Glossaries
Cost Of Delay
What is Cost of Delay?
Cost of Delay (CoD) is a product management concept that quantifies the economic impact of delaying a product or feature release. It helps teams prioritize work by understanding the financial consequences of not delivering value to customers quickly.
Synonyms: CoD, Delay Cost, Time Value in Product Development, Economic Impact of Delay
Why Cost of Delay is Important
Cost of Delay is crucial in product management because it provides a clear, quantifiable way to prioritize features and projects. By understanding the financial impact of delays, product managers can make more informed decisions about resource allocation and project sequencing. This leads to better alignment between development efforts and business value, ultimately resulting in improved product performance and customer satisfaction.
How to Calculate Cost of Delay
Calculating Cost of Delay involves estimating the potential value a feature or product could generate over time and how that value changes if the release is delayed. The basic formula is:
CoD = (Value per time period) x (Duration of delay)
For example, if a feature could generate $10,000 per week and is delayed by 4 weeks, the Cost of Delay would be $40,000.
Examples of Cost of Delay in Action
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Feature Prioritization: A product team has two features to develop. Feature A has a CoD of $5,000 per week, while Feature B has a CoD of $2,000 per week. The team would prioritize Feature A to minimize overall delay costs.
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Project Scheduling: A company is deciding between starting Project X or Project Y. By calculating the CoD for each project, they can determine which one would be more costly to delay and schedule accordingly.
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Resource Allocation: When faced with limited resources, a product manager can use CoD to justify allocating more developers to a high-CoD project, potentially delaying lower-CoD work.
Frequently Asked Questions
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Question 1: How is Cost of Delay different from ROI? Answer: While ROI measures the overall return on an investment, Cost of Delay focuses specifically on the impact of time. CoD helps quantify the urgency of a project or feature, which ROI doesn't directly address.
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Question 2: Can Cost of Delay be negative? Answer: Typically, CoD is positive as it represents lost value. However, in rare cases, a negative CoD could occur if delaying a project would actually save money or increase value.
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Question 3: How often should Cost of Delay be recalculated? Answer: CoD should be reassessed regularly, especially when market conditions change or new information becomes available. Many teams review CoD during sprint planning or quarterly strategy sessions.