A critical decision every organization needs to make is choosing the work we will do. Choosing one work item over another is in many ways similar to other investment decisions. As in other investments, we cannot pursue all available opportunities as we do not have enough time, capital or people to divert to each one of them. Hence we need to prioritize the investment opportunities knowing that choosing some means saying no to all the other.
A typical prioritization system will stack a series of options, the things on which we could work, ranked by its potential to generate the value we want as an organization. Assessing the priority we should give to each option is not a trivial task, and many different techniques have been used, typically involving the definition of a scoring card balancing aspects such as organizational strategic alignment, potential financial value measured (for example net present value, NPV, or return on investment, ROI) and risk profile, etcetera.
Donald Reinertsen has described the benefits of using the weighted shortest job first (WSJF), weighting by cost of delay (COD). This prioritization method has amongst many other advantages its dynamic approach. It is based on comparing the cost of not taking each option now, hence delaying it by a unit of time and looking at how much will we lose. More formally, it is the partial derivative of the total expected value with respect to time. One more useful way to look at it is thinking of the total value of the option as a water tank that has a leak and hence the total amount of water in the tank (total value) decreases over time. The longer the time we wait the less water in the tank. How fast it decreases depends on the size of the leak, which is the COD.
This dynamic aspect of cost of delay is what, in my opinion, gives this method an enormous advantage over other simpler approaches, like looking statically at the total ROI. On the negative side is the difficulty of estimating COD, but I must say I did not find it normally harder than estimating NPV or ROI. Learning the art and craft of estimating COD and hence prioritizing our portfolio is a long, arduous but absolutely worthy endeavor. It is learning to see how value evolves over time.
This post is part of a series on planning. In the same series, you can also read: