How do you prioritise requirements? Cost of Delay

Many organisations today, increasingly face projects with a growing list of requirements/features, yet, they have no effective method of prioritisation of which requirements/features to implement first. How do you distinguish between high-value features and low-value features? How do you prioritise which features to implement first?

There is an effective technique called Cost of Delay (CoD) which looks at the opportunity costs of not implementing features. This is done by estimating loss of revenue to the organisation caused by not implementing high value features. To calculate cost of delay, a per unit cost is used, such as per week, per month.

For example, feature A will cost organisation $500,000 in lost revenue per week if not implemented vs. feature X will cost $10,000 in lost revenue per week if not implemented. This approach will make it easier to identify which features provide the most value and need to be implemented first. In my experience, I often see a handful of features that represent the highest value that should take priority (see diagram 1).

This methodology can be used in various scenarios such as:

• Software Development: Estimate money organisation will lose if  new high value features implementation is delayed.
• Product/Service Development: Estimate money organisation will lose if certain new products/services launch is delayed.
• Project Selection: Estimate money organisation will lose if new strategic projects are not delivered.

This approach requires abandoning the typical waterfall big patch delivery approach, and adopt value based agile approach. Admittedly, this new approach is not easy, as it requires a shift in mind-set in how we approach work prioritisation.

I hope you have found this post informative.

Thank you for reading and sharing.

 

Regards,

Nick