We can also call it a cost of missed opportunities that will never come back. A permanent cost. A costly cost.
Today I want to write about a topic many product managers face and have challenges in making proper estimations which results in missed opportunities.
Cost of Delay (CoD) is a concept mentioned in The Principles of Product Development Flow and linked to the Weighted-Shortest-Job-First model (WSJF) whereas CoD refers to the economic impact or cost incurred by delaying a decision or action. This concept is commonly used in business decision-making to understand the consequences of postponing tasks, projects, or decisions.
Imagine you have a project to launch a new product or feature. The longer it takes to the release, the more money you might lose due to missed market opportunities, competitors gaining an edge, or simply not meeting customer expectations. The missed opportunity and impact you could have had is called the Cost of Delay.
To estimate it, you typically consider factors such as:
Revenue Impact: Calculate the potential revenue that would have been generated during the delay period. This could include sales revenue, market share, or customer acquisition.
Opportunity Costs: Identify any missed opportunities that could have been pursued if the project had been completed earlier. This could involve entering new markets, securing partnerships, or taking advantage of seasonal trends. What was the price of not being established as an esports betting site at the beginning of the covid pandemic?
Cost of Capital: Consider the cost of financing or capital tied up during the delay. This could include interest on loans, the cost of maintaining inventory, or the lost opportunity to invest capital elsewhere.
Competitive Disadvantage: Assess the impact of being late to market compared to competitors. This could involve losing market share, brand reputation, or customer loyalty. Speaking of the sports betting industry, imagine how much of a thing it was to hop on the early cashout feature soon after the feature appeared back in 2011 and quickly gained popularity among the sportsbook customers.
Customer Value: Evaluate the value to customers of having the product or service available sooner. This could include convenience, solving urgent needs, or addressing emerging trends.
Estimating the Cost of Delay involves a combination of quantitative analysis and qualitative judgment. It’s essential to consider both financial metrics and the broader strategic implications for the business.
To make it easier, you can start by identifying the key factors that contribute to the Cost of Delay in your specific context. Then, you can use data, market research including quarterly or yearly reports on both your and competitors’ end also backed up by expert opinions to quantify these factors as much as possible. Finally, make sure to regularly review and update your estimates as circumstances change.
ProdMan 
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