They wrongly assume that timing has no bearing on value, leading to poor prioritisation decisions that destroy value and render calculations irrelevant.
In brief, it is a mechanism for estimating the ongoing cost (in £/wk or $/wk) of delaying prioritising a particular piece of work. This cost might be an opportunity cost (lost potential revenue), an ongoing cost already being incurred or a risk-based cost (losing existing revenue or incurring legal costs or fines).
I’ve learned that:
The most important thing about prioritisation is to have some – and by that I mean an ordered list, not a bucket of MUSTs. Beyond that considerations of Value and CoD are useful. Ultimately the business still needs to be able to make the calls.
On the Public Sector side – it’s sometimes treated as if there’s no revenue side to the equation, focusing only on costs. That’s a misrepresentation of reality – public bodies are funded and compete for funding with others.
They may not be profit-making, but they still need to consider how the success of their products and services will lead to continued and increased future funding (as do charities). Sometimes the ultimate goal is less funding – if their mission is to no longer be needed because the social ill they are there for has been eradicated.
Good luck using CoD in your prioritisation challenges, I’d love to hear your experiences.
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