Thursday, July 04, 2013

The cost of lost opportunity

In a dynamic environment the quality of your product diminishes rapidly the longer you delay its delivery. In fact the value of your perfections will be completely outweighed by the lost opportunity from not having your product in use before it becomes irrelevant. Often this will require some tough decisions about scope.
The cost of excessive scope is shown as the waste component in Figure 1. Quality in dynamic environments needs to be interpreted as bare minimum fitness for use in a limited time window of opportunity. Conversely, the cost of insufficient scope or quality at some point outweighs the lost opportunity cost, as depicted in Figure 2.
A critical consideration in managing dynamism is balancing the risks of insufficient quality against the cost of lost opportunity as shown in Figure 3, and this can require close attention and pragmatic decisions. They key is understanding the actual material cost of delay and constantly comparing that to the value of the proposed enhancements. Anything that does not stack-up can go on the list for stage 2.
cost of lost opp
Figure 1 – The cost of excess quality in lost opportunity (Collyer 2013, p135)
cost of low quality
Figure 2 - The cost of insufficient quality (Collyer 2013, p135)
Figure 3 – Quality balanced against the limited window of opportunity (Collyer 2013, p136)
Simon Collyer
Collyer, S. (2013). Managing Dynamism in Projects - A Theory-Building Study of Approaches Used in Practice, The University of Queensland. PhD