Cost of Delay

Tom Breur

2 July 2017

Intuitively, anybody can appreciate that getting products out sooner, rather than later is more valuable. “Cost of delay” seems to mean wildly different things to different people. In an Agile context people are foremost concerned about getting fast feedback, to amplify feedback loops. In a manufacturing context, people think about the cost of expediting. Lean practitioners think about “waste.” And then, of course, there is a financial notion of deferred revenue from features being available later. Undoubtedly, I am missing a bunch of other connotations.

When you deliver a feature late(r), many losses are largely invisible. You miss out on additional sales you could have had, but you can’t see them. Maybe worse, customers in need of that feature, are now being served by competitors, or, they might be looking for totally different ways to meet their needs – obviating the initial need in the first place!

As to the financial consequences of delay, receiving your revenues later has severe impact: from one side your cash flow will be hurt, and from the other side the expenses (cost) to ship a feature have gone up. This double whammy is a true vicious feedback loop, and should be of concern to everyone on the team.

If shipping later means you get your monies later, that seems like a simple annuities calculation. It gets compounded by the incremental expenses made to complete a feature. When you add onto that the invisible cost of the feature becoming obsolete in the market, then you are looking at a truly exponential function! This is one of the reasons why Lean Start-ups are so eager to ship fast – sometimes (seemingly) irresponsibly fast! Getting product feedback, building a presence, share of mind and market, all add up to drive a sense of hyper urgency.

Needless to say, this all hinges on the maturity in the market. For well-established products, and clearly defined needs, shipping a quality product comes at a premium. But while you are still defining the market (fulfilling a ‘new’ need), turning on over-drive mode is the way to go. Full steam ahead!