© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

1

Time is and Asset

Delay is a Cost

Applying qualitative and quantitative analysis

for competitive advantage

Andy Carmichael PHD FBCS

@andycarmich ac@openxprocess.com

Twitter: #lascot16 @andycarmich

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

2

Who is

going

to win?

• Tempo from the Italian for time

• An essential element of strategy in chess

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

3

Who is

going to

win the

dogfight?

• Max speed? (level-climb-dive)

• Max altitude?

• Manoeuvrability? (agility)

• Pilot training

• Cockpit visibility

• Power-steeringReferences: Wikipedia, www.warbirddepot.com, Chet Richards, “Certain to Win”, OODA diagram drawn by Patrick Edwin Moran

John Boyd

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

4

Time is key to strategy in…

• Chess

• Warfare (Sun Tsu, Clauswitz, Von Moltke, John Boyd)– See Chet Richards, Stephen Bungay

•Business

We borrow time…

We buy time…

We invest time…

We save time…

We waste time…

We spend time…

Time “is” Money?

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

5Time “is” Money?

Time (t) influences Value (V)

𝐷𝑒𝑙𝑎𝑦 𝐶𝑜𝑠𝑡 = −𝜕𝑉

𝜕𝑡Δ𝑡

“Cost of Delay” (CoD)

A Cost –e.g. measured in dollars

A rate of change in valuee.g. measured in dollars per week

or “Urgency”

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

6

Essential Kanban Condensed: The Glossary

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

7

Cost of Delay is a decision-aid

• Context:• choosing the next “feature” / “experiment” to implement

(Product)?• Choosing which product to fund / postpone (Portfolio)?

• Why?• to maximise realised business benefit

• How?• By estimating (forecasting) future cash (or value) flows and the

time delay before the benefits will occur

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

9

Context:

Portfolio level is where decisions are made about investing/disinvesting in different products

Product level is where decisions are made about how to maximize the value delivered by that product

Portfolio

Product

Team

Personal

WEEKS/DAYS

DAYS/HOURS

MONTHS/WEEKS

YEARS/QUARTERS

Products - GoalsStrategic Direction

Options - ValueProduct Management

Stories - DeliveryDay to day Leadership

Tasks - FocusIndividual Professionalism

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

10

How to approach Cost of Delay?

quantitatively? qualitatively?or

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

11

Value flow from a new development – “adoption”

Cost of development

Increasing then decreasing

profits/savings

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

12

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

13

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

14

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

15

The “Last Responsible Moment”

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

16-100.0

0.0

100.0

200.0

300.0

400.0

500.0

600.0

0 20 40 60 80 100

Cu

mu

lati

ve V

alu

e $

(K

)

Time in weeks

No delay

10-week delay

20-week delayCost of 10 week delay

Linear benefits profile (e.g. Staff-Saving feature)

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

17

05

10

0

100

200

300

400

500

0 20 40 60 80 100

Urg

en

cy$

(K)

per

wee

k

De

lay

Co

st$

(K)

Length of Delay (weeks)

Approximately linear Delay Cost

Approximately constant “Urgency”

Linear benefits: Delay Cost & Urgency Profiles

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

18

Del

ay

Cos

t ($

)

Urg

ency

($

per

wee

k)Delay Cost and Urgency Profiles

General Delay Cost and Urgency Profiles

Low delay impact before this point

Low delay impact after this point

Roughly constant urgency over this period

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

19

WSJF with constant urgency (apply the formula)

prioritise highest urgency/duration

• Value realised by implementing item 1 then item 2:

𝑉1 + 𝑉2 − 𝑈1𝐷1 − 𝑈2(𝐷1 + 𝐷2)

• Difference in value by doing item 1 first, compared to doing item 2 first

𝑈1

𝐷1−

𝑈2

𝐷2𝐷1𝐷2

WSJF: Favours urgent short jobs

12 wks

4 wks

$8pw

$3pw

D2

Urg

ency

(C

oD

)

Time (weeks)

$96

$48

D1

U2

U1

D2

Urg

ency

(C

oD

)

Time (weeks)

$112

$12

D1

U2

U1

Total Delay Cost=$144

Total Delay Cost=$140

Total Delay Cost

“wisjif” or “CD3”

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

20

What is “Duration” in the WSJF formula

• Customer Lead Time?

• System Lead Time?

• Touch Time?

• Lead Time does not represent how long the team is “blocked” by a different item

• In some circumstances* Touch Time (for which an estimate of effort is a reasonable proxy) should be used

* where items are released on completion, rather than waiting for batch releases

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

21

How to approach Cost of Delay?

quantitatively? qualitatively?or

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

22

Value isn’t just increased profit…

• Protecting loss of profits• Increased turnover• Increased learning• Reduced risk• Cost saving• New market option• Cover competitors’ moves• Staff retention• Process improvement• etc…

How would you put a monetary value on each of these?

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

23

Qualitative Approaches to ordering work by Cost of Delay

1. Gut feel / HIPPO

2. SAFe

3. Delay Cost Profiles

4. Category Radar Plots

5. Hybrid approaches and combination with probabilistic forecasting

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

24

The SAFe formula for WSJF

• All quantities estimated on a 1-20 (sic) “Fibonacci” scale

• This is a qualitative rather than quantitative method

• The danger of this approach is the use of spurious numbers!

• As a qualitative method it may help people talk to each other about value… Couldn’t they do that without playing cards?

𝑊𝑆𝐽𝐹 =𝐶𝑜𝑠𝑡 𝑜𝑓 𝐷𝑒𝑙𝑎𝑦

𝑆𝑡𝑜𝑟𝑦 𝑃𝑜𝑖𝑛𝑡𝑠

No. It doesn’t!

𝐶𝑜𝑠𝑡 𝑜𝑓 𝐷𝑒𝑙𝑎𝑦 = (𝑇𝑎𝑛𝑔𝑖𝑏𝑙𝑒 𝐵𝑒𝑛𝑒𝑓𝑖𝑡 + 𝑇𝑖𝑚𝑒 𝐶𝑟𝑖𝑡𝑖𝑐𝑎𝑙𝑖𝑡𝑦 + 𝐼𝑛𝑡𝑎𝑛𝑔𝑖𝑏𝑙𝑒 𝐵𝑒𝑛𝑒𝑓𝑖𝑡)

No. It doesn’t!

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

25

Delay Cost Profiles

• Expedite: Very high urgency – no end point in sight

• Fixed Date: One off impact on fixed date

• Standard: Medium urgency; tails off (or cuts off) as value is lost

• Intangible: Low urgency, may be followed by high urgency

Del

ay C

ost

($

)

Delay (time)

Intangible

Del

ay C

ost

($

)

Delay (time)

Standard

Del

ay C

ost

($

)

Delay (time)

Fixed Date

Del

ay C

ost

($

)

Delay (time)

Expedite

We can define different “Classes of Service” for

these archetypes

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

27

Category Radar Plots

• Context specific dimensions of risk and value

• Dimensions…• must be Ordinal

• not necessarily Interval/Ratio

• and not just Nominal

Source: David J Anderson http://www.slideshare.net/ScrumTrek/david-anderson-enterprise-service-planning-kanban

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

28

How urgent is it to start this item?

• the ordering of work items (WSJF: Urgency / LT)

• Choosing the class of service that is appropriate for the work item • Policies for more value, less risk• Ensuring some intangible items are

always in play (interruptible if unexpected / irrefutable demand)

• Pay attention to the “last responsible moment” for starting a work item (say, 85% probability point)

Source: @lki_dja

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

29

Know the context…

• Chaotic (high risk, uncertain) domains are not susceptible to quantitative analysis

• Obvious domains don’t require it

• Complicated domains are most suitable to quantitative analysis

• Complex domains may benefit from a qualitative or hybrid approach

By Snowded (Own work) [CC BY-SA 3.0 (http://creativecommons.org/ licenses/by-sa/3.0)], via Wikimedia Commons

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

32Visit leankanban.com/guide for free download.

© 2

01

6

AN

DY

CA

RM

ICH

AEL

ALL

RIG

HTS

RES

ERV

EDLE

AN

AG

ILE

SCO

TLA

ND

20

16

33

Questions and Discussion