The Cost of Delay for Not Shipping on Time
The cost of delay is the way to think about the revenue you can lose plus the cost of continued development.
One of my managers many years ago would say, “We want to ship this product in the second quarter this year. We estimate it will take us a quarter to ramp up sales. We think there is a lifetime sales of about five years for this product. Any delays in our shipment will not push our sales figures down the line. They will remove our max sales from the middle of the project. We have to make our ship date.”
There weren’t too many of us developers in that organization. We all knew what our job was: to release on time and make sure the product was usable. The product didn’t have to be perfect, because we could release fixes if we needed to, but it had to at least be usable because we had to get to that max sales point.
We worked on one project at a time until it was done. Then we went to the next project. None of our projects was very long because we needed to realize revenue. You can’t realize revenue with a product-in-a-box if you don’t ship it.
We didn’t ship too many fixes. This wasn't because we were perfect the first time. We asked each other for review, and we found problems, and we fixed them inside the building. We did this before we shipped because the cost of not shipping on time was too great.
When you delay your release and don’t ship on time, you miss the revenue from the maximum sales times. Take your delay in weeks and remove the revenue weeks. That’s your basic cost of delay approach.
You can go through more serious calculations. Troy Magennis of Focused Objective talks about a “compounding impact” on other projects.
But even if you said, “Every week we slip, we lose at least a week of revenue from our maximum sales week of revenue,” do you think people would notice?
How do you release on time? You fix scope. You have release criteria. You have shorter projects because they are easier to estimate and deliver. You use an incremental or an agile lifecycle so you have more predictability about your release.
Shipping on time isn't always easy, but it's easy to see why you need to. If you don’t release your products, your customers can’t get any value.
