What do we need to change in our product development process? This is something that keeps me busy on a regular basis. Focusing on Continuous Improvement through kaizen or retrospectives, in my world I hear it a lot and everyone seems to take it in without question. And why not? Improvement is good, right?

But before you look at what you want to improve, you should focus on why you want to improve. Is it to ‘automate everything’, be innovative or have a ‘zero bug culture’? While these things may sound like the ambitious objectives that will get us to the best of our abilities, according to Reinertsen we should focus on a much more basic metric: you improve in order to increase product life-cycle profit!

This economic view on product development struck me. When focusing on improvement or the prioritization of new features we tend to think about a lot of objectives like improved quality, shorter development cycles, elimination of waste, faster time to market. And while all of these are a means to an end, impact on profit, they are all influencing it in their own way.

Let’s take a look at an example. One team is discussing whether to push the releasedate back by three weeks in order to fix some minor bugs, The alternative will be to release right away in order to benefit from the new but immature product, solving the existing bugs in a separate release. So what to do? Do they go for the faster time-to-market or do they chose to push a mature product?

In order to make a decision from an economic stance, you need to know two things: (1) the extra cost that is accompanied with the faster time-to-market, which is the cost of an extra bugfix release; and (2) the benefits of releasing the product early, which Reinertsen defines as the cost of delay. Cost of Delay can be defined as the benefits that you mis out on every day you do not put a feature or release into production. 

So if releasing a feature will improve sales by 30 a day at 200 euros of income per sale, your cost of delay per day is estimated at 6000 euros. So if the cost of a bugfix release is lower than 6000 euros, it is beneficial to aim for faster time to market.

Our primary aim in product development is to make good economic choices, the rest (innovation etc.) should be viewed as secondary. And in order to make good economic choices about what features you should build first or where you should improve, you must weigh both cost and benefit. So why do we see so much focus on cost and so little on the balance with benefits within product development teams…..