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The Economics of Product Development v0.8
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@KarimHarbott The Economics of Product Development Karim Harbott - Mar 2016
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Transcript of The Economics of Product Development v0.8
@KarimHarbott
TheEconomicsofProductDevelopment
KarimHarbott-Mar2016
• EnterpriseAgileCoachandTrainer
• The5thLeSSTrainergloballyand1stintheUK
• FormerHeadofScaledAgileatMcKinsey&Co.
• Formerdeveloper,ScrumMaster&ProjectManager
• TrainedTeamandExecutiveCoach
• YearsofexperienceinscalingScruminlargeproduct
groups
KarimHarbott
ALittleAboutMe
[email protected]@KarimHarbott
www.guidingagile.com
1. ACommonLanguage2. Queues3. BatchSize4. Prioritisation
ACommonLanguage“Youmayignoreeconomics,buteconomicswon’tignoreyou.”
DonaldG.Reinertsen
Shouldwerunourtestdepartmentat80%capacitywitha2weekqueueor90%capacitywitha4weekqueue?
Shouldwedelaydeliveryby4weekstoincludeanextrafeature?Whatabout8
weeks?Or12?
Wecanonlymaketrade-offseffectivelyifwehaveaneconomicframework.
“Ifyouonlyquantifyonething,quantifycostofdelay.”
DonaldG.Reinertsen
Benefit
Cost
BenefitCost
ProductDevelopment BusinessFunction
Queues“InProductdevelopment,ourgreatestwasteisnotunproductive
engineers,butworkitemssittingidleinpricesqueues.”
DonaldG.Reinertsen
Whataresomeexamplesofqueuesinproductdevelopment?
HowMuchdoYourQueuesCostYou?
CapacityUtilisation
Que
ueingTime
x2
x10
M/M/1/∞queue
50% 90% 100%0%
0
5
10
15
20x20
Capacityutilisation=%ofcycletimewaitinginaqueue!!
CapacityUtilisation&Queuesize
ResourceCost
ExcessCapacity
Cost
TotalCost
DelayCost
CapacityUtilisation&Cost
Selectivelyaddcapacityinareasofhighvariability.
GrowT-ShapedPeople
Queuelengthdependsonvariabilityandcapacityutilisation.
Watchthebaton,nottherunners.
BatchSize“Don’ttestthewaterwithbothfeet.”
CharlesdeGaul
Whataresomeexamplesoflargebatchesinproduct
development?
10Weeks10Weeks
SmallBatchesHaveManybenefits
Prob
abilityofo
ccurrence
£1
100% Spend = £1
£2
10%
Saving=£0.90
£3
Saving=£0.99
1%
67%lessinvestmentforthesamepayoff
Cumulativeinvestment
TheValueofFastFeedback
HoldingCost
BatchSize
Cost
TotalCost
TransactionCost
YourOptimalBatchSize
HoldingCost
BatchSize
Cost
TotalCost
TransactionCost
EnablingSmallBatches
Project funding
Large projects
‘Phased’ projects
Detailed project
planningManual
regression testing
Complex architecture
Reviews / sign-offs Manual
deployment processes
SomeInhibiterstoSmallBatches
Prioritisation“Thekeyisnottoprioritisewhat'sonyourschedule,buttoschedule
yourpriorities”
StephenCovey
Whichjobshouldwedofirst?The2-weekjobwitha£10kperweekCoD?
Orthe3-weekjobwitha£12kperweekCoD?
Schedulingisadecisiontodelayonejoboveranother.
Ifdurationsandcostsofdelayareequal,usefirstinfirstoutscheduling(FIFO)scheduling.
Ifalldurationsareequal,useschedulehighestcostofdelayjobsfirst(HCDF)
scheduling.
Ifallcostsofdelayareequal,usescheduleshortestjobsfirst(SJF)scheduling.
Ifdurationsandcostsofdelayarealldifferent,useschedule
weightedshortestjobsfirst(WSJF)scheduling.
Project Duration (weeks)
Cost of Delay (£k)
Weight = CoD / duration
1 1 10 10
2 3 3 1
3 10 1 0.1
Weightedshortestjobfirst
Weightedshortestjoblast
CostofD
elay
CostofD
elay
Delaycost£
1
2
£1k 3£3k
£3k
Delaycost=£7k
3
£100k
£30k 2
£30k 1 Delaycost=£160k
WeightedShortestJobFirst(WSJF)
9 68
7 34
5 12
ShortMediumLong
Low
Medium
High
Duration
Costo
fDelay
Quick-&-EasyEstimation
InSummary
1. Measurecostofdelay,evenifitisnotperfect.2. Payattentiontoqueuesandtheircost.3. Preventqueuesfrombuildingupbybuildingin
excesscapacity.4. Drivedowntransactioncoststoenablesmall
batches.5. Limityourwork-in-progress(WiP).6. Prioritiseusingweightedshortestjobfirst(WSJF).
Summary
6MythsofProductDevelopment
FindOutMore
“Whenhigh-qualitydecentralisedeconomicinformationisabsent,itistoooftenreplacedbythemind-numbingbureaucracyof
centralisedcontrol“
DonaldG.Reinertsen
