Usually there are many projects waiting in the delivery queue, in most cases the HiPPO method is what determines their relative priority and thus the order they are implemented in. Pet projects take precedence on potentially more important changes, with no consideration to the financial impact especially given how illusive it is to measure the financial impact of unrealised projects.
HiPPO
According to the Lean Enterprise, the biggest two risks to any IT projects are: Projects getting cancelled halfway through and Delivered projects to be shelved and never used. Based on my experience both are quite common, perhaps because of the aforementioned project prioritisation methods.
The Cost of Delay method (CoD) is an analytical approach that can help prioritise projects based on a measurable metric that can be understood by business. Simple, perhaps simplistic even yet it is much more scientific than the HiPPO approach.
CoD works as follows (and I’m using an example from the Lean Enterprise book), first each project is assigned a cost of delay value, for instance Project A which is a compliance project would entail a penalty of $250k per week of none compliance. Project B introduces a new sales method which is expected to bring in $100k per week. There are three options: A is implemented first, B implemented first, A&B are implemented concurrently.
Scenario 1: If A is implemented first , the cost of delay incurred by delaying B is $200k.
Scenario 2: If B is implemented first, the cost of delaying A is $250k.
Scenario 3: If A&B are concurrently implemented with the resources split between them, the cost of delay is $350K
Based on this the decision is easy, implementing A first has a lower CoD hence it is the best choice to go for. An objective rational decision that doesn’t rely on personal preferences of product owners.
Real life scenarios are more complicated, as calculating the CoD for a project often includes many factors some of which are not foreseeable, Furthermore the CoD is often not constant over time and risk might increase overtime with increase in sales. Even more interesting projects are often not independent and delaying one project might result in a chain of events incurring unpredictable costs.
CoD is not perfect yet it is provides an economical, analytical way to prioritise projects within a complex pipeline.
